Homes for All is a video series commissioned by Stadsleven in which correspondents from all over the world report on the state of the housing market in their city. In episode 12, Oscar Carracedo shows us Barcelona’s latest housing problem – the rental bubble – and the example of La Borda, an innovative cooperative project for affordable housing.
Written by Sanne van der Beek
Spain was one of the countries that was hardest hit by the financial crisis of 2007-2008 and the popping of the housing bubble. Spain was vulnerable, since home ownership has been encouraged for many years – to the point that more than 80 percent of the Spaniards owned their home. Catalunya, with Barcelona as its capital, was hit even harder. In Barcelona, housing prices plunged by as much as 40 percent and sales didn’t pick up until 2014.
What a difference a couple of years can make. Recently, Barcelona appeared fifteenth in a list of 2017’s most promising European cities for property investment. In neighborhoods popular with foreign home seekers such as the Eixample, Ciutat Vella and El Born, house prices increased by 18 percent last year. Nevertheless, Barcelona is still a bargain compared with other large European cities, including London and Paris, writes The New York Times. It helps that in Spain, there are no restrictions on foreign homebuyers and they can obtain a mortgage from Spanish banks.
Barcelona’s new real estate boom: a rental bubble
But this upheaval in the housing market has caused an unforeseen negative effect: a rental bubble. Many homeowners who had been renting out their properties during the economic crisis are now putting them back on the sales market as prices start to pick up again. Out of every 10 rental leases that expired last year, six of those properties are now being put up for sale, instead of rented out again. Also, Barcelona is a very attractive city for students and temporary workers, who reduce the options for local tenants.
And so in Barcelona rents rose to 16,5% in 2016, according to the real state site Idealista, and rental houses are barely hours on the market before eager searchers snatches them up. A study by the University of Barcelona predicts that rent will continue to rise this year at an average rate of 8% in Barcelona and 13% to 14% in Madrid, writes the Spanish newspaper El Pais.
Together with the increase in demand, and shortage in supply, there has been a change in laws regulating rents. In 2013, it was decided that rental contracts can last only three years, instead of five, creating more insecurity for tenants.
This rental bubble affects a lot of people. In the past, a lot of Spaniards owned their house, but due to the financial crisis and the drop in wages, many families now rent their home. Especially young working people cannot afford a rental house by themselves anymore.
The effect of tourism on the housing market
Added to this is the influence of tourism. Short-term rentals to tourists are far more profitable to home owners than long-term leases. El Pais reports on a study commissioned by the city of Barcelona that shows that these vacation rental properties represent 7.7% of the city’s entire rental home supply. The study also states that they do have an effect on rents for ordinary homes. Business associations and real estate groups deny this impact, and “note that the areas where rent has risen the most are not those with the highest number of short-term tourist lodgings. According to these groups, the biggest impact is caused by the thousands of homes sitting empty that are not on the market.”
It may be strange to hear about this amount of vacancy in a vibrant city such as Barcelona. But as Citylab reports: “Sellers can currently command far higher prices for empty buildings than occupied ones, because they offer a cleaner slate for investors who want to carry out luxury residential or retail conversions. Landlords can thus be tempted to leave property empty and encourage tenants’ departure through neglect in order to sell at a much higher price when the building is finally empty.”
Barcelona is currently taking measures against this negative impact of tourism on the housing market. The city already requires people letting out their properties to sign up for licenses. Landlords can be fined if they leave rundown buildings empty for over two years. But still it is estimated that there are 5000 to 6000 unlicensed tourist flats in Barcelona. So this August, the city decided – again – to increase the amount of inspectors checking up on rentals: from less than 10 in 2016, to a 110 by next year.
Cohousing as affordable housing solution
With the election of Ada Colau, a former housing activist, in 2015, Barcelona has taken a turn towards a social politics of the commons. But it still suffers a big shortage of affordable homes. Amazingly, only 2 percent of Barcelona’s houses are designated as social housing. Compare that to Amsterdam, where 40% of the housing build by the government is for low and middle incomes.
But in his ‘Homes for All’ video, Oscar Carracedo spots an innovative bottom-up initiative which might be an alternative for social housing. La Borda is a housing cooperative, which by 2018 will build 28 apartments on public land rented out for 75 years by the municipality of Barcelona. The site is a former industrial complex called Can Batlló, on which several organizations from the neighborhood have recreated a public communal space where locals can gather. Three years ago, they started looking for solutions to tackle the lack of affordable housing and imagined La Borda, a self-initiated co-housing project.
Cohousing is a type of housing that is little known in Spain. It is a model that enables a community of people to live in a property without being owners or tenants, for a lengthy period (50 to 100 years) at a price below the market rate. But the Barcelona city council supports cohousing and plans to put seven municipal sites out to tender for cohousing projects. These seven plots of land – in the Sants-Montjuïc, Ciutat Vella, Horta-Guinardó, Nou Barris and Sarrià-Sant Gervasi districts – have the potential for building nearly 115 flats in cooperative housing under a transfer-of-use scheme .These new housing projects will increase the city’s public housing stock.
Want to know more?
- You can find other episodes of our Homes for All video series here.
- Last year, we produced a talkshow ‘HEYU! Urbans’ about Barcelona’s struggle with tourism in conversation with Francesc Muñoz Ramírez, professor of urbanization at the Barcelona Autónoma University. Watch the video here.