Housing and the labour market in Spain

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The sharp increase in property prices in Spain, in addition to problems of low pay and unstable employment, makes it difficult for many workers to enter the housing market, and is proving an obstacle to labour mobility. Young people and immigrants are the groups most severely affected by these issues.

Housing in the Spanish economy

The construction and tourism sectors have played a central role in Spain’s recent economic growth. They are largely responsible for the considerable increase in the number of first and second homes and in the escalation of property prices. Although this model of growth may entail the risk of ecological problems (for land, water, physical systems), and even possible economic collapse due to mortgage default, these questions are beyond the scope of this article, which deals only with the direct labour issues.

The increase in the construction of dwellings (infrastructure shows a slower growth rate) has been spectacular: Spain built more dwellings in 2004 and 2005 than France, Germany and the UK combined. The purchase of houses as second homes or for rent in the tourist market has become an alternative to traditional savings due to the low interest rates offered by banks. Thousands of European citizens, particularly retired people, have taken advantage of the comparatively low prices in Spain to buy a second home on the Spanish coast and hence escape from the cold winters in their countries. In addition, low mortgage rates and the increase in employment have encouraged many young people to leave home (within the EU, Spain has the highest proportion of adults aged over 25 years still living with their parents). Finally, the large increase in the number of immigrants into Spain - from 800,000 in 1999 to 3,700,000 in 2005 - has led to another segment of demand for housing.

Public housing policy

This major increase in house building, accompanied by the pressure of speculation and the lack of a coherent housing policy, has led to house prices in Spain rising faster than in most other European countries in recent years. Between 1998 and 2004, the price of housing in Spain increased by 125%, whereas pay increased by just around 25%. Furthermore, the proportion of rented properties fell from 15% of the total in 1991 - already the lowest proportion in the European Union- to 10% in 2002. Much of the housing stock, both new and old, has changed over from rented to purchased property, possibly because of the availability of mortgages due to low interest rates - even 30- or 40-year mortgages which are within the reach of some immigrants and young people. As the availability has fallen, rents on those properties which remain in the rental market have risen sharply.

Most of the dwellings that are built are not ‘protected dwellings’, i.e. subject to government restrictions on size and price. In 1996, 30% of the dwellings built were protected; by 2002, the figure was less than 8%. The regional and local authorities, which are responsible for housing, are not requiring housing developers to apply quotas of protected dwellings, nor are they using public funding to build them. Furthermore, the government has tended to regard construction as an economic rather than a social function.

Difficulties encountered by immigrants and young people

A large part of the demand for housing comes from young people and immigrants, who are more likely than other groups to be in unstable employment, characterised by low pay and temporary contracts. Only those young people and non-nationals with high incomes are able to buy property on 30- or 40-year mortgages. The cost of housing for a young couple may be between 55% and 65% of their incomes, according to recent studies by the Youth Institute (Instituto de la Juventud). This means that in general these young people are finding it harder to leave home, are subject to a lower standard of living for a longer period, or have to work overtime in order to earn extra pay. This is one of the reasons for the effective increase in hours worked in recent years.

It also means that geographic mobility is highly limited. The working day is extended due to the time needed for commuting, and the labour market is becoming less flexible because workers are reluctant to take jobs far from their homes, even if it means turning down the chance of professional advancement.

Furthermore, a large proportion of young people are unable to find suitable accommodation because of their low incomes. They are forced to remain living in their parents’ houses, thus delaying their full independence and the formation of their own families.

Position of the trade unions

The trade unions began to call for a change of housing policy when the Government Housing Plan for 2005-2008 (Plan estatal de la vivienda 2005-2008) was published several months ago. They feel that the plan has positive aspects, such as the promotion of protected housing, and direct and indirect subsidies for young people to buy or rent dwellings. However, they believe that the policies on which the plan is based are insufficient because they fail to curtail the price rises, which are the root of the problem. This is mainly because of the lack of coordination between the public authorities and the lack of effective policies for reserving land. Above all, the trade unions take the view that more protected housing should be built, especially for the rental market, and that the public authorities are not using their full capacity to obtain public land for development.

In order to bring about a change of direction in the production of a commodity that is crucial to safeguarding people’s welfare, the labour market and much of the economy, the trade unions call for social concertation on the housing policy. According to their point of view, housing is not only a commodity, but a fundamental right.

Commentary

The high price of housing in relation to pay is restricting the labour market in Spain, leading to geographic immobility and other types of inflexibility, such as unwillingness to change jobs for fear of losing a month’s wages. It is leading to poor living conditions, in particular by increasing the amount of time used for commuting, and to an increase in working time to obtain extra pay for housing. In order to combat these problems, the central and regional governments must introduce policies to reduce the price of housing. The trade unions are beginning to realise that they must support this goal, and the experts are calling for a change of legislation to give less power to construction companies.

The construction of housing is a central aspect of local development and, therefore, a balancing factor in the labour market. The public authorities should strive to make housing available to all citizens, whether born in Spain or from abroad, and should also seek to curb property speculation. (Fausto Miguélez, QUIT-UAB, Spain)