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Madrid is facing a deepening housing crisis driven by a substantial shortage of available homes and rapid price increases for both renters and buyers. Construction has lagged far behind population growth, with labor shortages and high development costs worsening the bottleneck. This gap between demand and supply has made access to affordable housing especially difficult in central districts, where rents for a two-bedroom apartment range from €1,800 to €2,600, and citywide average rents have risen by more than 15% year-on-year—massively outpacing wage growth.
The crisis affects a wide spectrum of residents, but its impact is felt most acutely by urban youth, low-income households, immigrants, and single-parent families. These groups face rising risks of overcrowding or eviction and often must accept poor-quality housing or share small spaces. The influx of foreign buyers and the booming short-term rental market have also inflated prices, reducing availability for local residents. Even as home purchases become unattainable for a growing share of the population, the already strained rental market cannot meet soaring demand. The crisis is structural and most acute in Madrid’s most central and popular neighborhoods, where affordability pressures and lack of supply converge most forcefully.
In Madrid, around 40% of households currently rent their homes, while 60% own them. The rental market has grown sharply due to rising property prices and changing lifestyles, with renting increasingly favored by younger generations. As of spring 2025, the median price to purchase an apartment is approximately €5,467 per sqm—up 24% over the previous year—while the median rent is about €21.4 per sqm monthly, which is €10 above the Spanish national average.
Publicly owned housing plays a minimal role: only about 2–2.5% of all dwellings are publicly owned, far below the EU average, and just 1.1% of rental homes are designated as social housing, making public provision highly limited. Most social housing in Madrid is owner-occupied rather than rented, and social housing can be private or public, but always subject to price controls and targeted subsidies for eligible income groups.
Public housing and social housing in Madrid are not strictly synonymous. Social housing (vivienda de protecciĂłn oficial or VPO) may be privately or publicly owned and includes regulated pricing and allocation based on need and eligibility, whereas public housing refers specifically to dwellings directly owned by local authorities. In both cases, public supply remains far below demand.
Madrid’s city administration has recently prioritized policies that largely favor private development and conversion of housing, including new laws easing the transformation of residential blocks into short-term tourist apartments and allowing more commercial spaces to become ground-floor tourist flats. This approach is widely criticized for accelerating the loss of long-term residential units and deepening the affordability crisis, as it enables thousands of buildings citywide to shift from residential to tourist use, with minimal emphasis on building or preserving genuinely affordable homes for local residents.
The primary regional response is the "Plan Vive," led by the Community of Madrid but operating across the metropolitan area. This multi-year program aims to deliver 25,000 new affordable rental units by 2032, prioritizing youth under 35, seniors, people with disabilities, and women affected by domestic violence. Most units are realized through public-private partnerships using industrialized building methods to speed up delivery and reduce costs, but only a minority are located within Madrid city proper.
At the national level, the Spanish government has committed to tripling public investment in housing for 2026–2030 and established a new state-owned housing company to convert and manage thousands of former bank-owned properties as affordable rentals, with eligibility capped at 30% of income. Measures to penalize vacant property owners and regulate rents in “stressed” areas are also being rolled out. However, city-level action in Madrid remains limited and is widely criticized as insufficient to meet the scale of local need or to ensure sustainable, inclusive growth.