Spanish Government to Create Land Bank for the Development of Affordable Rental Housing

28 October 2019 – The Spanish Government announced that it was working on a plan to cede public land for the development of affordable rental housing through a series of auctions. The head of the Ministry for Development, José Luis Ábalos, stated that the ministry is working on a plan to auction the surface rights to public land for 50 years so that private developers can build and manage affordable rental housing. The government is looking to address the recent increase in prices.

The ministry is looking to create a single land bank, using land from several different ministries. The government hopes that this management model, if successful, will be replicated at a regional level.

Original Story: Cinco Dias

Adaptation/Translation: Richard D. K. Turner

Andalusia Decrees Safeguards to Prevent Sale of Protected Housing to Vulture Funds

28 August 2018

Regulatory changes were approved to reinforce the social function of the stock of public residential housing.

The Governing Council of the Regional Executive approved a decree on Tuesday amending the Regulation of Protected Housing in Andalusia, in force since 2006, to strengthen the social character of the stock of  and shield it from private capital.

The norm, called Defence Decree for Publicly-Owned Residential Housing of the Autonomous Community of Andalusia, adapts the regulations to the current state of the real estate sector and increases the guarantees that prevent the properties from ending up in the hands of vulture funds, with the consequent damage for families with limited resources.

As a spokesman of the Andalusian Regional Executive explained in a press conference, the text expressly prohibits the sale of property owned by the public administration to legal entities, thus formalising a measure that the Junta de Andalucía already applies in practice. To date, the executive has never carried out this type of operation with profit-seeking private entities.

The approved decree, which enjoyed input from social agents through the Andalusian Housing Observatory, also incorporates measures that guarantee compliance with the housing’s social function. Among them are included further specification of the people who can use protected housing and in what situations it can be accessed, setting new mechanisms to ensure that the properties remain the habitual and permanent domicile of the chosen families.

Thus, the regulation establishes that only natural persons may be awarded residency and excludes legal entities, though not non-profits, which may be the official tenants provided that the end users belong to groups with special difficulties in accessing a home.

A response to increasing prices due to tourist accommodations

On the other hand, the text broadens the powers of administrations’ rights of first refusal and withdrawal over any protected dwelling, regarding both ownership and rent. Also, with the increase in rent as a result of the interest in tourist accommodations, added guarantees were introduced to prevent that any property is used by any party other than the authorised family.

However, the protected homes may now be used to carry out any economic activity, provided that it is the habitual and permanent residence of the person who exercises it. Likewise, swaps and transfers of protected homes owned by the same developer will not be considered as assignments. Consequently, those transfers will not be subject to the municipal registry by the claimants.

Finally, the decree also modifies the regulation of these registries, in effect since 2012, to give priority in the adjudication processes to registered people promoting housing cooperatives and not, as it has been the case to date, to plaintiffs who express their interest in forming part of them.

Original Story: Eldiá / Europa Press

Translation: Richard Turner


BdE: House Purchases Are Becoming Less Affordable Again

29 March 2016 – Cinco Días

As well as looking at average house prices in Spain, the experts always like to analyse how many people can pay those prices and with what degree of difficulty. Or to put it another way, how accessible housing is for households. In this way, they assess how much potential demand may be left out (the so-called insolvent cohort) and determine whether social housing policies, amongst other initiatives, need to be developed, such as the ones applied since the end of the 1980s.

When it comes to measuring the accessibility of house purchases, there are two, more or less official, ways of doing it, which are accepted by the consensus of analysts. The first involves calculating the percentage of household income that is used to repay the mortgage. At this point, it is worth remembering that for the banks’ risk departments, the monthly mortgage instalment should never represent more than one third of a family’s income. (…).

The critics of this formula point out that this monthly mortgage instalment figure does not include any money that a family would have had to pay by way of deposit, and nor does it reflect the notary or registry fees, or the taxes that are levied on house purchases.

Removal of the tax deduction

Currently, according to the statistics prepared by the Bank of Spain, families spend an average of 32.5% of their incomes on mortgage repayments, which falls in the range considered healthy by the banks. But just before the burst of the real estate bubble, when real estate prices were sky high and the Spanish economy was growing at a good rate in terms of activity and employment, that percentage exceeded 60% of income, excluding tax deductions, and 48% if we include those incentives. Now that difference no longer applies as the Government abolished the possibility of making deductions from IPRF (income tax) for the purchase of a primary residence in 2013.

The other based on the relationship between the average house price and average salaries, with the resultant ratio understood to represent the number of full years of salary that would be required to pay for the home in full. The experts believe that accessibility is measured more correctly in this way. Moreover…, they established that this ratio should amount to around four years.

In other words, if it is healthy for a household’s monthly mortgage payment to absorb no more than one third of its monthly income, then in full salary terms, the ideal thing would be for it to take no longer than four full years to pay off the house purchase.

The Bank of Spain has been measuring accessibility using this ratio since 1987 and the historical series perfectly reflects how the effort required to buy a home has increased when prices have risen disproportionately.

In this way, since the end of the 1980s until the year 2002, accessibility ranged between three years of an annual salary and four and a half years, which the analysts classified as acceptable; but since then, a much steeper trend has been observed, to reach the series peak with nine full years of salary to pay for a home in 2007. (…). The minimum seen in recent years was recorded at the beginning of last year, at 6.08 years, but the Bank of Spain recorded slight increases in the ratio during the second and third quarters of 2015 at 6.29 and 6.32 years.

The reason is none other than the change in the trend led by property prices, which after accumulating an average depreciation of more than 40% since the end of 2007 (when they reached their peak), have now been rising again for a year and a half. And although the dominator of the ratio (salary) is also increasing, it is doing so at a lower rate than house prices. (…).

Original story: Cinco Días (by Raquel Díaz Guijarro)

Translation: Carmel Drake