In a major policy shift aimed at making housing more accessible, the Basque Government has officially designated San Sebastián as a “strained residential housing market”—the first capital city in the Basque Country to receive the label, and the sixth municipality after Rentería, Lasarte-Oria, Zumaya, Irún, and Barakaldo.
The declaration, announced by Basque Housing Minister Denis Itxaso alongside San Sebastián Mayor Eneko Goia, is expected to be formalised in Spain’s Official State Gazette (BOE) in July. Once in place, the designation will enable public authorities to deploy a set of price control mechanisms and incentives designed to curb market dysfunctions and increase the supply of affordable housing. The measures will initially be in effect for three years.
“We are opening a new chapter”
At an official ceremony held in San Sebastián’s City Hall, Minister Itxaso stated, “We are opening a new chapter marked by greater ambition and improved cooperation among administrations.” The minister acknowledged that housing has long been unaffordable for many in San Sebastián, where residents “have lost hope of living in their own city.” The goal, he emphasised, is to bring that expectation back.
Backed by what Itxaso described as an unprecedented public investment, the Basque Government aims to execute a broad policy package—containing prices, incentivising renovation, expanding public housing, and bringing empty homes back into the market.
Mayor Goia echoed this sentiment, highlighting the city’s €150 million investment in public housing and the existing stock of more than 2,000 rental units managed by the city council. “This declaration gives us one more tool to address housing, a top concern for our citizens,” he said.
A snapshot of San Sebastián’s overheated housing market
The case for declaring San Sebastián a housing stress zone is compelling. According to Donostiako Etxegintza, the city’s public housing body, the average property price has surged to €5,370/m²—among the highest in Spain. Rents are equally steep, averaging €1,037 per month in 2023, marking a 13.6% increase over five years.
Rent and utility costs currently consume 31.6% of disposable household income—above the 30% threshold used as a stress indicator. The housing stock itself is ageing (average building age: 53 years), with limited accessibility—one in five properties lack a lift, a figure that rises to 31% in areas like Intxaurrondo.
Additional concerns include:
- 2.2% of the housing stock is vacant, with around 1,481 homes considered suitable for reactivation;
- 1.4% is used for short-term tourist rentals, mostly in central areas like Centro and Gros;
- Only 360 properties were available to rent on Idealista in April, with asking prices averaging €25.73/m²/month—well above the national average of €14.3.
What the tension zone status means
As per the national Housing Law, the designation enables several key changes:
- Rent for new contracts with small landlords will be capped at the rent paid by the previous tenant (plus inflation as per INE).
- Properties owned by large landlords—defined in tension zones as those owning just five or more residential units—will be subject to reference price indexes.
- A three-year extraordinary extension of existing tenancy contracts can be requested by tenants.
- Landlords offering long-term leases will receive tax incentives, with IRPF deductions ranging from 50% to 90%.
The restrictions also include conditions for previously unrented or vacant dwellings, aligning with national guidelines published after the 2023 Housing Law.
More supply on the way—but slowly
Plans are already in motion to increase supply. The Basque Government and the San Sebastián City Council are collaborating on numerous developments, including:
- 1,360 new homes over the next few years in neighbourhoods such as Ciudad Jardín, Txomin Enea, and Martutene;
- The eventual redevelopment of the Loyola Barracks and the Auditz Akular area;
- New construction partnerships with the national Housing Ministry and Basque Department of Sustainable Mobility.
In total, the city counts over 3,150 protected rental homes and public-use accommodations—a quarter of all rented housing—managed by the public sector or social landlords such as Benta Berri.
The broader picture
San Sebastián joins a growing list of municipalities across Spain to be designated as housing stress zones. As of this year, 271 municipalities in Catalonia have already received this status, with further applications expected from Bilbao, Vitoria, and mid-sized Basque towns such as Galdácano.
Other regions, including Navarra and Galicia, are also preparing similar applications, indicating a rapidly expanding use of government tools aimed at stabilising housing markets.
Whether the measures will meaningfully increase supply or just dampen investor appetite remains to be seen—but for the moment, San Sebastián is now officially on the map as one of Spain’s hottest (and most expensive) residential markets under public review.
