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According to a new report from the Bank of Spain, three out of four households living in rented accommodation don’t not have enough savings to cover the down payment on a home. For so many, renting is not a choice but a necessity.

 

The findings highlight a growing divide in access to housing, especially among young people. While wages have only increased modestly, housing prices have surged at nearly double the rate.

 

With limited supply and rising costs, the Bank of Spain is calling for immediate action to expand the housing stock, particularly in the rental market. One proposal includes offering support to landlords to make more properties available for rent.

 

The report paints a troubling picture of affordability, especially for younger generations. With housing prices rising nearly twice as fast as wages, many aspiring homeowners are stuck in place with little hope of improving their circumstance.

 

Part of the problem, according to the Bank of Spain, is that landlords are nervous about renting out their properties. Spain’s somewhat relaxed approach to squatters doesn’t instil much confidence in homeowners, who fear being left in legal limbo if their tenants stop paying rent.

 

Currently, buying an average sized home in Spain costs the equivalent of 7.2 years of gross household income. This ratio has held steady in recent years, but it varies widely depending on where buyers live. In high-demand areas, like large cities, renters would need more than nine years of gross income to purchase a home.

 

Property prices rose by 8.7% in 2024 alone and over the past decade, the average increase has reached 39.8%. In regions like Madrid, Catalonia and the Balearic Islands, prices have climbed more than 45%. In contrast, areas like Extremadura and Castilla-La Mancha have seen increases of less than 10%.

 

But rental prices have also jumped. Since 2022, rents for new leases have risen by more than 10% annually. Despite this, renting has become more common among low-income households, particularly among young people and immigrants. But with higher costs and fewer options, many renters are struggling to transition into homeownership.

 

According to the Bank of Spain, around 75% of rented households lack the savings needed for a down payment or to take on a mortgage that would keep payments below 35% of their income.

 

“These proportions would be higher in the large urban areas of Barcelona or Madrid, where the demand for residential housing without access to mortgage credit would have shifted to the rental market,” the report states.

 

Young adults face especially steep barriers.

 

“Although in recent years the average real wages of young employees have increased at a faster rate than those of other wage earners, the cumulative growth in real rental and house prices has been greater,” the report says.

 

From 2015 to 2023, real estate prices rose more than 20%, while wages for people under 34 increased by only 11%. High unemployment among young workers further limits their housing options.

 

“This employment situation makes it difficult for young people to access both mortgage loans and rental housing,” the analysis explains.

 

The root of the affordability crisis is the imbalance between supply and demand. Despite rising prices, interest in buying remains strong. In 2024, nearly 715,000 homes were sold, 12% more than in 2023. The Bank of Spain attributes this to population growth, foreign buyers and favourable economic conditions. But the supply of homes falls far short.

 

Between 2022 and 2024, the country accumulated a shortfall of between 400,000 and 450,000 homes. Half of this deficit is concentrated in just five provinces: Madrid, Barcelona, Valencia, Alicante and Malaga.

To address the problem, the Bank of Spain is urging a coordinated and long-term response to increase available housing, especially for rent.

 

“The priority to mitigate the current housing affordability problems would be to adopt measures that increase the housing supply, especially in the rental segment,” the report concludes.

 

The report recommends several solutions. These include creating a stable legal framework to protect landlords and tenants, promoting partnerships between the public and private sectors for affordable rental housing and introducing schemes to insure rental income and compensate landlords for losses.

 

The study also identifies untapped potential in the existing housing stock. In Barcelona and Madrid alone, if second homes, tourist rentals and vacant properties were made available, between 310,000 and 390,000 households could be accommodated.

 

 

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