Spanish government intends to make almost 100,000 properties available as public housing stock

The Spanish government has taken the first step toward the transfer of land and apartments from Sareb to the public housing company Sepes that PM Pedro Sánchez announced would happen six months ago. At that time, the prime minister decided to convert Sepes into the new public housing developer and on Tuesday his ministerial cabinet approved the transfer of 40,000 Sareb homes and 2,400 plots of land on which another 55,000 affordable rental homes could be built. This was announced on Tuesday by housing minister, Isabel Rodríguez, at the press conference following the executive meeting.

Often referred to as the 'bad bank', Sareb was set up by public (state) funding and the major banks in 2012 to rescue about a dozen financial institutions that were drowning in debt from construction companies unable to repay their mortgage loans after the sector collapsed in 2008 and beyond. Sareb stands for 'Sociedad de Gestión de Activos procedentes de la Reestructuración Bancaria'.

The government has valued the current housing and land market approved for transfer to Sepes at 5.9 billion euros. This operation has several detractors, such as the funds that currently manage many of these assets, such as Blackstone and KKR. The housing that will feed this public housing portfolio will be affordable rentals below market land prices and "in no case exceeding 30%" of household income.

The first housing package to be added to the public housing stock will consist of approximately 13,000 properties, although the minister did not specify how soon they will be handed over to vulnerable families. "The Prime Minister committed to making 13,000 available immediately, which will be the number we are primarily working to, and we will gradually incorporate all of them because some of them will still require adaptation", said the Housing Minister.

The deal is valued at 5.9 billion euros, to which a further 593 million euros will be added for refitting or renovating the homes acquired from Sareb, according to Rodríguez. She values this agreement as it "fixes the outcomes of the previous financial crisis, which was the use of these homes from foreclosures and evictions of families to pay for the financial bailout." In her opinion, this is a "different way of dealing with the housing crisis, which is to save families instead of saving the banks."

However, the government's plans to expand the public housing stock won't be a walk in the park. First, this announcement of the transfer of 30,000 properties is questionable because some are already occupied by vulnerable families. Figures from Sareb indicate that, of the 38,300 homes it currently holds on its books (this entity sells properties, but also occasionally acquires some), some 60% are already occupied.

This means that the new public housing company may find that a large portion of the houses it receives may not be immediately available to the market, according to Sareb data. Sources at the Ministry of Housing are assured that, when the time comes, there will be a solution, also noting that there are contracts signed with certain conditions and that they will expire.

Another obstacle that will have to be addressed is that, of all the homes on Sareb's books that are occupied, some 8,000 are earmarked for social rentals. So, we would once again be talking about homes that are already occupied. These already provide a solution to the most vulnerable families and, therefore, would not be available to those currently struggling to access affordable housing.