City-Centre Squats and Slowly Dying Villages

An essay on Spanish housing ahead of the general election on 23rd July

This is the third article in a series of three on the upcoming general election in Spain. Check out the first two here:

Taming Lions (17 June) - the upcoming election is likely to bring populists into power no matter which side wins

Unfulfilled Promises (24 June) - the end of Spain’s long boom more than a decade ago created ideal conditions for populism to flourish

"Bloques / Blocks" by ajgelado is licensed under CC BY-NC-ND 2.0.

Forgive me for beginning this week’s column with an old joke. A man says: “In my house, I decide the important stuff while my wife makes the trivial decisions. I decide whether we should go to war on not, what interest rates should be and who should form the government. My wife decides where we live, what we eat, what clothes we wear, what we do at the weekend and where we go on holiday.”

Like the man in the joke, political commentators are often far too quick to jump into discussions about big, abstract issues, particularly emphasizing the ongoing culture war, while ignoring boring themes like housing. This week’s essay is meant to pull us back in the other direction.

As we mentioned in last week’s essay, Spanish construction boomed as the country entered the European Union (EU) and later adopted the euro. The new currency carried much lower interest rates than the peseta, which made credit extremely cheap in a country where home ownership is above 80%.

Property prices soared 200% between 1996 and 2007, thanks largely to the change in currency. This meant that many people who bought property before the mid-1990s did very well indeed; and even people who bought in the late 1990s could also make a healthy profit.

As prices rose, some banks began offering 50-year mortgages for people who would struggle to pay a more conservative loan. When the crash came, unemployment spiked in Spain just as the European Central Bank (ECB) raised interest rates and property prices fell. Many families found themselves unable to pay back their loans.

Nearly a quarter of a million homes were seized by banks between 2007 and 2010. The television news regularly showed families getting evicted from their homes. It shocked many (including me); and housing became the hottest topic for Spain’s populist left, which was emerging at the time.

Ada Colau is a case in point. She founded an organization in Barcelona for people who could no longer pay their mortgages as early as 2009 and was regularly seen on the frontline of protests outside buildings where families were getting evicted. In 2014, she formed a local populist left party in Barcelona that was loosely affiliated with We Can (Podemos); and ran for mayor of the city in 2015, winning a plurality of the votes with 25%. Her support for impoverished families won her large amounts of political capital ahead of her first victory.

"File:Barcelona, rueda de prensa con Ada Colau (cropped).jpg" by Ricardo Patiño is licensed under CC BY-SA 2.0.

Colau ran again in 2019, but her party’s support dropped to just under 21% and she came second. She was re-elected mayor as the liberal candidate (former French Prime Minister Manuel Valls, who has family roots in Barcelona) decided she was less bad than the separatist candidate, who won the most votes. In May of this year, Colau’s support fell again, to just under 20%. She came third and voted to make Socialist candidate Jaume Collboni mayor. He had come second.

What went wrong for Colau? We have just mentioned that she won great political capital by supporting families facing eviction during the worst years after the credit crunch. She spent much of her political capital by being too dogmatic in her support for squatter’s rights, including cases when squatted flats in working-class neighbourhoods were used by drug dealers. Around three-quarters of the inhabitants of Barcelona now think that the rules on squatting should be toughened up.

Supporters of Colau often point out the number of flats that are squatted is much lower than people think. There are 26m flats and houses in Spain but only 18m are first homes. Only around one in 1,553 is squatted. However, this is slightly misleading. Around 73% of the buildings built in Spain are blocks of flats. The average number of flats per building is 17. That means that if you live in a flat in a major city, the odds that one of the neighbouring flats will get squatted is much higher than the headline figure might suggest.

I speak from personal experience when I say that having a squatted flat in your building can be bad news. You will find the door to the building getting vandalised regularly; and this makes parents of young children more nervous about giving them their first taste of independence. The neighbours will have to pay more every time the building needs repairs because the squatters won’t pay their share. You might have windows you can’t open if a nearby squat smells bad. The squatters will often hijack a link to the electricity grid, which increases the risks of fires in the building.

There can be horror stories. Some friends of mine lived in a building in the outskirts of Barcelona where one of the flats was squatted and turned into an underground brothel. They used to get drunk men ringing the wrong doorbell at odd hours, strange people lurking in the entrance and they would sometimes find used condoms and syringes in the stairwell. They had young children at the time. There is rarely anything disgruntled neighbours can do about these issues, except at election time.

Of course, populists will reduce complex issues like this to black-and-white narratives with goodies and baddies and then use these stories to fuel the culture war. As we head into the Spanish general election on 23rd July, Addition (Sumar) - a hard-left party that is supported by Colau - will defend a recent law, which makes it harder to evict squatters, who are seen as innocent victims of a rapacious economic system run by immoral bankers.

Meanwhile, hard-right party Vox will try to make it as easy as possible to get squatters out of private property in a matter of hours. Squatters are seen as evil parasites in this view, which has zero empathy for families who have run into hard times through no fault of their own. Either Sumar or Vox could enter a coalition deal with the Socialists or the Popular Party (PP), respectively, after the next election, as we discussed in the first essay in this series.

More moderate voices are likely to be drowned out in the clash. It is good that anti-squatting insurance for landlords is becoming more common. Couldn’t the state offer non-ideological squatters (many of them immigrants from poor countries, who are struggling to gain a foothold in a new society) a path to owning or renting an apartment after they fall into arrears? Perhaps with gradually increasing payments over several years? And maybe asking for a commitment to adult education in return? All while compensating insurance companies for lost rental income? Yes, yes, crazy talk, I know. Please carry on shouting at each other!

Priced Out

Even though property prices fell sharply after the credit crunch, prices remain high in major cities, as they do in other large economies. The average price for property in Spain is €1,713 per m², although that includes rural areas, which are much cheaper than cities. Prices go up to €3,576 per m² in Madrid and €3,579 per m² in Barcelona, but San Sebastián (often known as Donostia, its name in the Basque language) takes the record with €4,212 per m².

A modest family flat of 80m² will cost €137,000 at the average price, but around €286,000 in Barcelona. Meanwhile, the minimum wage is €15,000, with around 20% of the population earning this amount. If both members of a couple earn the minimum wage, they will need to spend 9.5x their annual income on a modest 80m² flat in Barcelona or surrounding areas.

Meanwhile, the average salary is €28,000. Two thirds of the population earn up to 2x minimum wage, or €30,000. Earning enough to afford a modest home in a big city is a challenge for many voters in a country where home ownership remains very popular.

Populists on the left and right often agree on the need to control rents - a policy pursued for many years by dictator Francisco Franco. The economists among you will be unsurprised to learn that rent control measures ended as badly in Spain as they do everywhere else, with elderly tenants in rent-controlled apartments refusing to move to smaller properties, which would be much more expensive. This then restricted the number of large flats on the open market, making it harder for families with growing children to get enough rooms. Families stayed in cramped entry-level flats for too long, which in turn ruined the market for young people who needed to get a foot on the ladder with their first home.

Funnily enough, the Socialists repealed Franco’s rent-control laws in 1980, only for the party’s current populist-adjacent leader, Prime Minister Pedro Sánchez, to bring back his own version in 2023, with the support of his hard-left allies. Expect the policy to continue to generate poor results if he defies the odds and wins the next election. The opposition PP is likely to rush to repeal the law if it wins, as expected.

Economists will grow hoarse telling non-economists that rent controls never work. Most economists anyway. Sánchez has a doctorate in the subject, although a newspaper once published a story alleging plagiarism in his thesis. He has denied the claims. Whatever the truth of the matter, he stands out among economists by actively supporting rent control.

There is, however, a solution to housing crises that is both tried and tested; and supported by most economists. Build more homes! The laws of supply and demand mean that more homes entering the market will tend to keep prices at a relatively reasonable level.

This fairly non-controversial point leads to what is probably my most controversial opinion. Before I tell you, let me give you some background. Spain is a large country. Only 13% of it is inhabited and some 16% of the population live in rural areas. Cities are much better for the environment, for reasons that are painstakingly explained in the book in the Further Reading section.

So, my controversial opinion is… No, sorry. It is much too controversial. Please make sure you are sitting down in a comfortable chair. Close your eyes and take some deep breaths. Ready?

Here we go… The Spanish government should encourage a massive wave of building in large cities and in the outskirts of large cities. Some percentage of the new homes can be set aside for people on low incomes, as long as care is taken in working out what number will work without destroying potential profits for developers. The government should even consider building in green belts, at least some of the time, as well as expanding public-transport networks to connect new suburbs.

At the same time, the government should encourage the residents of Empty Spain (small villages where many young people have left) to move to cities, where they will be able to run errands without burning up lots of diesel. The country should also combine this with huge investment in digital skills for adults in cities to help the population cope with a rapidly changing labour market.

To compensate for the loss of some of the cities’ green belts, Spain should consider rewilding abandoned villages and maybe plant a forest or three in some of the vast and empty countryside.

I did warn you that my view would be controversial! Of course, everyone hates those of us who propose Yes In My Back Yard (YIMBY) policies. Strangely enough, much of the opposition will come from conservationists, who only pose as environmentalists. You regularly see hippies in rural Spain complaining about windmills ruining the view. Needless to say, this nominally green opposition to wind power isn’t a very coherent position.

Encouraging a move to cities and suburbs is actually in line with recent history. Spain’s urban population has increased since 1950 in two large waves. There was a rural exodus between 1950 and the 1980s as the country took industrialisation and mass tourism seriously at the end of the dictatorship and the beginning of the democratic era. Many of the migrants to the big cities, including Barcelona in Catalonia and Bilbao in the Basque Country, but also the capital Madrid, were working-class Spanish speakers from the south of the country.

Migration from villages to the cities has continued since the 1980s, but at a slower rate. This is due to the formation of regional governments throughout the country and the consolidation of the welfare state, which have combined to reduce the risks of staying in a village with no industry. Since the 1990s, people from Spain’s rural hinterland have often needed a nudge from friends and family members who are enjoying city life before making the move. There has also been massive immigration from Latin America and other parts of the world to Spain’s cities in recent years.

Grudging hostility from Catalan nativists to Spanish-speaking migrants and immigrants was the bedrock of the populist independence movement, which worked up a head of steam ahead of a failed coup attempt in 2017. Anger at Latin American waiters, who started working before getting a good level of Catalan, is surprisingly common in nationalist circles.

In 2020, more than 80% of the population counted as urban - a lower level than elsewhere in Europe. As previously mentioned, a number of stubborn Spanish residents still choose unemployment in small rural villages over a job in a city and a modest flat in the outskirts. Economists call this “structural unemployment.” Any sensible government would create incentives for people in rural areas to move to places where they would be better placed to find a job. However, bet against sensible governments in Spain (or indeed anywhere)!

Sadly, the chances of us seeing a serious plan to build more homes in the cities while rewilding abandoned villages, planting forests and encouraging the rural unemployed to move are close to zero. The main reason is the design of the Senate, Spain’s second chamber. Each mainland province, no matter how empty, gets four senators; while the big islands get three and the minor islands get one. The two autonomous cities get two senators each. Each regional parliament gets one senator per autonomous community, plus another for every million resident.

Quite simply, winning in the cities while losing badly in the countryside will never be a good election strategy. Rural voters don’t want to be told that living in anonymous blocks of flats in the ugly outskirts of major cities is much better for the environment than struggling to live on a small monthly unemployment payment and home-grown vegetables in a picturesque cottage with great views in the middle of nowhere. Indeed, opposition leader Alberto Núñez Feijóo recently announced how proud he is of coming from a village with 300 inhabitants.

As usual, the comments are closed whenever we discuss populism. I’ve said it before and I’ll say it again, but populists can be very annoying on the internet when they see institutionalists think critically about their worldview. See you next week!

Further Reading

Empty Planet by Darrell Bricker and John Ibbitson

Sharpen Your Axe is a project to develop a community who want to think critically about the media, conspiracy theories and current affairs without getting conned by gurus selling fringe views. Please subscribe to get this content in your inbox every week. Shares on social media are appreciated!

If this is the first post you have seen, I recommend starting with the second anniversary post. You can also find an ultra-cheap Kindle book here. If you want to read the book on your phone, tablet or computer, you can download the Kindle software for Android, Apple or Windows for free.

Opinions expressed on Substack, Twitter, Mastodon and Post are those of Rupert Cocke as an individual and do not reflect the opinions or views of the organization where he works or its subsidiaries.