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Affordable Housing Article

By 16 March, 2021October 28th, 2021No Comments

Xavier Aspachs (Chairman of Sogeviso, February 2021)

In Catalonia and Spain, unlike most of the European Union, we have a significant shortfall of rental housing, even more so if we’re referring to affordable and/or social rents.

The 1960s saw the advent of what we could call the “Spanish speculation virus”, during which almost 6 million flats were built for sale over fifteen years. They were also built in Europe, but mostly for rent. It was the Spain of “we want a country of owners and not proletarians”.

The peak of this situation arrived at the beginning of the 21st century, with “European” interest rates and the over-indebtedness of the Spanish State, companies and individuals and the unfortunate experiences of the property and financial crises.

This crisis was only used very partially to resolve the problem of the public housing stock, although it would in fact have been a real opportunity for it. Another situation of supply built without demand for purchasing is unlikely to recur, unless institutional (and often international) investors capitalise on the situation by obtaining prices (discounts) that would be unimaginable for small local investors. We will see what the future holds for these properties.

The autonomous communities (regional governments in Spain) are the bodies responsible for housing policy in their territories and some of them have taken advantage of the situation to implement “right of first refusal” rules, which they have been able to exercise inasmuch as they have the financial capacity to do so. As we all know, the economic situation of local government in general is not a healthy one and its capacity to generate new debt is almost zero. The result: the public housing stock has increased but its shortcomings remain structural.

It’s absolutely essential to clearly define two terms which, although generally accepted, don’t have a single definition. We are referring to the terms ‘affordable’ and ‘social’ housing. We can no doubt agree that the concept of affordability is related to a discount on the market price. It’s necessary to regulate how this “market price” is determined and what the discount is, but also to limit the income of the family unit with the right to buy or rent in terms of IPREM or IRSC multipliers (minimums and maximums).

With regard to social housing, it should be limited to the rental system for family units with a maximum salary of a certain IPREM [initials in Spanish of the Multiplier Effect on the Index of Public Revenue] or IRSC -initials in Catalan of the Income Sufficiency Indicator] multiplier, without any other residential properties, and a rent indexed to a maximum percentage of the net income of the family unit, including the deduction of basic utilities and potential benefits for the number of children, over-65s, disabled people, etc. in the calculation. There is also an additional clause for what we could call the “social clauses or social contract”, in which the parties agree on the monitoring and support of the family unit and support to help with reintegration into the labour market. The experiences in Europe and our own allow me to confirm the existence of positive results that materialise in the maintenance or even improvement of the income of the family unit, as well as the minimisation of the risk of social exclusion processes.

Let us hope that the new law in Spain, currently in the public consultation phase prior to the drafting of the bill, will encourage rentals of both affordable and social rental housing to the detriment of “protected housing” and not repeat the same mistakes of the past. As the protection classification is temporary and it has an expiry date, once it arrives it will increase the housing stock that is not subject to price restrictions. If things carry on like this, we’ll never be able to solve the problem that concerns us here.

Now is a great opportunity for public-private partnerships for the development of affordable rental housing. The aim is to apply successful experiences in other European countries, together with the mobilisation of public land and private funding through joint ventures for specific projects and public tenders.

The use of public land, with reasonable construction costs and mixed project management, should make it possible to shorten the implementation periods and develop economically sustainable projects in their own right. In certain cases, the mixed construction of housing for rent and flats for sale can make the economic project even more viable, while the combination of sales, affordable rents and social rentals should facilitate the necessary integration and social cohesion.

The European recovery funds will undoubtedly become an excellent new opportunity to modernise the Catalan and Spanish economies (140 billion euros) in the ecological and digital fields, facilitating the financing of specific industrial projects (via transfers and loans) that serve to assist in the inclusive, sustainable and transformational economic recovery of the country with a vision of the future. The PRTR (Recovery, Transformation and Resilience Plan) projects submitted by the government to apply for European NGEU funds envisage rehabilitation, urban regeneration and the promotion of sustainable housing.

Public-private cooperation, the appropriate application of European funds and the execution of the housing allocations included in the 2021 General State Budget [i.e. for Spain], together with other less significant initiatives in terms of the number of homes, such as cooperative-style developments on public land with the temporary transfer of surface rights and the promotion of urban house-sitting arrangements , are the opportunities that we cannot allow to slip through our fingers if we want to equip ourselves with a public rental housing stock that meets mid-term needs and consolidates the foundations for a social and affordable housing stock running in parallel to the development of free market ownership.