Spain's housing crisis
"The photo of Spain [...] is that it’s the country with the highest number of evictions in the European Union—half a million in seven years. It has the most empty properties, three and a half million, and has the smallest public rented housing stock.”
This is the bleak picture painted by Carlos Macías, spokesperson for the PAH, La Plataforma de Afectados por la Hipoteca (Platform for Persons Affected by Mortgages), a social movement fighting for housing rights, as, almost 10 years since the bubble burst, the effects of Spain’s housing crisis are still being felt across the country. Many have become trapped by their pre-crisis purchases, others are facing eviction, and some are having difficulty accessing any type of housing.
According to El Punt Avui, only two percent of Catalunya’s dwellings are dedicated to social housing, compared to the European average of 18 percent. A report by Barcelona’s housing committee, the Consorci de l’Habitatge de Barcelona, showed that in December 2015, the city’s waiting list for social housing, or VPO (Viviendas de Protección Oficial), contained 28,238 households, amounting to over 53,000 people. The most affected areas included Ciutat Vella, Sant Martí and Nou Barris. Despite a slight decrease in these figures from the previous year, the situation is showing little sign of improvement. Even if a property is found, security of tenure is not guaranteed, meaning families can be moved at any point, making it almost impossible for them to form community ties. The steady stream of evictions due to non-payment of rent and mortgages is adding to the problem.
The modification of the Land Act (Ley del Suelo de España) in 1997 marked the beginning of Spain's housing boom. Before 1997, land was controlled by the state, and for the most part the government and local councils decided what would be built and where. Under the new law, more land was considered suitable for private development, and the provision of affordable, adequate housing was not a priority for town and city planning departments. According to a report carried out by the Observatorio DESC (Observatory of Economic, Social and Cultural Rights) and the PAH in 2013, 6.6 million properties were constructed in Spain between 1997 and 2007, equalling the number of properties built in Italy, France and Germany combined in the same period.
The Land Act was modified with the hope that an increase in building and development would lead to a reduction in the price of land and property, making housing affordable and accessible. Due to speculation however, housing prices continued to increase. Banks began giving mortgages to almost anyone; sometimes giving more than the market value of the property. Nervous buyers were reassured that if their financial situation changed and they could not make mortgage repayments, they could simply sell the house, make a profit and invest in a more affordable property.
¨Those who made the mistake of signing a mortgage are financially condemned for life¨
When the global financial crisis hit in 2008, the bubble burst. Unemployment rose by seven percent between 2008 and 2009, and continued to rise in the years to follow, hitting its highest rate at just over 26 percent in 2013. Many now-unemployed property owners began to feel the heavy burden of their mortgage repayments, yet the unstable property market meant that selling was almost impossible. They were left with the fear of losing their home, and still being forced to repay a large debt.
It wasn’t long before the banks stepped in, this time to claim their collateral, with nationwide evictions. People were left homeless and in desperate need of social housing. It is important to note here that the repossession of a property does not cancel the owner’s debt. Barcelona’s current mayor, Ada Colau, who also co-founded the PAH, has played an important role in bringing this issue to the fore, pushing the development and implementation of housing initiatives. In her 2012 book, Vidas Hipotecadas (Mortgaged Lives), co-authored by her partner Adrìa Alemany, the situation is compared to that of indentured slaves.
“When a situation of non-payment comes about, the property goes up for auction. If the auction is empty, which is what happens in 90 percent of cases, in the current context of the crisis, financial institutions can auction off the house for 60 percent of the value. [...] The difference of the debt which is not covered by this 60 percent, plus interest and judicial costs [...], remain as outstanding debt for the ex-owner. [...] The result of this anachronistic law is practically a contemporary version of slavery. Those who made the mistake of signing a mortgage are financially condemned for life.” The ‘dación en pago’ or nonrecourse debt—the legal term referring to the handing over of the property and subsequent cancellation of the debt in full—is strongly supported by both Colau and the PAH.
Barcelona was hit hard by evictions, leaving many households indebted to the banks for the foreseeable future. Some found themselves homeless, whilst others were assisted by family members who had acted as guarantors when the mortgage was first signed. According to Vidas Hipotecadas, over 65,000 properties were repossessed in Barcelona between 2008 and 2011, making up 19 percent of the figures for the entire country during that period.
National and local governments were unable to offer any immediate solution. Angry and frustrated by the lack of political response, it was up to mortgage eviction had been pushing for nonrecourse debt. However, the bank would only agree to it if accompanied by a payment of €10,000. Left with few options, she, along with a number of others facing mortgage evictions present that day, were encouraged to chase their bank managers, send constant emails, and sit in the offices with a chair, a sandwich and a PAH t-shirt. These methods may seem unorthodox, but they get results.
As well as organising sit-ins and pressuring banks and landlords, the PAH strives to empower those facing evictions and give them the tools they need to fight for their right to housing. The organisation has been so successful that the city’s housing committee (the Consorci de l’Habitatge de Barcelona), unable to cope with the gravity of the problem, has directed urgent eviction cases to them. Indeed, the strain on the Consorci de l’Habitatge has been known to, inadvertently, worsen the situation for some. Speaking at a recent meeting, one woman explained that she had been issued an eviction order for September 22nd, but couldn’t move into social housing until the 27th. What could be seen as an administrative oversight causes additional stress and wastes time that could be dedicated to those with more extreme problems.
For those who do not qualify for the emergency housing list, the PAH has implemented structures to ensure nobody ends up on the street. ‘Obra Social’ is a programme, initiated by the PAH, which involves the reoccupation of dwellings from which families have been evicted or properties owned by banks. As it is illegal, this course of action is only advocated for extreme situations where evictions cannot be avoided and families are facing homelessness.
One of the crucial achievements of the PAH, along with the Alliance against Energy Poverty (APE) and the Observatorio DESC, was the passing of the controversial ‘Law of Urgent Measures against Evictions’ (La ley de medidas urgentes contra desahucios, 24/2015) by the Catalan parliament last year. Amongst other points, this law obliges financial institutions and landlords to allow tenants to stay in their property and rent it as social housing. The rent cannot exceed more than 10 percent of the household’s income and must be offered for a minimum of three years. The new law also prevents water, gas and electricity companies from cutting services to those unable to pay bills, in an attempt to combat energy poverty. The passing of the law was a huge victory for the the groups involved, although it has recently been brought before the Spanish Constitutional Court, as the Partido Popular (PP) has declared some areas unconstitutional. Some have questioned, however, whether the PP’s agenda is more concerned with commercial interests than the plight of the tenants.
In the meantime, the PAH have been using the outline of the new law to strengthen their cases. At a meeting last month, an announcement was made that one active member of the organisation, who is currently unemployed and living in fear of eviction, managed to obtain an agreement allowing her to pay just 10 percent of her income in rent, amounting to only €10 per month.
However slow, the Consorci de l’Habitatge de Barcelona has made efforts to improve the situation. Improving housing in the city is one of Colau’s main objectives as mayor, and one of the initiatives she has supported since taking office in June 2015 is the 'Empty Properties Programme' (Programa Pisos Buits) conceived by Habitat3, which aims to encourage landlords to rent their housing, through the council, to those on the housing list. According to the committee’s website, landlords commit to contracts which last a minimum of 40 months (48 should the property need renovations). In return for this, landlords are guaranteed 36 months rent, and renovations are paid for by the committee. Landlords receive an average rent of €300, as long as this does not exceed 30 percent of the household’s income; any difference is covered by the council. One of the main problems with this programme is the feasibility of landlords accepting low rates in a city where the demand for rented housing is high and private tenants are easy to find.
Along with the Empty Properties Programme, the council has been making efforts to make more units of social housing available by implementing a tax on empty properties. In Barcelona alone, the banks possess at least 2,400 empty properties. This June, a new tax for banks and landlords around the city was proposed. The provisional law was supported by Colau’s party, Barcelona en Comú, and the PSC (Catalan Socialist Party), while both the PP and Ciutadans voted against it. A decision will be taken in the coming months as to whether the law will be passed. If passed, it is hoped that the tax will deter banks from leaving properties empty and therefore opt for social rent tenants.
Other plans by the Housing Committee include the construction or acquisition of 1,000 properties destined for social rent tenants, with 300 of these specifically located in the areas of Ciutat Vella, Sants and Nous Barris. Building more properties, however, is a slow process and it is unlikely that the Catalan government or the city council will be able to fund enough new-build projects to solve the housing shortage.
Although time is of the essence, the lack of housing stock in Barcelona means that there will not be a quick solution for those on the housing list, and it looks as though there could be many more rent and mortgage evictions to come. Spain is not alone in its housing situation, with other European countries, including the UK and Ireland, experiencing long waiting lists and a woeful shortage of housing; the right to housing for all continues to be a pipe dream for many. Now, with the housing market on the road to recovery (see right), hopefully this time round both banks and potential buyers will learn from the mistakes of the country’s last housing boom.
A GUIDE TO BARCELONA'S HOUSING GROUPS
Consorci de l’Habitatge de Barcelona. The city's housing committee—a public body that involves both the regional government (Generalitat de Catalunya) and the city council (Ajuntament de Barcelona).
Plataforma de Afectados por la Hipoteca (PAH). A social movement formed by volunteers in 2009 in response to the increasing number of evictions in the country. Since its formation, the PAH volunteers have worked with people facing both rent or mortgage evictions. As well as providing emotional support to those with housing problems, the PAH also organises sit-ins, occupies and pressures banks and ensures that those affected do not end up on the streets.
Observatorio Derechos, Económicos, Sociales y Culturales (ODESC). The DESC promotes social rights, such as the right to adequate housing, work and education. They work closely with the PAH in relation to housing issues. Ada Colau worked with the DESC in the past, whilst Carlos Macías (spokesperson for the PAH) is a current employee. As the PAH is a social movement, it does not receive subsidies or use public resources. The DESC, on the other hand, manages these resources in order to respond to the needs of the PAH.
Alianza contra la Pobreza Energética (APE). Formed by a number of groups and social organisations in 2014, the APE’s aim is to combat energy poverty, guaranteeing universal access to basic provisions (water, gas and electricity) and to stop these provisions being cut off by suppliers.
GETTING BACK ON THE LADDER?
Despite the disastrous effects of the property crash in Spain, the culture of buying has not disappeared according to Carlos Macías: “I think the population’s general attitude has partially changed...but there is still a lot of work left to do in order to provide rental security and ensure it is a stable option for people.” It seems that buying continues to be the best way to guarantee security of tenure and a stable home for your family.
Recently, the housing market has finally turned a corner, with housing prices in Barcelona reported to have increased by 9.45 percent in the first half of this year (Grupo Tecnocasa). Much of the activity, however, is coming from investors. Some of the most attractive areas include Eixample, Poble Sec, the Gothic Quarter and Barceloneta, where investors account for 84 percent of sales (El Periódico). Sants, on the other hand, is reported to have a very high buy-to-live ratio.
Cash sales are thought to account for a high proportion of these transactions, which may be due to the fact that 40 percent of recent sales went to foreign buyers, or increased cautiousness on behalf of the seller or the banks. Either way, this recent recovery appears to be fuelled by landlords and foreign investment, rather than individuals or families managing to get a foot on the property ladder, and could result in rents being pushed up further.