Catalonia’s latest war on “speculators” will make its housing crisis even worse

Catalan politicians are once again targeting an imaginary enemy: property speculators. Their latest proposal risks driving away genuine investors who renovate homes, improve housing stock and provide much-needed supply.

A proposed Catalan law designed to limit what politicians call “speculative” home purchases has been delayed until at least October after opposition parties Junts and the PP requested a legal opinion from the Consell de Garanties Estatutàries.

The proposal would allow town halls in so-called “stressed housing areas” where more than 90% of the population live to restrict how homes can be purchased and used. In practice, municipalities could limit purchases so that homes can only be used as the buyer’s main residence, a family member’s residence, or as long-term rental accommodation.

The Catalan Government and its allies argue that the measure is needed to combat speculation and improve access to housing. Critics, however, question whether it is constitutional and warn that it could undermine property rights and create even more legal uncertainty.

Catalonia’s obsession with speculators

This proposal makes sense only if Catalonia is suffering from a plague of housing speculators. It isn’t.

Speculators generally seek markets with low risk, low transaction costs and high potential returns, or an opportunity to corner the market. Catalonia offers the opposite: high taxes, high transaction costs, growing regulation and increasingly hostile political rhetoric towards property ownership. It is not a paradise for speculators.

Unfortunately, it is not particularly attractive for genuine investors either.

Catalonia has fully embraced the powers of Spain’s 2023 Housing Law. More than 90% of the population now lives in areas declared “stressed”, where rent controls apply. The result has been a sharp deterioration in investor confidence, especially in the private rental sector.

Private landlords are selling up, new investment has dried up, and there is little incentive to renovate or improve rental properties. At the same time, the public sector is not building housing on anything like the scale required to compensate.

Who will renovate Catalonia’s housing stock?

The real victims of this proposal may be the small developers and investors who buy rundown properties, renovate them and sell them on.

These investors provide a useful service. They take financial risks, invest capital and turn neglected properties into attractive homes. Many buyers simply do not want the cost, hassle and uncertainty of managing a major refurbishment themselves. They are happy to pay a premium for a home that has already been renovated.

If this new law effectively makes it impossible to buy, renovate and sell properties for profit, many of these projects will simply disappear.

The consequence is obvious: fewer renovated homes, fewer investors willing to take risks, and an ageing housing stock left increasingly untouched.

Catalonia’s politicians keep talking about fighting speculation. In reality, they are fighting private investment. And every new regulation seems designed to make the region’s housing problems worse rather than better.

The war on landlords continues

As if the assault on so-called speculators were not enough, Catalonia has also quietly expanded its war on landlords.

The regional government has just broadened the definition of a gran tenedor (major landlord). From now on, anyone owning five or more homes anywhere in Catalonia will be considered a major landlord, regardless of whether the properties are in a ‘stressed’ area or not.

The problem is that Catalonia’s definition of “major” is absurd.

Take three siblings who inherit equal shares in a modest building containing five small flats in a run-down part of town. Each sibling might own assets worth little more than €100,000, yet all three could now be considered major landlords because they each hold a share in five dwellings.

Meanwhile, an investor with four luxury properties worth €10 million in total would not qualify as a gran tenedor because they own only four homes.

The consequences are serious. More small landlords will now be caught by rules that were supposedly designed for large institutional investors, including the obligation in some circumstances to offer social rent before recovering possession of a property from a vulnerable tenant or a non-paying occupier.

Lawyers specialising in housing law warn that the change will discourage investment, shrink the supply of rental housing even further, and make landlords even more selective about whom they rent to.

In other words, the people most likely to suffer are precisely those the government claims it wants to help.

Catalonia’s housing policies increasingly resemble a crusade against property owners, investors and landlords. Speculators are everywhere in the political narrative but almost nowhere to be found in the real market.

The reality is much simpler. Housing shortages are caused by too little supply and too little investment. Yet the response from the Catalan Government is to make investment riskier, less profitable and more heavily regulated with every passing year.

It is difficult to think of a better way to discourage people from investing in housing. And it is even harder to see how any of this will make homes more affordable.