Average rent in Spain has risen sharply in recent years, and this trend reaches beyond the largest cities. Between 2015 and 2022, tenant payments each month climbed by roughly 60%, according to data from the BrainsRE real estate data platform.
This rapid rise isn’t simply tied to wage growth. In the Balearic Islands, a tourism-heavy region, the average net household income recorded by the INE is 29,368 euros, while the typical annual rent sits at 23,400 euros. Catalonia mirrors the pressure with an average income of 34,982 euros and an annual rent of 16,644 euros, even with regulatory interventions in place. In the capital, Madrid, the pattern repeats with an average rent of 16,476 euros against an income of 37,687 euros. These figures illustrate a housing-cost squeeze that affects multiple regions.
Experts commonly define a healthy rent burden as between 30% and 35% of household income allocated to housing. In eight regions, besides Madrid, Catalonia, and the Balearics, this threshold has been exceeded: Andalusia at 51.23%; Canary Islands at 38.69%; Cantabria at 36.89%; Valencian Community at 43.26%; and the Basque Country at 35.2%. Areas where rent consumes less than 30% of income include Ceuta, Melilla, Aragon, Asturias, Castilla y León, Castilla-La Mancha, Extremadura, Navarra, and La Rioja, underscoring regional disparities in housing cost burden.
Residential Property Telescope notes that large landlords and institutional funds currently represent among the cheapest rent options, with rents 7% to 20% below market pricing on certain portfolios, according to EY analyses. This dynamic highlights how ownership structure can shape pricing, even as overall rents trend upward across the country.
Spanish manager Azora faced criticism for acquiring social housing from the Community of Madrid during the previous financial crisis, offering rents about 30% below market levels. Resydenza, a platform tied to one of Spain’s 50 largest fortunes, maintains homes roughly 21% below peers, while Realia, owned by Carlos Slim, discounts by about 10%. All of these properties are concentrated in high-demand areas such as Madrid, Barcelona, Málaga, and Valencia, where affordability pressures are most acute.
Javier García-Mateo, Real Estate partner at EY Strategy and Transactions, notes that institutional investors have historically prioritized housing access for lower-income groups, emphasizing the social dimension of investment decisions. This perspective frames how capital markets intersect with housing policy and tenant outcomes.
Despite the prominence of large-scale capital, their share in the overall rental market remains relatively modest. Roughly 95% of housing stock is held by individuals, a composition that shapes pricing dynamics and market resilience amid rising rents. Demand currently sustains higher prices, while supply shortages continue to constrain options for renters.
paralyzed housing law
Spain’s Housing Act, long billed as a cornerstone of coalition policy, has stalled in Congress for months despite being identified as a priority. Negotiations are proving difficult as regional powers are a focal point, with Transport and Housing Minister Raquel Sánchez emphasizing the need for guarantees that regional authorities will be respected.
Meanwhile, a Critical CGPJ report calls for clear rules governing rent intervention, noting concerns that regions under the governance of the PP may resist enforcement of new norms. Critics warn that price controls could deter investment and reduce the current supply, potentially worsening access to housing rather than alleviating it. As stated by public officials and industry observers, workable solutions require stability and predictable regulations that encourage both owners and investors to participate in the market over the long term.
In the meantime, authorities have limited rent increases by tying them to a ceiling—keeping annual rent updates below 2% and decoupling them from CPI through the end of the year—to dampen volatility while policy debates continue.
Possible solutions
Spain faces a substantial building gap. Colliers estimates a need for between 1.5 and 2 million new rental homes to meet current demand. Given that around 110,000 new jobs start each year, it could take roughly 15 years to close the gap, depending on economic conditions. Meeting this demand would require a capital infusion of about 250 billion euros, a sum that outstrips annual pension spending, which is estimated to be below 200 billion.
On average, owners may expect annual returns of 2.5% to 5.5%, a modest yield compared with equities or other real estate plays. Yet housing remains one of the safest, most enduring investments, especially during market volatility. For funds to scale affordable rental housing, yields must reach a minimum threshold that motivates continued investment.
Public-private models are being explored in several regions. Catalonia, the Community of Madrid, and Madrid City Council have piloted schemes to fund the construction of affordable rental housing on public land with long-term rental income commitments of 40 to 70 years. The Vive Madrid program has moved forward, aiming to complete thousands of units within its eight-year horizon.
Public administrators are urged to create a stable, enduring regulatory framework that offers legal clarity to owners and investors over the long term. The emphasis is on sustained collaboration between public entities and private partners, following successful approaches seen in other European countries where such cooperation has yielded real, scalable results.