Bank of Spain sees 1 million home shortfall through 2028 as parties fight over rent decrees

Supply is falling behind demand

The Bank of Spain presented its new economic projections on Friday, and its director general of economics, David López Salido, pointed to a gap between homes started and homes finished. That difference stands at 35,000 properties and has been widening since 2021. The bank attributes the lag to the fact that homes handed over now were started in 2022 and 2023, when rising construction material costs and higher interest rates hit those projects. The bank keeps its estimate of a deficit of one million homes of supply over the next year and a half, by 2028. It expects more than 140,000 homes to be delivered that year, the highest figure since 2011, when 157,405 units were finished.

Constraints on construction

The bank's quarterly report says residential investment is growing more moderately in 2026 than anticipated. It links the slowdown to fewer building permits being executed, a lower completion rate, rising production costs and difficulties connecting new developments to the electricity grid. A bank survey of firms (EBAE) found that 60% of construction companies struggle to cover their labour needs. The bank also points to slow urban planning, where town councils are a bottleneck, and to a shortage of land ready to build on. Roughly 140,000 free-market homes were started over the past 12 months, while completions have stalled at around 80,000 a year.

The Vox argument on migration

Vox's housing spokesman and deputy for Málaga, Carlos Hernández Quero, shared a viral video showing a Latin American couple and their child sharing one room in a flat where other families also live. He used the scene to argue that rents are rising because of immigration. He said the arrangement now means one foreign family per room, and that a three-bedroom property rented for 700 euros before now rents for 1,800.

A three-bedroom property that used to cost 700 euros now rents for 1,800.

He blamed left-wing policies for feeding demand while limiting supply.

If there is business in housing, it is because the left wants it: endless tenants and scarce supply.

ABC, citing INE microdata from the 2025 Living Conditions Survey, estimated in June that about 5.2 million foreign-born people rent, roughly 52% of the approximately ten million renters. ABC notes that this figure is misleading because it includes minors living with their parents, among them children of immigrants born in Spain.

Decrees and ownership

The Council of Ministers approved two royal decree-laws last Tuesday, similar to decrees that Congress rejected the week before. The first, considered more likely to be validated by the Diputación Permanente, protects current tenants through rent controls, longer contracts, a temporary suspension of evictions and tax benefits. Its supply measures are limited to ICO guarantees for social or affordable housing and industrialised construction. The governor of the Bank of Spain, José Luis Escrivá, said the measures must be designed with great care so they do not reduce rental supply. Bank of Spain data for 2024 put individuals at about 92% of market-rate rental homes and companies at 8%, while Alfonso Serrano, PP secretary general in Madrid, puts small owners with one to three flats at 95% and investment funds at 4%.

A false debate is being created.

Speaking on Al Rojo Vivo, Serrano argued that the focus is wrongly placed on investment funds and that owners need security. He said Madrid has offered tax incentives to owners 14 times and that the decrees make it harder for low-income and working people to access rentals.

Affordability and public spending

Economist Gonzalo Bernardos wrote on X that the housing market now consists almost only of used homes for purchase.

The residential market in Spain now almost only consists of the used-home purchase segment.

He argues that demand shifting to second-hand homes could keep prices from falling even if mortgages become more expensive. Per a barometer from the CIS, 86.9% of people say they are very or fairly worried about the housing situation in Spain. Young entrepreneur Jorge Branger calculated on LaSexta Xplica that a worker would need 185 months, about 15 years, of saving while living with parents and spending nothing to buy a flat. The Observatorio de Emancipación reports that the poverty risk for young people renting rises from 25.9% to 43% after paying housing costs. In 2024, according to Eurostat, Spain devoted 0.1% of total public spending to housing, compared with 0.8% in the euro area.

What comes next

The Bank of Spain will evaluate the government's housing decrees in the coming months. In the same projections, it raised its growth forecast to 2.6% and warned that the inflation crisis will be longer and more generalised across goods and services.