A recent report by PwC challenges the widespread belief that short-term rentals (STRs) are the primary driver of Spain’s escalating rental prices. The findings reveal that STRs make up a negligible portion of the housing market and their role in rental price increases is minimal. Instead, the report points to deeper structural issues in Spain’s housing market as the main culprits.
The minimal impact of STRs on rental prices
According to the report, STRs constitute only 1.3% of the national housing stock, with just 0.5% dedicated exclusively to tourism. PwC’s analysis indicates that STRs account for just 0.3% of the variation in rental prices across Spain. Even in major cities with strict STR regulations, rental prices have continued to rise:
- Barcelona: Despite a 56% reduction in STRs between 2020 and 2023, rental prices climbed by 24%.
- Madrid: Intensive STRs make up less than 0.34% of the housing stock, and the districts with the highest rental price increases do not correlate with areas of high STR concentration.
- Palma: Rental prices rose by 27% between 2020 and 2023, even as STRs decreased by 37%.
- Ibiza: A 39% reduction in STRs coincided with a nearly 20% rise in rental prices.
These statistics underline the limited influence of STRs on overall rental market dynamics.
Structural issues driving rental price increases
The report identifies several factors as more significant contributors to rising rental costs:
- Housing shortages: Since 2015, rental prices in Spain have surged by 57%. This is exacerbated by a growing imbalance between housing supply and demand, with three times more households being formed in 2023 than new homes built.
- Scarcity of new construction: Limited construction activity has failed to keep up with population growth and urbanisation.
- Vacant properties: Nearly 4 million homes in Spain remain vacant, representing 14% of the total housing stock.
- Geographical and market constraints: Urban areas with limited space for expansion face additional pressures on housing availability.
Why STR restrictions are not enough
While regulating STRs is a common policy response, PwC’s report highlights the ineffectiveness of this approach in tackling the housing affordability crisis. Severe restrictions on STRs have not managed to curb rising rental prices, underscoring the need for broader, more comprehensive solutions. These include:
- Increasing social housing supply: Expanding access to affordable housing options is critical.
- Incentivising reuse of vacant properties: Addressing Spain’s significant stock of empty homes could help alleviate housing shortages.
- Encouraging new construction: Streamlining regulations and incentivising developers could boost housing availability.
STRs’ economic contributions
The report also acknowledges the economic benefits that STRs provide, particularly in tourism-dependent areas. STRs cater to the demand for flexible accommodation, boost local spending, generate employment, and offer property owners additional income streams. These contributions are important to consider when crafting policies that regulate the sector.
Key takeaways
PwC’s findings challenge the prevailing narrative that blames STRs for Spain’s rising rental prices. Instead, the report calls for a nuanced understanding of the housing market and a shift in focus towards addressing root causes, such as housing shortages and vacant properties. While regulation of STRs has its place, broader solutions are essential to ensure housing affordability and market stability. By tackling the underlying issues, policymakers can create a more sustainable housing environment without disregarding the economic value of STRs.
