Home » Spanish government is destroying the rental market in cities like Madrid and Barcelona

Spanish government is destroying the rental market in cities like Madrid and Barcelona

Barcelona rent controls

The Housing Law recently passed by the Spanish government is well on the way to destroying the long-term rental market in cities like Barcelona and Madrid.

Spain’s left-wing coalition government led by Socialist President Pedro Sánchez introduced a new Housing Law just before local and regional elections that was meant to woo voters with its rent controls and squatter rights but did nothing of the sort. The governing coalition took a beating in the polls, leading to an early General Election in July.

Even though the Housing Law failed abysmally to achieve its primary objective of wooing voters, it is now the law of the land, and has already had a dramatic impact on the rental market in Spain’s two biggest cities, Madrid and Barcelona. I didn’t look at other cities but I wouldn’t be surprised if it’s a similar story all over Spain.

Rent controls

The law introduces price controls on long-term rentals and makes evictions more difficult, which is all bad news for landlords big and small. As the government was repeatedly warned by critics of the new law such as trade bodies, economists and politicians, the Housing Law was bound to lead to a reduction in rental investment and the supply of homes for rent, which is exactly what has happened. As I explained last week, the current government has also learned nothing from Spanish dictator General Francisco Franco’s disastrous experiment with rent controls.

If you search for a flat to rent today in central Madrid or Barcelona using the property portal Idealista you will find that 80% of apartments in Madrid are offered on a mid-term basis (fully furnished with services included), and just 15% on a long-term basis with nothing more than fitted kitchens and bathrooms. In Barcelona 74% of flats are offered fully furnished on a mid-term basis whilst just 12% are offered unfurnished. Until recently the opposite was the case in both cities – unfurnished flats for long-term rent were 70% or 80% of the market, and furnished flats were 20% to 30%.

Owners of flats to rent in both cities have switched en masse from the long-term to the mid-term rental market in response to this government’s housing law that intervenes heavily in favour of sitting tenants and squatters. Quite predictably, a majority of landlords have left the long-term rental market.

This is a disaster for people who cannot afford to buy but who would have been able to afford to rent in the centre of Barcelona or Madrid. In the past they would have found a decent selection of flats to rent long-term if they had the budget, but now they will find very little at any price. They will be forced into the mid-term market, with more expensive contracts that typically never last longer than 11 months. Neither landlords, who mostly value good long-term tenants above price, nor tenants, who now can’t find long-term rental homes in city centres, benefit from this.

This Housing Law is already killing the long-term rental market in Barcelona and Madrid, and probably other Spanish cities, which will make housing access for the least well-off even more difficult in those areas. Once again, a government intervention achieves the exact opposite of its stated goals.