Spanish government pledges €23bn for housing via 'España Crece' sovereign wealth fund

The Spanish government has announced a new initiative to build affordable housing to address the severe housing shortage that is particularly affecting young people across the country.

Prime Minister Pedro Sánchez announced this Monday that the sovereign wealth fund known as 'España Crece' (Spain Grows) aims to raise 23 billion euros - a combination of private and public capital - to build 15,000 new homes per year at affordable rents.

This objective was first set in April 2025 when Spain's 'industrial-scale housing plan' (Perte) was presented, but significant results have yet to be seen.

This investment vehicle will be endowed with a total of 13.3 billion euros (10.5 billion from European funds and another 2.8 billion from non-repayable transfers).

However, the government aims to mobilise a total of 120 billion euros (seven per cent of Spain's GDP) in public and private capital. For this housing policy target, the plan is for Spain's Official Credit Institute (the ICO - the body in charge of managing the sovereign wealth fund) to contribute approximately 14 billion euros, with the hope of raising another nine billion euros from private investors.

Such were the details presented by PM Sánchez, surrounded by his hard-core supporters in Moncloa, at Monday's presentation of the 'España Crece' sovereign wealth fund initiative.

In the midst of the housing crisis, the construction of new homes will be one of the focuses of this funding tool that, according to Sánchez, will aim to mobilise 23 billion euros in public and private funds "to boost supply and move towards closing the housing deficit, financing the construction of 15,000 homes per year" for affordable rental.

"The fund will roll out the red carpet for investors, but not for speculation", stated the PM, adding that the money to fund the investment vehicle will be managed by the ICO and will come from surplus loans from the European Recovery Plan funds.

The idea is to give continuity to the reformist momentum of the EU's economic recovery plan beyond August 2026, when the EU's Next Generation funds dry up, at a time when Spain is still functioning without a set budget.

During his presentation, Sánchez explained that discussions have already begun with other investors, sovereign wealth funds and private equity firms that have expressed interest in participating. He acknowledged that, in these negotiations, stakeholders have placed particular emphasis on the need for transparent and "highly qualified and professionalised" governance.

Economy Minister Carlos Cuerpo further stressed that this fund will be used "where there are market gaps" or to be "long-term, patient shareholders in transformative projects".

Housing Minister Isabel Rodríguez highlighted the role of social housing providers, who will assist central government in managing the housing stock. In this regard, various representatives from the construction sector and the social housing movement attended the presentation to advocate for the creation of this investment vehicle.

Manel Rodríguez, partner and CEO of the Salas Group, stressed the need for increased investment to boost social housing. Regarding the workforce and the modernisation needed for the sector, industry representatives advocated for public-private collaborations to accelerate industrialisation of the sector.

"The public fund must be very well structured and we should not consider it as an expense. If we do it well, we will build much better, faster, with less environmental impact, providing a real solution to the major challenge of access to housing," stated these participants.

Despite the funding vehicle's aspirations, the opposition has been highly critical of the fund. The Partido Popular has described it as "smoke and mirrors and propaganda", warning that the government could use this instrument to gain a foothold in certain companies.

The PP's calculations point to a total failure in the disbursement of EU loans (some 83 billion euros). Specifically, according to the PP, only about 750 million euros have been used for the ICO line of credit for promoting social housing out of an initial allocation of four billion euros.

In response to criticism that this fund is merely an excuse to manage unused European funds given to the Spanish government, Sánchez argued that the Next Generation EU funds were only the starting point.

He advocated for leading a movement committed to new joint financing from Europe - as was done to tackle the pandemic - using instruments such as debt mutualisation, Eurobonds and all types of common financing to achieve objectives in areas such as technology, security and defence, "where a large part of our future is at stake".

Economy Minister Carlos Cuerpo also used his speech to defend the government's economic management and Spain's strong position relative to the rest of the Eurozone. "We have managed to square the circle thanks to our commitment to the digital and green transitions, with transformative results," he stated.

Cuerpo also pointed out that the Bank of Spain had already highlighted the "relatively rapid" recovery of the national economy after the pandemic, thanks to improved productivity, resilient employment and demographic dynamism, which has led to potential annual growth of two per cent until 2028.

"Despite this, we must continue to make progress in closing the productivity gap with our European peers, in access to housing... that is why this powerful tool has been created, seeking to support companies in innovative projects to modernise the economy," said Cuerpo.

The PM also stressed the growth in the Spanish economy, remarking that this vehicle "will force those who systematically ignore reality to admit, even if only through gritted teeth, what they always deny: that Spain is growing".

He continued: "In Spain, black gold doesn't flow in abundance, but our best resource is the confidence we have earned through hard work over these years," referring to how large sovereign wealth funds around the world operate, using their oil revenues for this type of investment.

This sovereign wealth fund - announced in mid-January, but postponed due to the train accident in Adamuz (Cordoba) - is Moncloa's big gamble for the country's immediate future without the support of funds from Brussels at a crucial time when Spain is operating without a set budget.

As planned, the resources will be allocated to key industries to improve productivity in the Spanish economy, with a firm commitment to investment in housing, energy, artificial intelligence and digitalisation, as well as reindustrialisation, the circular economy, infrastructure, water and security.