Barcelona and Madrid have very different ideas on tackling Spain’s housing crisis. Which will succeed?

In Spain, the cities of Barcelona and Madrid are facing a significant housing crisis, yet they are adopting fundamentally different approaches to address the issue. This contrast highlights the broader debate on sustainable housing across Europe. Both cities have experienced soaring housing costs over the past decade, with rents increasing by approximately 60% and sale prices by 90%. This has created challenges for young people, working families, and retirees, who struggle to find affordable housing.

While Madrid embraces a construction-focused strategy, allowing significant investment from large developers, Barcelona is attempting to steer the housing market toward public welfare, even amidst political and institutional hurdles. This situation underscores the competing visions of urban development currently emerging in Europe.

Spain's economic growth is overshadowed by rising inequality and housing exclusion. More than half of all homes sold in the last decade were purchased without a mortgage, indicating that properties are increasingly acquired by those already owning multiple homes. The number of individuals owning ten or more homes has increased by 20%. This phenomenon, termed "the great housing grab," has seen over 1.3 million units enter the rental market, primarily acquired by investors following the 2008 mortgage crisis. The previous conservative government exacerbated the situation by providing tax breaks and rewriting tenancy laws, which turned tenants into profitable assets.

The long-held belief in a middle-class society of homeowners is crumbling, as wealthier individuals continue to purchase homes and outbid working families. These families often end up renting homes at inflated prices, enriching the already affluent. The crisis stems from decades of governmental policies that have prioritized housing as a financial asset, including dismantling social housing, removing rent controls, and fueling mortgage debt.

Madrid's response to the housing crisis has been to promote construction without significant regulation. The regional government has openly opposed new housing laws aimed at capping rents and addressing housing inequality. Their approach prioritizes building over regulation, believing that increasing supply will alleviate the crisis. However, research indicates that simply building more homes does not guarantee affordability.

In contrast, Barcelona has adopted the new housing regulations, which have already begun to show positive results, such as a 6.4% decrease in average rents for new contracts. Despite this, loopholes in the law have allowed landlords to exploit temporary contracts, leading to increased rents and fees. To combat this, the Catalan government is implementing additional regulations to control these practices and curb speculation.

Both cities represent different futures for housing policy. Barcelona aims to ensure permanent affordability through regulations, while Madrid focuses on supply-driven growth. While it remains uncertain which model will ultimately prevail, the experiences of both cities illustrate that merely increasing housing supply without regulation does not necessarily lower prices.

Barcelona's journey highlights the importance of effective regulation, but also indicates that without addressing the incentives that promote housing as a financial asset, reforms may fall short. The choice between these two cities reflects a broader societal question: whether to allow housing to remain a source of profit or to reestablish it as a public good. This is not just about housing, but about tackling inequality and ensuring sustainable living standards for all.