Arcano, the investment management firm, has outlined the true origins of Spain's housing problem and the measures that can help alleviate the economic and social consequences. Its research team, Arcano Research, makes it clear that the current crisis is not due to the proliferation of tourist apartments, large landlords, or foreigners buying homes here. The problem lies elsewhere: new construction plummeted after the Great Recession, housing taxes are sky-high, there is a lack of land and skilled labor, public investment in social housing is minimal, and the rental market is much smaller than in other European countries. Furthermore, legal uncertainty hinders private projects and investment. Added to these supply-side obstacles is the pull of demand: new homes are being created, more immigration is arriving... The result is the perfect cocktail.
Regarding solutions, Arcano debunks several myths. To begin with, he criticizes rent controls. He directly calls for an end to rent caps, because according to 90% of studies, they only result in fewer apartments available and higher prices in the medium term. They also create a black market, drive out low-income families, and concentrate the scarce supply in homes with a lower risk of default. As if that weren't enough, prices end up rising in nearby neighborhoods. Not even Brussels supports this measure, although Pedro Sánchez's government defends it.
Saying that limiting rent prices has positive effects is, according to Arcano, a myth. The same goes for the idea that empty homes solve the lack of supply. The reality is that almost half of these empty homes are in small towns with fewer than 50,000 inhabitants, where demand is very low.
Another belief that the report debunks: there's no need to increase the housing supply throughout Spain. Population growth is not equal throughout the country, nor is demand or the distribution of future supply.
Nor are tourist housing the main culprit. They barely represent 1.43% of the residential stock, according to the INE (National Institute of Statistics and Census). The same applies to large landowners: their market share is minimal, so measures to increase supply shouldn't be limited to them alone.
Regarding social housing, Arcano doesn't see the solution there either. The housing shortage is already around 700,000 units, according to the Bank of Spain. Therefore, the free housing market also needs to be boosted.
And another myth: non-EU foreigners. They have been accused of speculating, but in reality they only account for 3% of home purchases in Spain. Their impact on overall prices is very limited.
Arcano also debunks the idea that decentralizing urban planning helps produce more housing. Spain is among the most decentralized countries in the OECD in this regard, yet it still has problems with access to housing. More decentralization, the report says, doesn't solve anything. Only the United Kingdom is more decentralized than Spain in the ranking of large economies.
Finally, the study criticizes the belief that high housing taxes are good. In fact, when taxes make access to housing so difficult, especially for young people, they cease to be positive. Spain is one of the European countries with the highest housing taxes: more than 30% in total, including purchases, ownership, and sales. In the EU and the OECD, the average does not exceed 10%.
From vertical construction to tax cuts
There is no silver bullet to fix the residential market right now, and the research service openly acknowledges this. Even so, they dare to put several ideas on the table that could help.
The first: build upwards. It's that clear. Arcano Research puts it bluntly—vertical density must be increased, as they have done in Auckland, New Zealand. The idea? Add more housing in less space and increase supply quickly.
Another proposal is to eliminate restrictions on density. Urban planning regulations still require apartments with a specific number of rooms, even though families in Spain are increasingly smaller. Arcano advocates letting the market decide the size of the homes that actually sell. If supply is tailored to what people are looking for, the apartments no one wants will disappear and prices will stabilize. The same goes for garages: they insist that there's no longer a need to require so many spaces in new buildings because fewer people are asking for them.
The research department also says that land ready for construction must be freed up as soon as possible and that land use must be changed more easily. And they are pushing for greater legal certainty for rentals: eliminating rent controls, approving measures, and so on anti-squatting initiatives and the creation of a strong and clear legal framework.
Arcano Research also emphasizes increasing the supply of affordable rental housing. How? First, invest in collaboration between the public and private sectors, with tax incentives that help cover the difference with market prices. Another option is contracted rentals, as in Dublin: owners lease their homes to the state for years and, in return, receive regular rent and the security of returning their homes in good condition. They also propose rental solutions tailored to groups such as healthcare workers or members of the Armed Forces, following examples from the United States and Australia.
Finally, the report points out that we need to improve the sector's productivity and increase the capacity to build housing. How? By industrializing processes, attracting skilled foreign workers, and shortening urban development times. Here, technology can help a lot: Artificial Intelligence is already cutting processing times in other countries. While urbanizing a plot of land here takes an average of 10 to 18 years, in other places where AI and new technologies are applied, the process drops to about five years. There's plenty of room for improvement there.
Regarding taxes, Arcano Research proposes reducing or deferring taxes associated with home purchases by young people, with the aim of facilitating their emancipation, whose rate is at historic lows and is hampering both the birth rate and productivity, which are necessary to finance social spending.
Finally, the research service considers it crucial to increase financing for housing construction and reduce its cost. According to its data, "doubling housing production to meet demand requires increasing current financing, which is around €18 billion, to approximately €33.5 billion." To achieve this, it calls for "a stable, secure, and coherent legal framework across the different levels of government."
It also sees merit in attracting infrastructure funds to the residential market, since "they have a high capacity for low-cost financing, and if they participated in incentivized social housing projects, they could issue bonds at reduced costs." Furthermore, Arcano Research is committed to fostering a savings culture among the population, "channeling part of these savings into housing investment."