Housing as the Fifth Pillar of the Welfare State: Why Spain Needs Structural Reform

Considering recent political debates, particularly in Spain and across Europe, there is growing consensus that housing should be considered the ‘fifth pillar’ of the welfare state, alongside health, education, pensions and unemployment protection. Recognising housing in this way underscores its essential role in securing individual and collective well-being. Over the past two decades, housing costs have risen sharply, while public investment and regulation have failed to keep pace. At the heart of the crisis lies a political failure to treat housing as a social good and a social right. The result is a fragile system shaped by speculative investment, a weak social rental sector and an overreliance on homeownership—conditions that lock many out of both ownership and stable renting.

The structural causes of the housing crisis in Spain

Spain’s housing policy reflects historical legacies, particularly the Franco regime’s promotion of homeownership as a form of both social security and political control. This focus on ownership has endured, with successive governments subsidising home purchases while neglecting and privatising social housing. As of 2024, only 8.8 per cent of Spain’s housing is below market rent or free—far below the Netherlands (25.9 per cent) and the EU-27 average (10.5 per cent). The 2008 crisis exposed deep vulnerabilities. Indeed, mass foreclosures and rent hikes were met with mortgage restructuring and bank bailouts, not expanded social housing. This inaction worsened affordability, benefiting investors while squeezing low- and middle-income households, which Covid-19 then intensified. Addressing these challenges requires a long-term strategy that treats housing as a human right.

Barriers to consensus in housing policy

Implementation of such a strategy remains fraught with conflict. Real estate investment trusts (REITs) have gained significant control over Spain’s housing market. Blackstone’s Spanish REIT had amassed 17,000 rental units by 2017, and have reshaped housing into an investment asset. In response, housing activism has grown. Movements like Sindicat de Llogateres in Barcelona push for tenant rights and social housing, and NGOs have also stepped in to fill gaps, acquiring or developing affordable housing through partnerships and cooperative models. However, they face regulatory and financial hurdles, relying heavily on public funds, philanthropy, and access to affordable land, a situation which is not helped by Spain’s decentralised political system. Cities like Barcelona have led with rent controls and social housing expansion, while others lag behind due to political fragmentation and a lack of funding. Greater intergovernmental coordination is needed to even out the results.

Rebalancing public sector leadership

Local governments should have greater authority to enforce inclusionary zoning policies requiring private developers to allocate a share of new housing for social and affordable units to help balance private interests with broader social needs. However, Barcelona’s experience with its 30 per cent inclusionary zoning rule shows the difficulty of implementation as only 156 units were created in six years. In contrast, cities like Vienna and Amsterdam have seen more success by pairing zoning policies with strong public investment and active land acquisition. These local governments secure land and ensure a substantial share of new developments is dedicated to social housing, which in turn reduces reliance on private developers. For inclusionary zoning to work in Spain, it must be paired with government co-investment in affordable housing, with local and regional governments proactively acquiring land to prevent speculation and ensure long-term affordability. The 2023 Housing Law marks progress with rent controls and tax incentives, but long-term financial commitment lags behind other countries. Indeed, Spain’s public housing expenditure remains low—just 0.6 per cent of GDP in 2023 versus the EU average of 1.2 per cent.

Enhancing market stability and speculation

A comprehensive strategy must also address the existing housing stock. This includes measures to improve energy efficiency, adapt older units to changing demographic needs (such as ageing populations), and mobilise vacant housing.

Spain’s recent Housing Law introduced rent caps in high-demand areas, limiting rent increases to 3 per cent annually in stressed market zones, and prioritising protections for tenants. This could be coupled with vacant property taxes to discourage speculative investment and encourage property owners to make units available for long-term rental. Spain has over 3.4 million vacant homes, representing a significant portion of the total housing stock. A well-enforced vacant property tax could help reduce artificial scarcity and improve affordability, though a further problem lies in the proliferation of short-term rental platforms like Airbnb, where up to 30 per cent of available rentals have been converted into short-term. This has no easy solution.

Expanding alternative housing models

Spain should adopt innovative models that prioritise long-term affordability and community control. Cooperative housing offers a viable alternative, as seen in Barcelona’s La Borda project, where residents collectively own and manage housing. By removing speculative pricing, cooperatives ensure stability and affordability, but this model requires structural reforms including discounted public land leases, cooperative-specific financing, and legal and tax protections as part of a national strategy. This could be matched by a public-private impact investment. These investors pursue both financial returns and social goals, making them ideal partners for social housing. Spain could attract impact capital by creating a dedicated investment fund, offering tax breaks for long-term affordability commitments, and providing risk-mitigation guarantees. Another promising solution would be Community Land Trusts (CLTs), which maintain community ownership of land while leasing housing at cost-based rates. For CLTs to thrive in Spain, legal recognition of land trusts, alongside public funding for land acquisition and tax incentives for land contributions are needed. Together, these models could transform Spain’s housing landscape.

Conclusions

Spain’s housing crisis is deeply rooted in historical policy choices that prioritised homeownership over rental housing, leaving the country with one of the lowest proportions of social housing in Europe. A long-term solution means reasserting housing as a public good through a coordinated national strategy. Reframing housing as the fifth pillar of the welfare state requires a robust national framework that integrates long-term investment with regionally sensitive planning. This is the only viable path towards a more equitable, inclusive and sustainable housing system.

Digested read produced by Sam Hill in collaboration with the author.