In response to rising property prices and limited housing supply, Prime Minister Pedro Sánchez has unveiled a series of sweeping reforms aimed at making homes more affordable for residents. The measures include curbs on non-EU property purchases, tax incentives for landlords, and tighter regulations on tourist apartments. These steps come as Spain deals with a housing market where speculation and tourism-driven demand have made it harder for locals to find affordable homes.

Why Are Housing Prices Rising in Spain?

Spain’s housing market has seen sharp price increases in recent years, driven by a combination of factors. Many homes are bought as investments, often by foreign buyers who do not reside in the country. As the Prime Minister detailed in his speech on Monday, January 13, in 2022, non-EU residents purchased 27,000 properties, contributing to reduced availability for Spanish families. Additionally, the proliferation of short-term tourist rentals has led to higher rents in popular cities and coastal areas, further squeezing local residents out of affordable housing options.

New Restrictions on Foreign Property Buyers

To tackle speculative buying, Sánchez has proposed limiting property purchases by non-EU citizens. He argues that housing should not be treated as a financial asset when there is a shortage of affordable homes. This reform aims to prioritize housing for those who live and work in Spain, ensuring that foreign investment supports economic growth rather than driving up prices.

Más viviendas, mejor regulación y mayores ayudas para el acceso a la vivienda.

Esa es la política del Gobierno de coalición progresista. Con las medidas ya aprobadas y con las 12 medidas nuevas que aplicaremos ahora.

Nos vamos a dejar la piel en la causa de la vivienda.

Por… pic.twitter.com/frt87gAdL4

— Pedro Sánchez (@sanchezcastejon) January 13, 2025

Incentives for Affordable Rentals

Encouraging more affordable rentals is central to the government’s plan. Property owners who rent at or below the reference price index set by the government will qualify for a 100% exemption from income tax on their rental earnings. Unlike existing schemes, this incentive will apply across Spain, removing the need for an area to be officially designated as high-demand. If approved by Parliament, this measure is expected to increase the number of homes available for rent at reasonable prices.

To further support landlords, the government will introduce public guarantees to ensure rent payments, focusing on leases to tenants under 35. This initiative aims to reduce the financial risks of renting out properties, encouraging more owners to participate in the rental market.

Stricter Controls on Tourist Apartments

Tourist rentals have been a significant driver of rising housing costs, especially in major cities and tourist hotspots. The proposed reforms will classify tourist apartments as commercial businesses, subjecting them to VAT and other taxes in high-demand areas. Increased inspections and enforcement will target illegal and unregistered properties, aiming to balance tourism’s economic benefits with residents’ need for affordable housing.

Expanding Public Housing Supply

To boost the availability of affordable homes, Spain’s government will transfer 30,000 properties from the state-controlled ‘bad bank’, Sareb, to a new public housing entity called Sepes. This includes an immediate transfer of 13,000 homes and nearly two million square meters of land for future residential development. New legislation will also ensure that state-built housing remains publicly owned and protected indefinitely, preventing it from being sold off.

A Comprehensive Strategy for Fairer Housing

Sánchez’s twelve-point plan reflects a multifaceted approach to solving Spain’s housing problems. By regulating speculative buying, encouraging affordable rentals, and expanding public housing, the reforms aim to create a fairer, more balanced market. With a mix of fiscal incentives and stronger oversight, the government hopes to make housing a sustainable pillar of social welfare for all citizens.

However, will these measures be enough to curb the rising costs of homes and rents in high-demand areas? Can tighter controls on foreign investment and tourist apartments effectively balance the needs of residents and the benefits of a thriving tourism sector? As these reforms move forward, their long-term success in improving housing affordability will depend on careful implementation and continued public oversight.

Main image: Pexels/David Pickup