A €150 Billion Outlay
The Bank of Spain estimates that about 1.5 million publicly owned homes aimed at social rental must be created to bring Spain’s public housing up to European standards. Today, Spain has roughly 300,000 such homes, representing about 1% of the total housing stock, compared with a European average near 7%.
The regulator attributes this shortfall to decades of housing policy that favored owner-occupied protected housing and to limited budgets for social rental at both national and regional levels. This assessment appears in the most recent analysis of the residential rental market, where the aim is to examine how recent trends, determinants and investment efforts shape the sector.
Data from the study show that between 1990 and 2014 more than 1.3 million protected homes were planned under state and autonomous programs, accounting for about 6.7% of Spain’s total stock, a pace not far from the contemporary deficit. These VPO homes were largely promoted and financed by private developers and financial institutions on land designated as protected, even though subsidies and favorable taxes were in place.
Compared with a scarce public rental stock, the European and OECD averages sit around 7% of the total housing stock. Some nations such as France, the United Kingdom and the Netherlands report shares well above 15%, with some areas approaching 30% in certain periods.
The Government, through the Ministry of Housing and Urban Agenda, plans to build 184,000 new homes in the coming years. The ministry notes that achieving this target would markedly raise the level of protected rental housing, given that only slightly more than 2,300 units were completed between 2022 and 2023. The assessment emphasizes the substantial effort required to climb toward the rental shares seen in advanced economies.
These figures underscore the modest recent production and illustrate the scale of the challenge to meet the goals and to converge with international benchmarks for social rental housing.
A €150 Billion Outlay
Putting the 1.5 million homes into operation would require an accumulated investment of between €150 and €200 billion, since construction, licenses and related costs imply roughly €100,000 to €130,000 per unit. This magnitude is equivalent to more than a decade of state pension spending.
Unlike affordable rental schemes, which set below-market rents while offering returns to investors, social housing provides neither guarantees nor attractive returns. These properties are allocated to families facing insolvency or very low incomes, and they are funded by the State.
Beyond the large public effort, the regulator notes that the country lacks the necessary industry to deliver such a program. On average, about 90,000 homes are completed each year, which would push the time required to close the deficit of 1.5 million units to well over 16 years if only public housing were produced.
Contributing factors behind the shortage include limited final land availability, rising construction costs, shortages of skilled labor in certain construction activities, and a lack of investments dedicated to acquiring and developing new urban land for housing.
A Difficult Solution
The regulator stresses that the scale of the problem makes it improbable that short-term, isolated actions can meaningfully reduce housing access. It calls for a long-range horizon with a sustained emphasis on boosting supply.
The agency also urges that resource allocation prioritize vulnerable groups and that the broader debate consider other factors affecting the housing market, such as the labor market, productivity, tax policy and transportation. In a market with tight supply, public policy design should avoid measures whose short-term gains in demand protection could create unintended consequences for the rental market in the medium to long term.