The Catalan government is calling for rent controls ASAP, claiming that the rental market has gone “wild” without them, but a closer look at the figures suggest this policy was a failure in Barcelona when last tried (and the time before that).

The Generalitat (regional government of Catalonia) run by the Catalan Republican Left party (ERC) has just released figures showing average rents increased by 62pc since 2013 to 1,123€/month in Q2 this year, up from 676€ in Q2 2013 (and an average of 682€/m in 2013).

Sra. Ester Capella (pictured above) the councillor in charge of the Generalitat’s ‘Territory’ department, which includes housing, told the press that “there is no society that can cope with an increase like this because nobody in this country has seen their income increase in the same proportion as the price of rents.” This narrative was dutifully reported in the local paper La Vanguardia here.

Sra. Capella used the opportunity to call for urgent powers to reimpose rent controls in Barcelona under the rubric of the new Housing Law. She wants Barcelona certified as a ‘strained housing market’ and rent controls implemented as soon as possible. “Without this law the [rental] market will continue to function in a wild way,” she said.

But it seems to me that Sra. Capella is cherry-picking data to justify rent controls that failed when last tried in 2020 (and when the Spanish dictator Francisco Franco tried them in the 1950s), and will fail again because they never increase the supply of private rental housing.

All about the base

Sra. Capella has chosen 2013 as the base year for her comparison to show how much rental prices have increased. 2013 was the year the Spanish property market bottomed out after a monumental crash that drove purchase and rental prices below normal values, just as the boom inflated prices to levels above normal in 2008. In 2013 you could buy entire buildings in the best parts of Barcelona for below their replacement cost, implying the land was free. In the same year rental prices in Barcelona were down by 16pc from a peak in 2008.

Rental prices have indeed risen significantly since the bottom of the crash, but you can also cherry-pick figures to show the opposite. Using the Generalitat’s own figures, if you compare rental prices in €/sqm between 2022 (14.5€/sqm/month) and 2008 (12.2€), prices have risen by a much more modest 19pc over 15 years, which in real terms (inflation adjusted) means that rental costs in Barcelona have actually fallen to 11.4€/sqm in ‘2008 euro terms’, compared to 12.2€/sqm in 2008, a real decline of 6.6%. Yes, it is cheaper to rent property in Barcelona today than it was fifteen years ago (in real terms). It’s all about the base.

Another thing to note is that, according to the Generalitat’s own figures, rental prices in terms of €/sqm increased rapidly between 2015 and 2017 (after the market bottomed out and recovery began), but then barely budged between 2017 and 2020, with the index going from 132 in Q3 2017 to just 137 in Q3 2020 – a mild increase well below inflation. Rents in Barcelona were subdued for the three years before the Generalitat and former hard-left Mayoress Ada Colau illegally introduced rent controls in Barcelona in Q3 2020, as illustrated by the chart below.

Barcelona rent controls last time around

Despite a sideways and even downward trend in rental prices the Generalitat and Barcelona City Hall introduced rent controls in Barcelona in September 2020, which were struck down as illegal by the Spanish Constitutional Court in March 2022, so they were only in force for 6 quarters between Q3 2020 and Q1 2022. 

The next chart shows the picture that rent control boosters would like you to see showing rents declining when they were in place, and rising when they were removed. They argue that rent controls were the only reason prices declined in that period.

What about Madrid?

So, what happened in Madrid, where there were no rent controls? The next chart shows rental asking prices in €/sqm for Barcelona and Madrid (dark blue line) over the same period, and you can see almost exactly the same curve as before in Barcelona. The data source in Idealista, a property portal.

Clearly rental prices followed exactly the same curve in Madrid over the same period, without any rent controls. Why? Covid is either partly or all to blame. It pushed down demand for housing in big cities like Barcelona and Madrid.

Rents then started rising faster in Barcelona as the pandemic subsided, even whilst rent controls were still in place, before taking off and leaving Madrid in the dust. If you compare Barcelona (rent controls) with Madrid (no rent controls) it looks like rent controls in Barcelona did something to drive up prices.

Barcelona housing shortages

The supply of long-term rental flats in Barcelona has dwindled in response to these policies, which helps explain why rents are exploding in Barcelona but not in Madrid.

The official data shows that the number of Barcelona rental contracts signed has been falling every quarter for more than a year, and there were less contracts signed in Q2 than in the same period ten years ago, when Spain was in the depths of a recession. The next chart tells the story.

Yes, rents have risen substantially in Barcelona from a trough in 2013, and are unaffordable for many, but the collapse in the long-term rental supply brought about rent controls and the new Housing Law is just as serious, if not more so.

If you search for homes to rent in Barcelona today, using any portal like Idealista (or talking to agents), you’ll find that between 20pc and 30pc of listings (it varies from month to month) are offered for rent long term. The other 70pc to 80pc are offered on a mid-term basis, basically between one and eleven months. Before rent controls and the new Housing Law, it used to be the other way around, with 80pc of listings offered as long-term rentals. Thanks to these wrong-headed policies, there are now far fewer homes to rent long-term in Barcelona, even if you can afford it.