Social housing in Spain: what role does the private rented market play?

Abstract

The global economic and financial crisis has hit the Spanish economy hard, creating an unstable framework for employment and growth. Since 2007, housing markets have been deeply affected by the crisis. The private rented market has exhibited two specific consequences: on the one hand, the bursting of the real estate bubble has inhibited profit gains in the homeownership sector, providing better incentives to operate in the rented market. On the other hand, huge social conflict has emerged in relation to the lack of proper shelter for certain households which can be seen in the increase in evictions and in homelessness. We want to focus on the latter: since Spain lacks a critical mass of social housing, low-income households have been attracted by the private rented sector, particularly during expansion periods, as quite often there is no available (and affordable) alternative. In periods of economic recession, the substantial pressure that rents put on the financial situation of these households might even cause them to move out of their homes. The hypothesis we will test in this paper is that private rented markets fill several aspects of the role of social housing provision in Spain reinforcing the negative effects the lack of social housing creates in the country, highly visible during recession periods.