Spain’s rent controls were sold as protection for tenants. Economist Santiago Calvo says the reality is very different: fewer homes to rent, smaller flats, and a housing crisis that keeps getting worse.

Spain’s experiment with rent controls is approaching its second anniversary, and the debate about whether they work is becoming harder to ignore. In a recent interview with property portal Idealista, economist Santiago Calvo argues that the evidence already points clearly in one direction: controls are shrinking supply, worsening the quality of rental housing, and doing little to reduce the real cost of renting.

In the interview, Santiago Calvo — a PhD economist from the University of Santiago de Compostela and professor of Quantitative and Public Economics at the University of the Hesperides — offers a detailed critique of Spain’s current housing policy. His central argument is straightforward: rent controls do not solve the housing crisis because they address symptoms rather than causes.

Catalonia provides the most widely cited example. On the surface, the policy appears to be working. Average rents in Barcelona have reportedly fallen around 4.8% since the introduction of rent caps in 2024.

However, Calvo argues that this statistic is misleading. When rents are measured per square metre rather than per property, prices are broadly unchanged and still rising slightly. The apparent fall in average rents is explained by a shift towards smaller flats being rented.

In other words, tenants are not paying less for the same housing — they are paying roughly the same price for less space.

At the same time, the number of new rental contracts has fallen sharply. Barcelona saw just over 7,400 contracts signed in the second quarter of 2025, down nearly 25% from the previous year and roughly half the number seen at the peak in 2021.

According to Calvo, this outcome is exactly what economic theory predicts when price controls are imposed: the adjustment occurs through quantity and quality rather than through price.

Supply shrinks wherever controls are introduced

Calvo notes that similar patterns are emerging in other regions that have introduced rent controls.

In Navarra, the regional government has highlighted an 8.6% fall in rents as evidence of success. But Calvo points out that the data tells a different story when examined more carefully. Average rental property sizes are shrinking, temporary rentals are increasing, and new contracts have dropped sharply once the period after the controls were introduced is isolated.

In A Coruña the effect has been even more dramatic. The number of rental contracts reportedly fell from more than 700 in July, when the city was declared a “stressed housing zone”, to just over 200 by December.

For Calvo, these examples show a consistent pattern: wherever rent controls are applied, supply contracts and the quality of available housing deteriorates.

Why governments keep backing rent controls

If the evidence is so clear, why do governments continue to defend rent controls?

Calvo’s answer is blunt: politics.

Rent caps are politically attractive because they allow governments to present themselves as protecting tenants from market “abuses”. The immediate beneficiaries — existing tenants paying lower regulated rents — are visible and politically grateful.

Those harmed by the policy are less visible. They are the people who cannot find a rental property at all, or who never enter the market because the supply has dried up.

Admitting that the policy has failed would be politically costly. As Calvo puts it in the interview, publicly recognising that rent controls do not work would be “political suicide”.

The real problem: Spain doesn’t build enough housing

For Calvo, the rental crisis is not the core problem but a symptom of a deeper structural issue: Spain does not build enough housing.

He cites research from the Ruth Richardson Centre for Public Policy Analysis showing that construction profitability in Spain is effectively zero or slightly negative. Despite house prices rising more than 40% since 2020, rising costs and heavy regulation have eroded margins.

Several factors are responsible:

• Strict land-use regulations that severely limit buildable land
• Planning procedures that can take 10–15 years to convert land into housing
• Increasing technical and energy standards that raise construction costs
• A shortage of skilled labour in the construction sector

The result is that building new housing is simply not profitable enough to attract large-scale investment.

Without new supply, prices inevitably continue to rise.

A regulatory spiral

Calvo also warns about what economists call the “regulatory spiral”.

Rent controls tend to trigger behavioural responses from both landlords and tenants. Property owners shift towards temporary contracts, room rentals, or withdraw properties from the market entirely.

Governments then respond by expanding regulation to cover these new arrangements, which in turn reduces supply further.

Spain may already be entering this cycle. Catalonia has begun regulating temporary rentals and room rentals, and the national government is considering extending controls to those segments as well.

According to Calvo, each new restriction simply removes another “escape valve” in the market.

Lessons from abroad

The economist contrasts Spain’s approach with policies in other countries that have focused on increasing supply.

Austin, Texas, for example, has seen rents fall sharply after liberalising planning rules and dramatically increasing housing construction. San Francisco is converting unused office space into housing. Canada and Australia have introduced policies designed to reduce regulatory barriers and encourage building.

The pattern is consistent: where governments make it easier to build housing, supply increases and prices stabilise.

Spain, Calvo argues, is moving in the opposite direction.

No ceiling for rents yet

Without structural reform, Calvo believes rental prices will continue to rise.

Households can adapt by sharing flats, moving further from city centres, or spending a larger proportion of their income on housing. But these adjustments simply stretch affordability rather than solve the underlying problem.

Spain has created roughly one million new households in the last four years while housing construction remains historically low.

Until supply increases substantially, Calvo’s conclusion is stark: there is no ceiling for rents in sight.

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