Spain and Portugal to use bad bank and private properties to address housing crisis

Spain and Portugal, two of the poorest countries in western Europe, are looking to tackle the issue of soaring property costs by using a “bad bank” created during Spain’s most recent financial crisis to build up to 50,000 units of public housing. The lack of investment in public housing in the past has resulted in limited stocks of subsidised homes in the region.

The rising costs of rent, mortgages and property prices have surpassed food and energy prices as the biggest part of the cost-of-living crisis. Spain’s cabinet is set to approve a plan that would increase the number of public homes by 17% using properties from its bad bank, which was established in 2012 to deal with toxic assets from failing lenders after a real estate bubble burst four years earlier.

According to Pedro Sánchez, the Prime Minister, the plan aims to address a significant and authentic issue by providing more homes at reasonable prices, particularly for young people. He stated that although housing is a constitutional right in Spain, it is not yet a tangible right.

The housing minister of Portugal, Marina Gonçalves, has stated that the private market alone is not enough to address the housing issue in the country’s largest cities, Lisbon and Porto. The government has approved plans to invest €2.4bn in public housing by the end of 2026 and presented a housing bill to parliament last week that would allow the state to convert vacant private properties into social housing.

Similarly, Spain plans to sell 21,000 empty properties from its bad bank, Sareb, to regional and municipal governments to convert them into public housing. Public housing represents only a small percentage of housing stock in both countries due to the lack of policy focus in the past. The governments are now pursuing broader reforms to make their private property markets fairer, while also making public housing a priority.

The majority-owned central government bank is offering its resources to build 15,000 units of public housing. Jesús Leal, a sociologist and professor at Madrid’s Complutense University, believes that public housing is the only long-term solution to Spain’s affordability crisis. However, he is sceptical about the effectiveness of the plan since the housing crisis is most severe in large cities, such as Madrid, Barcelona, and Valencia, whereas the bad bank’s properties are located elsewhere.

The bad bank’s assets are mostly situated close to the Mediterranean coast, but they are not in prime locations, which resulted in their becoming toxic assets. Nevertheless, a government official stated that the number of homes is significant and that 50,000 homes are a high number compared to the current amount of public housing available.

Next (Home prices in China increase rapidly in March, for the third consecutive month)

Spain and Portugal to use bad bank and private properties to address housing crisis

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