Spain's plan to end housing crisis affecting foreigners

The Socialist government of Pedro Sánchez has presented a plan to ease Spain's housing crisis, which includes measures to discourage non-EU foreigners from buying homes and a tax reform so that tourist apartments are taxed like other economic activities.

During her speech, the President of the Government and Minister of Housing, Isabel Rodríguez, assured that the right to decent housing must constitute «the fifth pillar of the welfare state». In December 2024, Sánchez announced the creation of «a large public housing company capable of building and managing housing from the General Public Administration», without going into details. However, the leader of the executive branch has now made public some of the measures he has prepared for the Spanish real estate market in 2025.

Tourist apartments have been a controversial topic in recent years. The government has announced that it will introduce tax reform so that tourist apartments are taxed in a manner comparable to other economic activities, such as the application of VAT in tourist areas.

But the government is also proposing to restrict home purchases by non-EU citizens who do not live in the bloc. In fact, it intends to increase the tax burden on these buyers to 100% in order to guarantee residents free housing.

Sánchez also announced that the government would tighten laws to prosecute holiday rental fraud and create a fund so that autonomous communities can strengthen checks.

The Socialist government also plans to transfer around 3,300 homes to the State Housing Company, which will be protected by affordable prices. During the first quarter of this year, the state company will also include in the housing market more than 30,000 apartments and houses that SAREB (Sociedad de Gestión de Activos Procedentes de la Reestructuración Bancaria) has put on the market.

In 2023 alone, non-residents from outside the European Union bought around 27,000 houses and apartments in Spain.

Pedro Sánchez

President of the Spanish Government

A legal mechanism will also be created to ensure priority in the purchase of housing by the new State Housing Company, and a system will be created that will provide public guarantees for the protection of landlords and tenants participating in affordable rent. This way, the landlord will be confident in collecting rent, and the tenant will be confident in greater equality in access to housing and a greater supply at an affordable price.

Finally, the state will create a program to help rehabilitate empty homes so they can be rented out, providing financial assistance to people who renovate an apartment to rent it out for at least five years.

Spain plans to introduce strict laws on property purchases in a bid to control the country's rapidly growing housing crisis, which has seen residents complain they cannot afford to buy or rent property.

Spain is set to levy a 100% tax on property purchases made by non-EU buyers and non-residents in a bid to better tackle the country's growing property crisis by reducing foreign purchases.

It is one of 12 measures recently announced by Prime Minister Pedro Sánchez to try to improve the housing crisis. Spain is facing a shortage of affordable properties to rent or buy after a sharp rise in house prices, exacerbated by rising inflation and interest rates.

The current situation has caused anger and discontent among residents, aggravated by the lack of new housing, which has led to the demand for housing significantly exceeding supply, leading to an even greater increase in prices.

Sanchez told an economic forum in Madrid that «the West faces a crucial challenge: not to become a society divided into two classes: rich landowners and poor tenants.»

Sanchez added that in 2023 alone, non-EU residents bought around 27,000 houses and apartments in Spain, and they did so not to live there or with their families, but to “speculate” and “make money” from them, which he said could not be allowed in the current context of a shortage of affordable housing.

The Prime Minister stressed the seriousness of the problem and the potential economic and social consequences that could result from a prolonged housing crisis. No further information was provided on how the proposal would work or when it would be adopted and finalised. Other major European economies, such as Ireland and the Netherlands, have also experienced housing crises in recent months.

Spain's reputation as a popular second home destination is under threat

Spain has long been one of the most popular destinations for second homes and holiday homes, particularly in areas such as Barcelona, Ibiza and Marbella.

Much of the interest has come from American, British and Moroccan buyers, while interest from Venezuelan and Mexican buyers has increased in recent years.

Opponents of the plan argue that such restrictions could have a serious impact on the country's tourism sector, which is a major contributor to the country's economy.

Other measures proposed to address the housing crisis include increasing the supply of social housing, as well as tightening restrictions on short-term rentals of apartments. Sánchez also proposed encouraging the renovation and rental of existing homes at fair prices.

Spain announces shock plan to tackle housing crisis

Prices too high, not enough supply, a market partly dominated by non-resident foreigners: at a time when most Spaniards cannot buy a home and are having great difficulty renting, the government of Pedro Sánchez presented on January 13 a comprehensive plan to combat speculation in the Spanish property market.

The President of the Government, Pedro Sánchez, is aware that housing is one of the main concerns of Spaniards and wanted to address a problem that he knows the electorate is waiting for him to solve. The package of measures, which includes announcements made in recent weeks, meets “three objectives”: “more housing”, “better regulation” and “more help”, the Socialist leader said at an economic forum.

Double taxation of foreigners

Among the 12 decisive measures he presented, the Socialist leader announced the construction of more than 40,000 public buildings this year so that owners can rent out their homes at affordable prices and the restoration of empty houses to put them on the market. But the plan also includes a ban on social housing ceasing to be social housing, preventing its owners from making a profit from it, and doubling the tax on all foreigners who buy buildings who are not residents of Spain. Of all the buildings and houses under construction, a third are owned by foreigners who do not live in the country.

For most of the Spanish middle class, as well as those under 40, finding a place to live has become an ordeal. One of the main obstacles is the increase in investment funds and tourist apartments, according to the government and experts. For this reason, Pedro Sánchez wants fewer rental apartments and more houses on Airbnb.

It remains to be seen whether these measures will be able to change the reality of the market, which has led a prominent sociologist to say that Spain is now divided between rich landlords and impoverished tenants.

Only 90,000 homes on the market

According to Pedro Sánchez, during the real estate boom of the 2000s, when authorities registered 400,000 new homes, 600,000 homes were built per year. Today, only 90,000 homes are on the market, while 300,000 new ones are built each year.

The Prime Minister, who attributes this decline to the measures taken by the right-wing People's Party after the 2008 crisis, pointed in particular to the low level of social housing. Today, «we have only 2.5% public housing. We are far behind other Member States» of the European Union, «such as France, where it is 14% (social housing), or the Netherlands, where it is 34%,» Sánchez said.

To this end, the President of the Government announced the transfer of two million square meters of land to a newly created state-owned enterprise on which thousands and thousands of units of affordable social housing could be built.

Curbing rent increases

To combat the proliferation of tourist apartments, which he blamed for skyrocketing rents by limiting the number of homes available to locals, Sánchez also announced tax increases and increased government controls. “It’s unfair that owners of three, four or five rental apartments pay less tax than hotels,” he said, promising to present a reform to parliament to tax these owners in the same way as “companies.”

To curb rent increases, Pedro Sánchez also promised tax exemptions for landlords who agree to rent out their homes according to a rent index set by the government, even in areas not under pressure.

In May 2023, the Spanish prime minister had already approved a landmark housing law that would increase the construction of social housing, control rents in areas of tension, and sanctions for landlords who leave their properties unoccupied. But the legislation has so far failed to curb rising prices. Last year, rents in Spain rose by another 11%, according to the Idealista real estate portal.

Main measures of the plan:

Transfer of housing and land to the new Public Housing Company.

Creation of the Public Housing Company

The General State Administration has transferred more than 3,300 homes and nearly two million square metres of residential land to build affordable social rental housing for young people.

SAREB will incorporate 13,000 homes during the first half of 2025 and another 17,000 progressively.

The company will have priority in the purchase of homes and land, in the absence of action by the autonomous communities.

Protection of protected housing

A new regulation will guarantee that all housing built by the State maintains its public ownership indefinitely.

Boost to industrialized construction

Launch of a PERTE to promote modular and sustainable construction, which will reduce times and costs. This project will begin in the province of Valencia as part of the recovery after the DANA.

Public guarantee system for affordable rentals

It will protect owners and tenants in the affordable rental market. It will ensure the collection of rents from owners and offer more options at fair prices for tenants. It will be implemented this year, starting with those under 35 years of age.

Rehabilitation of empty homes

New aid to renovate flats that are intended for affordable rentals for at least five years.

Tax exemptions on affordable rentals

Proposal for 100% exemption from personal income tax for owners who rent homes according to the Reference Price Index, without the need to be in stressed areas.

Regulation of tourist housing

Proposal for these homes to be taxed as an economic activity, including VAT in areas of tourist saturation.

Tax reforms for SOCIMIS

The tax advantages of these entities will be conditioned by the promotion of affordable rental housing.

Limitation on purchases by non-resident non-EU citizens

100% increase in the tax rate for non-European buyers who do not reside in Spain, prioritising access to housing for residents.

Strengthening against fraud in illegal rentals and tourist housing

Stricter inspections and creation of a fund for regional and municipal governments to combat fraudulent use of housing.

New State Housing Plan 2026

It will increase aid for rent and first homes, with special attention to young people, the elderly, people with disabilities and residents in stressed areas.

With these measures, the Government aims to comprehensively address the housing problem in Spain, balancing the needs of owners, tenants and communities affected by tourist saturation or the lack of affordable supply.

The Spanish real estate market will continue to be one of the main protagonists in 2025, with a crisis that could even worsen, warns Julián Salcedo, president of the Forum of Real Estate Economists. Despite the expected increase in permits for new construction, which will reach 125,000 units in 2024, the supply is still insufficient to satisfy demand, especially for rented apartments.

«The problem is not only supply,» explains Salcedo, who points out that the European Central Bank estimates an overvaluation of 10% in the prices of Spanish housing. To address this situation, it proposes three fundamental measures:

1. Controlled liberalization of developable land, facilitating its transformation into urban land.

2. Maintenance of construction costs to allow a moderation in final prices.

3. Taking advantage of the current downward trend in financial costs.

The sector is showing signs of recovery, with approximately 650,000 homes sold in 2024, exceeding the 586,000 in 2023. This improvement is due to several factors: the drop in interest rates, the basic need for housing and the perception of being a safe investment. However, the rental market is in an even more critical situation, with a 36.3% drop in supply and a 26.8% increase in demand.

The situation in the rental market is even more critical. The supply of rental homes has decreased by 36.3%, while demand has increased by 26.8%. This has led to strong competition, with «up to 15 and many more buyers for each home offered.» Salcedo argues that the difficulties in accessing a rental home are even greater than those in purchasing.

The lack of legal security is also affecting the rental market, as landlords are hesitant to put their homes on the market due to the protection of delinquent tenants. Although the government has taken measures to speed up trials for trespassing, protection for non-paying tenants remains a problem.

«It is not a problem unique to Spain, it is a global problem,» says Salcedo, pointing out that the housing crisis affects large cities in Canada, the United Kingdom, France and Italy, among other countries. This global situation is due to the perception of housing as a safe asset in a context of low financial returns.

The expert concludes that the solution lies in more efficient land management: «As the essential raw material in housing is land, what we need is land ready to be put into operation immediately and at the rate at which demand is increasing.»