The Balearic Islands embrace Ayuso's housing model: more market and less protection

PalmaThe PP's decision to allow companies and investment funds to buy housing at a regulated price is the latest example of the change in housing policy model in the Balearic Islands, driven by Marga Prohens's government, with political role models like Isabel Díaz Ayuso's Community of Madrid. The Popular Party has opted to increase supply and private initiative over protected housing, a strategy that the left and experts consulted by ARA Balears have criticized.

"Legal entities that exclusively allocate these homes to rental subject to the requirements provided for in this decree will be able to acquire housing at a regulated price": this is what Article 5 of the PP's amendment states, which was approved during the processing of the Decree-Law on the acceleration of strategic projects as a bill. A measure that was not a requirement of Vox to support the regulation and that the Popular Party introduced on its own initiative. Francesc Antich's government created the figure of housing at a regulated price through Law 5/2018 on strategic land reserves, with Jaume Carbonero as Minister of Housing. The Administration is the one that sets the maximum price for these homes.

Housing purchased by companies must be intended for rent or rent with an option to buy for a period of 20 years. But Article 6 of the amendment makes an important clarification: "Except for prior authorization from the Director General of Architecture and Housing for exceptionally justified reasons." This means that companies and investment funds have a way to shorten this period. And there is also a way to increase the price: Article 7 of the amendment states that maximum prices must be respected "except for prior authorization" under the terms provided for in the decree.

"With this measure, investment funds, which are the only ones with the appropriate financing mechanisms to generate profitability from this operation, are given entry. The opportunity to buy an entire block of apartments is always attractive," explains economist and housing expert Eduard Robsy. The economist also notes that "the drop in protection over a period of 20 years does not pose any inconvenience for this type of operator" and that "they can request an early disqualification process" as has happened on other occasions. "There are precedents of very inelegant and premeditated operations," he adds.

Another aspect to consider is that the regulations do not limit "other expenses that can be passed on and that are not strictly the rental price," points out Robsy. "They must be justified, but they are not limited," he emphasizes. "We find these practices with large holders. In addition to rent increases, other amounts began to be significantly increased and the price did not stop growing," explains the expert, who sees parallels with the government of Isabel Díaz Ayuso in Madrid. "We are already doing fiscal dumping like them. They do not deviate from this paradigm and oppose any control mechanism," he remarks in reference to measures such as declaring the islands a tense zone to limit rental prices.

The MÉS per Mallorca deputy criticizes that allowing the purchase of housing valued by investment funds implies "making normal people, people who do not have housing, compete with those who want to profit from it." In this way, it becomes possible for "housing at a valued price to be a source of business and be subject to speculation in the medium and long term." "The [Balearic] PP copies the model of Ana Botella in Madrid and all the PP leaders who have come after. It is about opening the doors wide to vulture funds and deepening the vision of housing as a market commodity," he adds.

On the other hand, the PAH lawyer Gloria Olmos criticizes that, while people are required to have roots in the Balearic Islands, the same does not happen with companies and vulture funds. "These entities are not required to have roots or to pay taxes here. The requirements are not the same, so entities will come, buy apartments, and expel people. They are completely buying Ayuso's model," she assures.

A shared housing policy philosophy

The Balearic Islands have adopted the same philosophy that characterizes Ayuso's housing policy, with the promotion of the market and private developers and a lesser emphasis on traditional protected housing. In fact, just a year ago, the Government had not even started any housing construction, and currently, there are not even five. Instead, the figure of Limited Price Housing (HPL) has been prioritized, with less protection and less strict restrictions. Ayuso has promoted figures such as limited price public protection housing (VPPL), also less strict than other protection schemes. In this way, affordable housing is spoken of, but there is also a lack of public control.

Both the Islands and Madrid and other PP governments propose increasing construction as the main solution to the housing problem. This commitment is based on the argument of balancing supply and demand (currently there is more demand than supply). But according to many analysts, this approach ignores that the demanders do not start from equivalent positions: many families face difficult economic situations, while companies and vulture funds want to place their capital and multiply their profits. To build more and faster, Prohens has modified the regulations, with urban planning changes, reconversions, and an increase in the minimum residency period, among other measures.

The outright opposition to controlling prices is another trait shared by communities governed by the Popular Party, and criticism of the state housing law has been constant from the Balearic Islands. Here, the idea that the market is capable of self-regulating comes into play again, even though the bursting of the real estate bubble in Spain proves the opposite. According to data from the Bank of Spain, between 2000 and 2009, five million new homes were added in Spain, while the average price of free housing doubled – data from the INE and Banco Sabadell: from 1,000 euros per square meter in 2000 to 2,218 in 2007.