Governments worldwide are at a loss on how to solve the housing crisis. Prime Minister Pedro Sánchez of Spain believes placing a 100% tax on properties purchase by non-European Union residents will solve the crisis. He’s wrong.
“The West faces a decisive challenge: To not become a society divided into two classes, the rich landlords and poor tenants,” Sánchez said. An estimated 700,000 properties sold throughout the nation in Spain, the second-highest volume of sold homes in over 15 years. Non-EU residents accounted for a mere 27,000 home purchases. News outlets like BBC are stating that foreigners composed 15% of the Spanish housing market in 2023 but they are also including EU residents who will not be burdened by this tax. The German and French, for example, are large purchasers of properties in Spain.
The government has not said when this will go into effect. What they fail to realize is that the average real estate investor may purchase a handful of properties and rent a few out. They are not buying anywhere near the level of massive funds like BlackRock who have taken over the residential real estate market globally in recent years. The government is not calling out these funds because they partner with them to create new housing, student residences, and co-living options. BlackRock and others can be considered a necessary evil to some extent as there is a severe housing shortage in comparison to demand. However, the president said he wanted to target those looking to profit from real estate but failed to target actual investment funds. The government always targets higher net-worth INDIVIDUALS looking for passive income.
Then at the same time, Spain is eliminating a fast-tracked residency program called the “golden visa.” This program was intended to attract high-net-worth individuals who are able to spend a minimum of €500,000 on housing. These individuals would have paid taxes into the economy and likely intended to live there for a portion of the year, spending more money in Spain.
Let us not count out okupa laws that not only legally permit squatting, but it forbids homeowners from evicting squatters. Over 55,000 complaints regarding illegal occupation have been filed in the last four years. Not only are squatters permitted to stay in unoccupied housing, but the landlord has an obligation to keep the utilities on AND pay for them.
Open borders certainly are not helping, as 63,970 new migrants entered the nation last year, a 12.5% increase from the year prior. The government says they are curbing migration since figures are down from the 2018 high of 64,298, but nations, especially coastal nations, cannot truly calculate everyone who illegally enters.
No one in government will ever question, “Has this been done before? If so, what was the outcome?” Canada attempted to charge an albeit smaller 25% entry tax on real estate for foreign buyers, but good luck finding a home there. I believe these measures are simply smoke and mirrors. The concept appeases the people who are struggling to afford housing and the government can say that they attempted to combat the problem.
