The European Commission has formally dedicated one of its economic policy recommendations to the Spanish government, emphasizing the urgency of addressing the ongoing housing crisis in Spain under the leadership of Prime Minister Pedro Sánchez.

Notably, the recommendations provided by the Commission, led by Ursula von der Leyen, do not align precisely with the current policies implemented by Sánchez's administration.

While the Spanish government has prioritized rent control measures, the Commission does not explicitly endorse this approach.

The Commission identifies the swift acceleration of new housing construction as a critical action point, citing a shortfall of approximately 600,000 housing units according to data from the Bank of Spain.

There is also an urgent call to increase the stock of social and affordable rental housing, particularly in high-demand areas.

Addressing the housing supply issue necessitates the approval of a reform to the Land Law, which was rejected in Congress for the second time in February, garnering opposition from the People's Party (PP) as well as from Sánchez's coalition partners, including Sumar, Junts, ERC, Bildu, and Podemos.

This reform aims to streamline housing development processes by reducing bureaucratic delays, ensuring regulatory stability, and eliminating unnecessary administrative bottlenecks.

Additionally, the Spanish government must tackle the labor shortage within the construction sector and enhance the supply of social and affordable housing, as reiterated in the Commission's recommendations.

More than 50% of construction companies in Spain are experiencing difficulties in recruiting workers.

The European Commission's annual report on the Spanish economy indicates that a selective increase in housing development could significantly benefit the country, improving labor absorption capacity in densely populated metropolitan areas while promoting internal labor mobility.

Housing prices in Spain have experienced a considerable rise over the past decade, with a nearly 50% increase observed since 2015. Although price growth moderated in 2023 due to rising interest rates, housing prices surged once again in 2024, reporting an annual increase of 8.3% in the third quarter, with current valuations estimated to be about 10% over actual worth.

The Commission attributes part of Spain's housing crisis to the growth of tourism, which has led to an increase in properties designated for short-term rentals.

This shift has diminished the availability of rental properties for primary residences, compounded by a low stock of social housing and a relatively slow pace of new construction or renovations to meet rising demand.

As a consequence, many households face reduced disposable income, and the issue is particularly pressing for low-income families and young people.

Data indicates that nearly 40% of Spanish tenants allocate 40% of their income to rent and related expenses, significantly exceeding the EU average of 27%.

In Spain, social housing constitutes only 1.5% of the total housing stock, markedly lower than the EU average of 9%.

The growing lack of affordable housing is increasingly linked to broader social challenges such as homelessness, difficulties for the youth in achieving independence, and rising eviction rates.

Approximately 29.9% of individuals at risk of poverty struggle to meet housing costs, while only 14.8% of young people aged 16 to 34 successfully achieved independence in 2024. The issue of homelessness also represents a rising concern, with a reported rate of 71.3 homeless individuals for every 100,000 inhabitants.

Spain's overall stock of social housing stands at one of the lowest levels in Europe at 3.3%, compared to the EU average of 8%, leaving approximately 4.5 million people in a state of residential exclusion.

Significant disparities exist between different regions, as well as urban and rural areas, with urban centers like Madrid and Barcelona particularly affected.

To address the deficit, the European Commission advocates for mobilizing public land, expanding the stock of social rental housing, and increasing funding for affordable and social housing.

Enhancing housing availability relies on reversing factors that restrict supply to stimulate residential construction and broaden the rental market, with a specific emphasis on affordable housing options for young people and low-income households.