The IMF has praised Spain’s economic performance, but warned that the housing crisis will not be solved with more political tinkering, rent controls, and legal uncertainty.

Spain’s economy might be doing better than most in the eurozone, but the International Monetary Fund has put its finger on the country’s biggest domestic problem: housing affordability.

In its latest assessment, the IMF says the deterioration in housing affordability requires “more decisive measures to increase supply”, including faster urban development, less legal uncertainty, and quicker building-licence procedures.

In other words, Spain needs to make it easier, faster, and safer to build homes. Revolutionary stuff.

The supply problem Spain keeps dodging

The IMF’s criticism is politely phrased, but hard to miss. Spain’s housing problem is being made worse by a chronic shortage of supply, especially in the places where people most want or need to live.

Instead of focusing on supply, the Spanish government has spent much of this legislature tightening controls on the rental market, extending so-called stressed-market areas, and intervening in contracts. The latest forced extension of rental contracts has already opened a legal front, with challenges in the courts after the decree that introduced the measure expired without parliamentary approval.

That is the kind of “legal uncertainty” the IMF is talking about. Investors, landlords, developers and owners all make decisions based on rules. Keep changing the rules, or threatening to change them, and many will simply sit on their hands.

Rent controls are no substitute for homes

Spain also has a tiny stock of public and social housing by European standards. Just 2.5% of the housing stock is public or social, compared with an EU average of 9.3%, according to Spain’s Housing and Land Observatory.

Building more public housing takes time, money, land and administrative competence, so politicians prefer quicker gestures such as rent caps and emergency decrees. The trouble is that those gestures can reduce supply even further by discouraging landlords and investors.

The IMF is effectively warning Spain that affordability will not improve unless supply increases. You can regulate prices on paper, but people still need somewhere to live in the real world.

A strong economy, but housing remains the weak spot

On the broader economy, the IMF remains positive. It expects Spain to lead growth in the eurozone in 2026, with GDP expanding by 2.1%, helped by strong domestic demand, immigration, a dynamic labour market and a growing share of renewables in the energy mix.

But the housing market is flashing warning lights. The IMF also warns against lax mortgage lending standards as prices rise quickly, recommending borrower-based measures in the coming year to prevent financial risks from building up.

So Spain has two housing challenges at once: prices rising too fast for many households, and a policy environment that may be making supply worse rather than better.