Why are there 420,000 apartments pending construction in municipalities with rent caps?

BarcelonaThe situation is contradictory in capital letters: while developers warn that the lack of land is one of the main impediments to the creation of new housing, the data show that there is an "overabundance" of vacant and stagnant land, which is not entering the market. Only in the municipalities declared a tense residential market zone (ZMRT) –that is, where policies such as caps are needed to facilitate access to housing in a context of high demand–, there is land to build 423,600 apartments on plots that are not yet part of the urban fabric, but are at its gates. Beforehand they must be urbanized or require changes of use, but the town councils, in their urban plans, already foresaw that housing would be built there.

According to the Urban Information System (SIU) –the Ministry of Housing's database that collects municipal planning– consulted by ARA, in these municipalities only three out of every ten properties projected in the current municipal plans have been promoted. The rest are listed as "pending realization". How is it explained that there is empty land if the current housing crisis responds to the lack of supply to respond to growing demand?

Where there is more homework to be done

To perform the calculations, the SIU uses the "most recent available" satellite images and maintains that it has a "high degree of reliability," despite being exposed to a "significant margin of error." About sixty images correspond to 2024, and the rest are from earlier.

Of the municipalities analyzed, in a third (110) the work of soil transformation to build practically no flats has begun. In absolute terms, those with the most work to do are Lleida (21,007 properties pending), Terrassa (15,401), and Vilanova i la Geltrú (10,189). At the top of the list are municipalities near Barcelona such as Granollers (3,795), Sabadell (2,140), Badalona (2,992), Rubí (2,624), and l'Hospitalet de Llobregat (1,857). There are also towns and cities with a lot of tourist pressure, such as Cambrils (9,128), l'Ametlla de Mar (5,452), Puigcerdà (3,509), Roses (3,355), and Sitges (1,978). In all cases without exception, the photos are from 2024.

On the other side of the scale, there is practically no more room to build in Barcelona –where there is land for 148 new flats–, Sant Adrià de Besòs and Sant Joan Despí: two examples in which, according to current plans, there is no developable land to erect any more housing. Another matter is the plots that are already part of the urban fabric and that, for some reason, are not built upon. Of these, all the experts consulted by ARA agree, there are practically none.

Ignacio Ezquiaga, PhD in Economics from the Autonomous University of Madrid (UAM) and collaborator with Funcas, sets up Barcelona as "a good example of few empty plots", but warns that, in Spain as a whole, during the last twenty years, the land market has seriously decoupled from the housing market. From 2015 to 2024, there has been a "total price insensitivity" for flats, materialized in very low land transaction volumes and in "historical minimums" in housing production.

Unaffordable land?

In a housing crisis context like the current one, the issue of land is key: "Without land on the market, we don't have fuel to run the construction machine. And that is what is happening now," warns Alfredo Sarrias, a member of the board of directors of the Architects' Association of Catalonia (COAC). Experts agree on the same diagnosis: on one hand, accessing land and preparing it costs a lot of money and, on the other, finding the financing to make the investment a reality is much more difficult now than it was a few years ago.

"Plots are empty basically for the same reason there is a problem obtaining housing: they are not cheap enough," opines Ezquiaga. "Developers do not find land that implies an affordable cost for the average housing demand, and they orient building towards the high-end of their potential buyers."

Sarrias estimates that land accounts for between 25% and 30% of the final price of housing, provided that no actions need to be carried out to urbanize it. As has already been made clear, in Catalonia there is a lot of land, but it is not prepared, rather, work must be done: these actions increase "very approximately, because it depends on each case," the impact of the land on the property price by up to 20%.

Financing, the cornerstone

Beyond the costs of acquisition and urbanization of land, there is a consensus in the sector that there is a serious financing problem: developers and builders cannot access the funds they need to put vacant land into circulation. In other words, they do not find sufficient loans or credit, nor at affordable enough interest rates, to do their job and, at the same time, build apartments at a price that the public can then afford to buy.

"Since 2008, financial institutions have not been financing land," laments Carles Sala from the Association of Developers (APCE). Professor at the UPC Center for Land Policy and Valuations Josep Roca explains how banks consider that "land is a very liquid asset, which fluctuates, and which, therefore, carries a high risk for banks, so they place restrictions on it."

Along these lines, sources from the Barcelona City Council criticize that "banks are not behaving well" because, although mortgages for buying housing have been on the rise for a couple of years, the institutions are not supporting the creation of supply.

Does land have a fair price?

Beyond the shared diagnosis, the debate begins when explaining why land is worth what it is worth. According to the professor of administrative law at the University of Girona (UdG) Josep Maria Aguirre, the obligations that the landowner or developer must face in order to build on it in "some cases", are "oversized". They include works to connect the land with the rest of the municipality, such as connection bridges to main roads or access roundabouts. "If private individuals cannot afford them, that land suddenly becomes economically unviable," states Aguirre.

In contrast, Roca argues that "it is not a problem of urbanization costs", although he admits they are "high", but rather of a "processing procedure that is always long" and which includes municipal procedures, agreements between landowners –usually more than one– and also with the local council of the day.

Sarrias rejects that the land market is the victim of a speculative wave. Instead, he highlights the impact of the time elapsed between the start of land development work and the recovery of the investment; the legal uncertainty that the law might change midway through the work, and the rising cost of construction materials. "Profitability is not high, if you look at how much the Ibex rises during the term of the developer's investment, surely the profitability of the land will be much lower", he predicts.

The aftermath of the financial crisis

Ezquiaga shifts the focus and analyzes who currently owns these lands. Although there is no official data, he estimates that, as a result of the financial crisis, nowadays the land is "concentrated" in banking institutions and international investment funds. He is convinced that land ownership "has significant consequences on supply, including price elasticity [that is, variability according to demand]": in his view, the new owners have "an objective oriented towards an accounting result" and not the promotion and construction of housing.

In this line, the professor of administrative law at the University of Girona (UdG) Josep Maria Aguirre asserts that the "massive" transfer of land to banks and, subsequently, to Sareb or international funds "has reduced the ability of land prices to adapt to demand," which right now cannot pay the cost without shooting up the final price of the apartments intended to be built there.

Roca admits that "land retention, which is not put on the market while waiting for better situations, is a fairly general strategy," although he calls for caution and more evidence to reach this conclusion.

Public policies to boost supply

Catalonia should build about 25,000 apartments annually to respond to the creation of new households, according to the Generalitat, and in the first half of the year fewer than 8,000 have been promoted, according to the Architects' Association. All the experts consulted agreed in emphasizing that construction is essential to alleviate the current housing crisis, but that it must be aimed at expanding –mainly– the accessible housing stock.

It should be noted that three of the experts consulted are academics with no interests in construction –Ignacio Ezquiaga, Josep Maria Aguirre, and Josep Roca–, while the remaining two have provided the vision and experience of the sector –Carles Sala, representing the developers, and Alfredo Sarrias, from the architects–.

Regarding which specific measures are needed to boost supply, Aguirre recalls that the legislation has included "legal instruments to avoid land hoarding" –that is, not bringing it to the market for construction– for more than two centuries, but it has been applied "residually". Likewise, he advocates for carrying out a review of all buildable land that has not currently been transformed to adapt it to future projects.

Sarrias suggests that, "if banks no longer finance transformations or the purchase of land, it should be the administration" that accompanies the developers and, like Sala, demands addressing "the drama of administrative processing". "The worst cost is time", they criticize from the APCE.