Policy Reform

Policy Reform in Spain: Impacts on the State of Young and Student Living

Patricia Klopf, Ph.D.
Policy Advisor

At the beginning of 2022, the Spanish federal government announced policies to help the youth find affordable housing and move out of their parents’ homes to encourage their independence. In this article, we attempt to assess the effectiveness of the policies that have been put forward by reflecting on their (un-)intended consequences and ruminating on potential ways forward.

Spainʼs housing market does not differ greatly from other European countries in the sense that it is also struggling with a lack of available, affordable, and accessible rental housing options. What makes Spain stand out from the rest this year, however, is its significant attempts to counter the housing crisis at the federal, regional, and local level. At the beginning of 2022, Spainʼs federal government approved a range of policies, tailored to facilitate young individuals in being able to find and afford their own place to rent and live.

Rental Popularity Among Young People

Spain ranks among the countries with the lowest rentership rates in Europe. Less than one in four of Spainʼs 18.7 million households live in rented homes. While ownership appears to be the norm, a closer look at the rental housing segment reveals a biased demographic picture - one that is far from representative of Spainʼs overall population: In 2020, nearly 70% of young people between 16 and 29 years lived in rented housing. Renters not only tend to be young, but also more likely to be internationals.

Looking at the development of the rental market in Spain over the past 15 years, we have seen a slow, but steady, growth of the Spanish rental market. This development may partially be explained by the fact that job insecurity and low salaries have pushed housing prices out of reach for the young, while implying an increase in the demand for rental housing. Also, if young people wanted to live independently in a rented apartment in Spain in 2020, the average rent would be equivalent to 92.9% of the average net salary of a young person for the same period.

Furthermore, the persisting and continuously increasing attractiveness of Spain as a destination for international students has been adding stress to an already stressed housing and rental market. Indeed, the government and universities continue to forge ahead with the well-intended internationalisation of higher education to fuel talent attraction and retention, despite a closer look at the number of students and PBSA in Madrid, for instance, already indicating a substantial gap between demand and supply.

The Spanish Housing Market in Transition

The Spanish federal government, as well as regional and local governments, have recently put effort into housing policies and measures. This article focuses on two measures that could be particularly relevant for student housing.

Measure 1: A rental bonus for young citizens was announced by the federal government in January 2022. Through subsidising rents, the measure was intended to help young Spaniards become independent at an earlier age. Although this measure may be a punctual aid to become independent, it is questionable if a rental bonus can sustainably help secure the youthʼs independence.

Solution Angle 1: People need a place to live, in order to stand a chance to become independent. After all, a necessary precondition for independent living is the availability of a place to rent. A rental bonus, however, is a solution that fails to address the lack of supply. Moreover, in many popular cities in Spain, the bonus amounts and the criteria to qualify for bonuses do not match the reality of rental prices –– even less so in a context of continuously rising rental prices. Although a rental bonus is a well-intended gesture, it likely is a toothless one that widely disregards the cost of living. Moreover, measures to facilitate independent living of the young must go beyond housing. For instance, salary levels and employment rules, can be important topics to address, for ensuring economic and social stability or even upward mobility of the young.

Measure 2: A rent cap that had been implemented in Catalonia to limit rent prices was found to be unconstitutional in March 2022, before the federal government approved a rent cap in an attempt to counter inflation and help warrant affordable rental housing. In the short term, rent caps may indeed show the intended consequences; namely a cut in rental prices. However, it would be naive to ignore potential mid- to long-term consequences of rent caps when weighing their pros and cons.

Solution Angle 2: People need an incentive to build a place and/or oer it for rent. The implementation of rent caps can have an impact on the rental market as a whole –– especially in the mid-run landlords may find it increasingly difficult to make informed decisions about offering rental homes. In a worst case, it may discourage them from offering their supply for residential living purposes at all. In the longer run, moreover,  investors may be disincentivized to invest into new constructions in a market with rent caps in place, because of the expected low and/or uncertain yield prospects. After all, rent caps may only intensify a core problem many rental markets in Spain and Europe have been facing for years: the lack of rental housing supply.

Lessons from Abroad

As the Spanish case of the youth rental bonus and rent caps suggests, governments may sometimes be tempted to initiate measures with the potential of bringing immediate relief to urgent matters on a short time horizon. They may do so, no matter how illusionary and short-lived the actual impact in terms of intended consequences may eventually be.

Yet not a lot of policies come without precedent, and governments would be well advised to learn from past cases of other countries, when considering policies. More specifically, the Netherlands may be a fruitful case to learn from: The country has been extremely successful in internationalising higher education and attracting international students.

Nevertheless, the country is now experiencing painful consequences from its focused silo-approach to policy-making: What governments did not consider, while being eager to create rules and an environment that help attract international students, is that these students need housing. Hence, what we can witness in the Netherlands currently are the visible consequences that have been rooted in a neglect of housing as an important part of the knowledge ecosystem - a long-standing way of working in silos.

Spain seems to be in a good position in learning from the cases of other countries. Indeed, it appears to be and remain among the top destinations for international students. However, they need to be cautious in their policy-making, as when demand is created, supply should follow. By working on a balance of measures including incentives and restrictions, Spain may hopefully manage to get the best of both worlds - attracting and retaining international students and talent, and offering housing options to everyone.

Towards Consensus and Long-Term Solutions

What we see in Spain - and it is only one example across a phenomenon that is observable in many European countries - is a lack of consensus on housing regulation and lack of understanding of the role that diverse stakeholders play and the influence of their decisions on other industries and sectors in the knowledge ecosystem. The underlying problem is the same in all cases: the lack of supply of rental housing.

This lack of supply does not only mean limited availability of rental housing in general but may affect affordable and accessible rental housing options in particular. To find long-term solutions, it will take all actors in the ecosystem to help develop sustainable solutions to treat the cause of the housing crisis, rather than short-term measures that just cover symptoms.

Disclaimer: Housing debates are rarely focused on student/young housing exclusively, such that the political discourse revolves around student housing in isolation. However, and after all, any housing debate may also have implications for student/young housing. Therefore, the focus of this article is on housing policies in general.

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