Spain rental market in need of reform
News Article Date: Wednesday 21st of October 2009
Spainís housing market is broken and urgently needs fixing, argue a group of top-flight economists from Fedea, one of Spainís leading economic policy think tanks.
In a new report just released, 'For a Housing Market that Works: A Proposal for Structural Reformí, a group of economists at Fadea, including Pol Antrŗs of Harvard University, Luis Garicano of the LSE, and Javier DŪaz-Gimťnez of IESE Business School, explain how and why Spainís housing market should be fixed to reduce social problems and help the economy recover.
The report identifies a dysfunctional rental market as lying at the heart of the problem, causing serious economic and social consequences such as a bloated real estate sector, low productivity, over-indebted families, unaffordable housing, and low labour mobility.
Just 13% of Spanish households live in rented accommodation, compared to >40% in Germany and France, and around 30% in the UK. The report blames Spainís regulatory framework and calls for immediate changes to liberalise the market.
For example, the law restricts rental contracts, which makes it difficult for landlords and rental clients to agree conditions that might suit both parties. Even the Governor of the Bank of Spain is critical. ďItís ridiculous that the law prevents landlords from renting their properties for less than 5 years, even if tenants agree,Ē he told the Spanish press.
Low labour mobility, reduced access to housing, high levels of unsatisfied demand for housing (especially amongst the young, as 65% of Spaniards between 25-29 live at home with parents, compared to 20% in France, Holland and the UK), and a glut of empty homes are all consequences of Spainís small rental market.
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