The average rent in Spain has increased exponentially in recent years and not only in the big cities. Generally, the rent that a tenant must pay every month has increased by nearly 60% between 2015 and 2022, based on data collected by the Brainsre real estate data platform.
This rapid increase, not correlated with the salaries of the Spanish, has shot the percentage of income that goes to pay the rent. In the Balearic Islands, a region highly influenced by tourism, the average net income per household is 29,368 euros, according to the INE; while the average rent is 23,400 euros per year. The same happens in Catalonia, where despite market intervention, the average income is 34,982 euros and the average annual rent is 16,644 euros. In the capital of Madrid the phenomenon is repeated, with an average rent of 16,476 euros and income of 37,687 euros.
The rent threshold with respect to income that experts consider to be ‘healthy’ is located at 30%-35%, that is, allocate that percentage of household income to pay for housing, either rented or owned. This percentage is exceeded in eight autonomies in addition to Madrid, Catalonia and the Balearic Islands: Andalusia, located at 51.23%; Canary Islands, by 38.69%; Cantabria, by 36.89%; Valencian Community, by 43.26%; and the Basque Country, located at 35.2%. The areas where the least percentage of salary goes to rent, below 30%, are Ceuta, Melilla, Aragón, Asturias, Castilla y León, Castilla La-Mancha, Extremadura, Navarra and La Rioja.
According to the report The Housing Property Telescope of the consulting firm EY, the investment funds and large homeowners in Spain are the cheapest to rent their homes, between 7% and 20% below the market price of its areas of influence.
The Spanish manager Azora, criticized for buying social housing from the Community of Madrid during the previous financial crisis, rent on average with a discount of 30% regarding the market. Resydenza, the platform of one of the 50 largest fortunes in Spain, puts its homes 21% lower than its comparables or Realia, owned by Mexican billionaire Carlos Slim, does so with a 10% discount. All these homes are in areas of great scarcity such as Madrid, Barcelona, Malaga and Valencia.
The partner responsible for Real Estate in the EY Strategy & Transactions area, Javier García-Mateo, assures that “institutional investors are the ones that are favoring access to housing for the lower classes & rdquor;.
Despite the importance of the large forks, their role is insignificant in the Spanish rental market. The total 95% of the housing stock in this market is in less than individuals, which raise their rents to obtain higher profits. For the time being, demand is supporting these price increases, sustained by a shortage of supply.
Paralyzed housing law
The Housing Law, one of the main promises of the coalition government led by Pedro Sánchez, has been paralyzed in Congress for four months despite being considered a priority. The negotiation will be difficult because the partners of the Executive legislature demand guarantees that the autonomous powers will be respected, something to which the Minister of Transport and Housing, Raquel Sánchez, has committed.
This issue also prompted a critical report from the General Council of the Judiciary (CGPJ) in which it asked to specify the rules of intervention in rents. To them is added that the communities governed by the PP have announced that they will not apply the norm.
“Interventionist measures, such as price controls, only generate legal insecurity and reduce the existing offer, resulting ineffective in solving the problem of access to housing,” he tells this newspaper Joan Clospresident of the Association of Rental Housing Owners and former mayor of Barcelona.
Until now, the Executive has acted indirectly in the housing market by prohibiting the rent update above 2% until next December 31, separating it from the Consumer Price Index (CPI).
Possible solutions
Spain needs between 1.5 and 2 million new homes for rent to meet existing demand, according to a report by the consulting firm Colliers. Taking into account that around 110,000 new works are started each year, it would take 15 years to cover the rental demand. The necessary budget would require an investment of 250,000 million euros, more than the annual expenditure of the State on pensions, estimated at less than 200,000 million.
The owners of flats obtain on average a annual return between 2.5% and 5.5%, a very modest return compared to what can be obtained in other investments such as the stock market or other real estate assets. Despite the low profitability, it is one of the safest and most resilient bets in times of crisis. However, no matter how much interest there is, if the return does not reach a minimum, the funds will not promote more affordable rental housing.
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Some Administrations have opted for public-private formulas to encourage the construction of new flats. Catalonia, the Community of Madrid or the Madrid City Council have proposed funds build affordable rental housing on public land in exchange for rental income for 40 or 70 years. The Vive Madrid Plan has already started the procedures for the construction of 7,783 units of the 25,000 it hopes to have in eight years.
Joan Clos urges the Public Administrations to “generate a stable and lasting regulatory framework, which gives legal certainty to owners and investors in the long term”. It is also important, in his opinion, “to make a firm commitment to public-private collaboration, as other European countries have successfully done”.