The President of the Government, Pedro Sánchez, has launched a Housing Law contrary to what was promised in the Recovery Plan to receive European funds.
According to the decision of the European Council of July 7, 2021 -see attached reproduction- the promise is to promulgate a new pioneering Housing law in which "it will prevent the adoption of measures that could hinder the supply of housing in the medium term." In the so-called financing agreement of October of that year, it goes further and the commitment is even that "the law should stimulate an increase in the supply of social and affordable housing." And there was no mention then of setting any ceiling on rents, because at that time there was no agreement with Podemos and it was considered contradictory to that claim of not dissuading owners from offering flats.
However, this reform within Component 2 of the Plan does imply hindering the offer, according to a multitude of experts since the announcement last Friday, including Enrique Illán, president of the Association of Realtors with Property for Rent in statements to this newspaper. A study de Idealista already places the rental offer "at 2016 lows" after a new fall of 5% in the first quarter, with, among other factors, the current ceilings.
The mobilization of 50,000 Sareb homes is a theoretical increase in supply, but it is not part of the Housing Law, nor is it a sufficient figure to counteract its restrictive effects on the increase in the stock.
Being then contrary to what was promised, will it pass the Brussels exam? Up to now, the European Commissioner for Economic Affairs, Paolo Gentiloni, has shown great flexibility and has given hope to the Government that he will endorse the controversial pension reform, for example.
In order to endorse the Housing Law, Gentiloni has documents from his own department against him, such as documents from his own department, such as the one last fall called the Housing Market. Evolution in the Eurozone. It alerts against the short-termism of setting ceilings on rent increases. “Caps in the private rental market may have short-term appeal in the sense of restraining increases at a time of cost pressure. However, in the medium term, excessive regulation of the rental market can create dual markets and reduce supply (...,). Strict regulation can lead to mismatches between supply and demand, which can lead to speculative housing bubbles and an excessive accumulation of household debt by pushing them to buy a home, “he describes.
Thus, it joins studies by the Bank of Spain against putting caps on increases due to their effect against supply and by BBVAResearch or Funcas. Very illustrative of short-termism is the so-called Housing and Future of Pompeu Fabra University on the pioneering Catalan experiment of 2020 to control prices. "During the year and a half that the law is in force, there is a price reduction of around 5% -decreasing throughout the period-, while the drops in supply are around 15%," he says. When including the pandemic period, it is difficult to measure the true reduction effect, but an Esade study that revisits this report affirms that where prices fell was in the most expensive homes.
On the other hand, although the Housing Law is launched in the middle of the electoral campaign, it means trying to lately fulfill a commitment to receive the fourth payment of European funds next autumn, because it forms part of the package for this period together with, for example, the reform of pensions. In that decision of the European Council, it was assumed that the Housing Law should be "finished no later than September 30, 2022."
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