According to data obtained by Atlas RE Analytics and Gesvalt,, In its latest study on affordable housing in Spain, more than 1 million dwellings are needed (1.003.064) to meet the demand of the Spanish population with difficulties in accessing a home. The consultants have estimated this figure on the basis of the number of households that currently spend more than 40% of their income on rent.
Since the bursting of the housing bubble in Spain, and especially since the start of the recovery from 2015, one of the most pressing social concerns in the country has been access to housing. Although it is a problem that is focused on the big cities, the whole country has experienced in recent years a strong growth in the price of housing, which has made it inaccessible for a significant part of the population.
Atlas RE Analytics and Gesvalt, have analysed the contextual elements that have led to the current situation, as well as the interest of both the public administration and the private sector, in order to identify possible opportunities for developers and investors.
Sandra Daza, Managing Director of Gesvalt, said: “We believe that this type of collaboration between the Atlas and Gesvalt are of great benefit and usefulness to the sector. Reports such as this one, combining the experience and knowledge of both companies, are essential to understand the state of our real estate sector more accurately and to anticipate future trends. We will continue to work to further develop this type of research on the main issues currently occupying the sector”.
The growing problem of access to housing
The rise in house prices in Spain in recent years is one of the factors that has led the authorities to take a close look at the problem of access to housing. Property prices have not only risen significantly, but also at a faster rate than Spanish wages. This factor has been particularly accentuated since 2014, when we began to see an increase in the requirements for accessing a mortgage.
In particular, the purchase and sale price has increased by 12% since 2014, while the average wage has only risen by 5%. «With regard to mortgages, in 2009, the following were signed 1.79 for each sale and purchase, while in 2020 the figure was 0.72 per transaction. At the same time, in the last quarter of 2020, less than one 10% of mortgages exceeded 80% of the appraised value of the mortgage, with an average of 65%.»
In addition to these phenomena, after a year of pandemic caused by Covid-19, the economic effects derived from the cessation of activity point to a slow recovery of the Spanish economy. The high unemployment rate, especially among young people in the process of buying their first home, is one of the factors that will most influence the real estate market in the coming years. In this respect, government-led affordable housing plans and strategies can be expected to be increasingly ambitious.
The role of public administration and the private sector's views
Due to the aforementioned factors, over the last decade, it has been observed that the main tool of the administration, the promotion and qualification of social housing, has suffered a significant decline. Since 2014, the majority of developments have been carried out by the private sector, with the public sector managing only a small proportion of the total. 19% of total dwellings. Despite this, there has been a drop in private interest in social housing development, which is justified by increasing operating costs and price caps that sometimes bear little relation to market prices in each area.
As a counterpoint, the rental option has registered a notable increase, especially among the young population. The segment between 30 and 44 years of age has gone from a 20% in 2004 to a 31% in 2019. It is precisely this group that tends to seek access to their first home, so it makes sense for affordable access policies to be based on renting.
In addition, the initiatives developed by the administration in the area of renting have coincided in time with the rise of interest in the Build to Rent, Another trend that has led developers to consider new business models linked to the development of rental housing and the long-term operation of assets.
Alejandro Bermudez, CEO of Atlas RE Analytics, The private sector's interest plays a crucial role throughout this process, as it develops the bulk of housing development,“ he notes. Important voices in the real estate sector have seen public-private partnerships as a unique opportunity to reactivate development activity after the pandemic's hiatus, which would in turn serve to alleviate the growing housing problems in Spanish society”.
For its part, Mercedes de Miguel, Operations and Research Director at Gesvalt, For there to be true collaboration, plans must be designed with features that satisfy all parties,“ he adds, ”For there to be true collaboration, plans must be designed with features that satisfy all parties. The country's major developers have expressed an interest in collaborating with the public administration to solve housing problems, but, for the moment, several of them have been sceptical of the plans already published - such as the Plan Vive Madrid, which they consider unattractive from the developer's point of view.
Specific affordable housing schemes
Although there is national legislation describing the basic VPO modalities, each Autonomous Community has legislative competences in the field of housing, so that subsidised housing plans, the modalities available and even the access requirements vary significantly from region to region.
“To assess the plans, it is necessary to know where the greatest volume of affordable housing is needed. Using an analysis of rents per household at postcode level, it is possible to calculate that, in an intermediate scenario, 1,003,064 affordable rental dwellings are needed in Spain. The provinces most in need are Madrid (214,740), Malaga (136,700) and Barcelona (128,733), although Seville (71,319), Valencia (60,146) and Cadiz (59,694) follow closely behind,” explains Bermúdez.
From this estimate, it can be anticipated that the plans that will have the most widespread impact on the sector are the MITMA National Plan and the Plan Vive of the Autonomous Community of Madrid, The total affordable housing needs are not close to being met by any of them, although none of them come close to meeting the total affordable housing needs.
In this sense, Mercedes de Miguel points out that, “The Plan Vive has been welcomed as an interesting initiative by society as a whole. The CAM is making a series of plots of land grouped into lots available to developers. The plots are located in different locations and with very different characteristics, which generates fluctuations in profitability between them. We have calculated the economic yield for each lot currently available and the differences between them are as high as 4.6 M€ per year. The rents that operators could pass on to tenants range from €550/month to €615/month.
With regard to the MITMA Plan, despite an initial target of generating a stock of 20,000 affordable housing units, it has been revised to 100,000 units in affordable rental schemes. Although the first projects are already being put out to tender, there are still many details to be defined in the Housing Rights Act.
Opportunities of the European recovery plan
To alleviate the economic effects of the pandemic, the European Union has launched an ambitious recovery plan in the form of aid and transfers for key sectors of the European economy under the name of Next Generation EU. Within this major plan, Spain will receive 60 billion euros in subsidies. The administration has already made public the axes that will form the backbone of the application of the funds: ecological transition, digital transformation, territorial and social cohesion, and gender equality.
One of the most obvious aspects for its implementation in the real estate sector is the rehabilitation of buildings for housing, This could be greatly boosted in the coming years. Numerous experts in the sector have already highlighted that Spain has an ageing housing stock that requires extensive refurbishment activities to bring it up to date with the latest energy regulations.
This bodes well for the property acquisition and refurbishment can become an interesting and low-risk activity for real estate agents.. The Ministry of Transport, Mobility and the Urban Agenda will receive about 4,982 million to be used for housing rehabilitation and sustainable mobility schemes.
On the other hand, the administration has yet to define how the social cohesion axis applies to affordable housing. Social concern with housing-related problems is only increasing, so it cannot be ruled out that as the uses of European funds become more concrete, the following will emerge aid related to the promotion of affordable housing The Commission will have to be attentive to the needs of promoters and other actors in the sector.
For the calculation, an effort of more than 40% of a household's income to pay the rent has been estimated as an intermediate scenario. This 40% rate can be substituted to calculate different scenarios.
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