“The welfare state in Spain, unlike other neighboring countries, has neglected access to decent housing, despite expressly appearing in the 1978 Constitution.” Those are the words with which Alejandro Inurrieta, former adviser of the Ministry of Economy in the Government of José Luis Rodríguez Zapatero, doctor in Economics and former president of the Public Rental Company, begins the book ‘Housing, the most urgent revolution’ (Economic Alternatives).
Inurrieta draws a critical analysis on how the different public administrations, of all colors, have put aside public housing policy influenced, to a great extent, by the power of pressure groups in the real estate sector or banking, among others . Also on how there are pending subjects or that have been suspended by the different governments, such as the creation of a public rental park and reliable statistics that allow us to know the reality of the market.
It is difficult not to start a conversation with a question other than what do you think of the Housing Bill …
All the parliamentary procedure is missing and we will see how it looks in the end, but what the skeleton is is a law that is basically born dead. First, because of the temporal space that it incorporates for its entry into force, which is 2024. That first element already completely distorts the analysis because no one knows who will govern in three years. It is clear that, if there is a majority different from the current one, the first thing they are going to do is repeal it. That is already a symptom of what is the real will of this Government to regulate the housing market, which is very little. The socialist part of the Government has been pushed, it must be recognized, by the United We Can to regulate the housing market. In the end, a kind of very timid arrangement has been made, practically without touching the bargaining power of the large construction companies, the ‘lobbies’ and the funds.
It is in 2024 because it remains to be defined how the index will be made to control the rental price in stressed areas.
That remains to be done, but the Housing Law It is not going to solve the problem of escalating rental prices. There will continue to be vulnerable families who will not have access to decent housing at a reasonable price. And the market is practically going to remain a buying market. It is a law that is doomed to failure, it is very unambitious and really reflects the pressure that the PSOE is receiving from the big real estate ‘lobbies’.
In the book he talks about ‘lobbies’, the power of political parties, banks, real estate portals. How is this lattice mounted so that in the end there are no changes?
Any structural change, such as this one, needs many actors, starting with the media, which I also mention. There are political actors, the financial system, real estate and construction. How has this been built? Because society has assumed that the best thing in this life is to buy. From a young age, practically with the pacifier, they almost endow you with a mortgage. It is a particular idiosyncrasy of Spanish society, because there has been little mobility of workers. People, knowing that they will always stay in the same place, have ended up buying. Second, because of the interest rates. In an opportunity cost relationship, one could analyze what the rent costs, which is very expensive in some cities, and what a mortgage costs. The question that not everyone asks is: if I can’t pay the mortgage, will they evict me? If you do not pay the rent, too, but in the end I am making an effort to buy a property when the payment for use, if there was an efficient market, would be infinitely cheaper.
Do we have a cultural problem with the rent?
No, I think it is an incentive problem. In the book I also talk about when there was a home purchase tax relief, which in Spain has been one of the most difficult things to eradicate. I was in the Ministry at that time, both in Economy and Housing. Some of us said that the purchase allowance had to be eradicated because it is regressive. In other words, those who have benefited the most from this tax relief are the highest incomes. I did a calculation. With what the State was spending on the purchase allowance, which was around 6,000 million per year, 100% of the rent of four million people could have been subsidized, an average rent of 700 euros nationwide. The public manager has to choose: what do I prefer, that there is a percentage of buyers or tenants who can have access to fully subsidized housing?
But in Spain there has been no continuity in housing policy. Change the government and change the focus.
Exactly. In Spain, in no case has there really been a policy dedicated to renting, which is what the most advanced European countries do. Public policy should only be dedicated to facilitating decent rent at a reasonable price. If you want to buy a home because you decide to do so, I think it’s great, but that’s a personal decision. There is a saying: the Spanish owns by conviction and renter by obligation. There the situation is summarized.
The State Housing Plan contemplates the creation of 20,000 rental flats at affordable prices. It seems like a small number. How many would have to be built?
It is a ridiculous figure. Public housing, no matter how much construction is announced, is still a ridiculous amount compared to what is really needed to stabilize the market. I have done some calculations and I have some housing needs that can be public or private, but managed by the public sector, of about seven million rental homes, 40% of the total market. What the public market would do is to be a counterweight in the rental price to the private market. That is not going to happen with the figures that are being talked about.
Is it a solution for administrations to buy housing to put it up for rent?
In Barcelona it is being done. Of the experiences that I have seen in Spain in housing, the best is Barcelona. It has a fantastic team of people who have understood what the rental market is, from a statistical point of view, from the point of view of public-private management, from the point of view of the purchase of buildings, from the point of view of construction. public housing. It is a very dynamic city hall. I don’t know if it’s because Ada Colau is here, who comes from PAH, but she has a fantastic team.
And which is the worst?
Madrid, by far. It is the worst management and the worst scenario for those who need access to housing. It has been the epicenter of the fraudulent sale of public housing, where access to rent is more difficult, where there is less public aid and where there are really more obstacles and, above all, contempt for the most disadvantaged segments of the population.
Housing powers are held by the autonomous communities, which are the ones that will have to implement the law. So is it possible to make a state policy?
It is complicated because the sensitivities at the regional level are very different and it shows. In Andalusia it is where more VPO has been built and more has been sold, because that generates political patronage. On the other hand, in the Basque Country, where rents are higher, it has opted for an accessible housing stock. Having urban planning and housing policy in regional hands has that toll. I believe that in Spain the problem with housing, as in other sectors, is that there are no public managers. In Spain there has been no housing policy, there has been a real estate policy. Is not the same. Here what has been tried is to favor the real estate sector.
Because it is a sector that creates a lot of employment, at least temporarily. It is a very labor-intensive sector and that has been the objective of different governments, right or left. It’s the same. And also, curiously, the only moments in which there has been less tension regarding access to housing has been in the real estate bubble phase.
He comments in the book that many people have been left out of the market due to lack of solvency. Criticizes the role of banking and analysis departments …
Effectively. Access to the purchase of a home is in the hands of the risk departments of the banks, but I do not want to ignore the role played by the Bank of Spain, which has been very important in the negative. He systematically denied the housing bubble for many years and then he was not vigilant with the practices that were done in the bank.
Was the Bank of Spain negligent?
Yes. It was negligent in its function of monitoring the capitalization and solvency situation of the banks. Then he was surprised by the huge problem that there has been with savings banks and with medium and not so medium banks. The banks preferred to generate short-term profits and, in the end, they had to be rescued with public money.
Has the situation changed?
No, it has not changed. It has not changed because the power that banks have today, even over the Bank of Spain, remains the same. I think there is a very strong pressure from the banks so that their true situation is not aired and then look at the sentences that have been arriving from Europe. They have corroborated what many of us said, the amount of fraud and illegalities that have been committed with the practices and with the banking products around the entire house, from the floor clauses, the reverse mortgages, in foreign currency. That is what the Bank of Spain should have been watching instead of being so concerned about wages and other facets of the economy.
In recent days, the employers’ association of construction companies has said that we are not in a new real estate bubble because there is no longer a free loan bar and because, despite the fact that we are in figures for the sale of homes similar to those of 2007, they are not selling so many new houses. Do you agree? Aren’t we going to another bubble?
I share it. Yet another bubble is not appreciated, but it is possible to speak of overheating again. Right now, there are actually two obstacles. One is that not much new work is being started, it is true. And that’s why people throw themselves more into the used housing market. In addition, there is not, at the moment, a financial situation as buoyant as the one that existed before 2008, when you entered a bank office and left with the mortgage because they only asked you four things. I hope something has been learned.
But is housing still seen as an asset that generates profitability?
It is seen as a financial asset, which is driven by expectations, not by supply and demand. Housing, when there are expectations of a rise, is when people buy. Public managers do not understand that a change in mindset is needed.
And how, then, can the price of housing and rents be controlled?
First, knowing the market, which is not known, and forcing the price not to rise. And for that we have to have two elements that are not in the law. Who is watching this? Contracts are coming to me where the tenant is forced to renounce all the mechanisms included in the law. And it has not entered into force. There will be picaresque because there is no one to control those contracts. There are also no arbitration mechanisms, which there are in other countries. The law is a series of recommendations, no control, no sanctions, no arbitration …
Can there be changes in the law during its processing?
No, because it is very political. Both parties have to cover the file in front of the electorate and say that something has been done. I have spoken with people from United We Can and the feeling is that it is the only thing they are going to be allowed to do and what they are going to achieve.
Regardless of the law, how do you see the 250 euro voucher for the rental of young people?
I see it well as long as there is rent control and a strict surveillance of the contracts. There would have to be inspectors to verify the new contracts and the old ones. In short, a utopia. But the measure, as well as the rental insurance for young people, for 12 months, which I left signed in the Public Rental Company, are measures of President Rodríguez Zapatero that are interesting. But control and transparency are needed.