Jaime Palomera: "It is necessary to tax the accumulation of housing."

BarcelonaJaime Palomera (Barcelona, ​​1982) receives the ARA in the Sant Antoni neighborhood, in the Eixample district, where he has lived for eleven years. In this part of the Catalan capital, a rental apartment costs, on average, 1,131 euros per month, 60% more than a decade ago. He has just published The kidnapping of the house (Portico).

Why is it so difficult to have a house?

— Because in most countries, including ours, we have believed that housing was a market good like any other. And housing, and especially land, which is what homes are built on, is not a good like any other. It is an incomparable, exceptional good.

His book seeks to "debunk myths." One of those myths, he says, is the reason why housing prices are rising.

— In fact, the common mistake is to believe that free competition truly exists, as in the market for cell phones or computers. In the housing market, it is impossible to generate competitive conditions that drive down prices because land and house owners are in a monopoly position.

But wouldn't building large-scale, permanent public housing, a measure on which there now seems to be consensus, be decisive?

— The proposal to build social housing in perpetuity is on the right track, but other measures are needed. Right now, we have a massive forest fire, and these figures being floated—50,000 public housing units in Catalonia—are like trying to put out that fire with buckets. And it's very difficult to build 50,000 public housing units in the timeframe they want to do it, but these social housing units will reach a small portion of the affected population.

And what can we do to reach everyone?

— You have to start implementing measures that take land and housing out of the rentier machine, with measures that reverse the massive housing hoarding by wealthy sectors that we've experienced over the last twenty years. The main one, for me, is to tax the housing stockpile, because what we pay in rent is only a symptom of the problem. You can implement price regulations, and that's fantastic; it's a way to stem the flow of the virus, but price regulations don't solve the underlying problem, which is the increasingly unequal distribution of resources.

What are these measures?

— For example, the Generalitat (Catalan government) has proposed something interesting: that purchase aid for young people should be provided as long as, if they want to sell their home, they can't raise the price above the CPI limit. If you want to buy a home, the government should provide you with facilities, such as tax exemptions and assistance, if you want to live in it. If I want to buy a second or third property, then I have to pay taxes. We should raise taxes on those who are buying apartments as an investment product.

The Government has set a 20% rate on the Property Transfer Tax (ITP) for property purchases by large property owners.

— It's a first step, because what they've done is make it more difficult for those who own more than four apartments. There's a consensus right now. In a 40DB survey, they asked people how many apartments they thought a person or family should own, and the majority said one or two. And, in general, they said the number of properties should be limited. Only 15% of the population owns second homes.

Some actors warn that increased regulation discourages the market.

— Is this a problem? What could happen is that those who diversify their investments and have money in stocks, cryptocurrencies, Treasury bills, and housing might say, "Wow, housing is earning me less than certain cryptocurrencies and certain stocks, so I'm not interested, so I'm selling it." This isn't bad news; it's good news.

And don't you think construction will stop because companies will have lower margins?

— When it comes to construction, of course it's needed, but above all, public housing is needed. And to build public housing, you have to do it with companies that have a limited-profit business model. In Vienna, there are 220,000 public housing units and 180,000 units owned by limited-profit companies. There's an Austrian law that regulates these companies, which are called housing associations, we don't have that here, that.

But one of the problems with building affordable housing is precisely the low margins.

— Of course, because this is the problem: their business model is incompatible with creating a social housing system like that of Singapore or Vienna. It's not that they're bad or good; it's that their shareholders expect better rents than those offered by other markets. This is very difficult to make compatible with affordable rents for their residents. The only option is to opt for social housing developers, and we have them in Catalonia.

And what would you say to those who warn that rehabilitation will be discouraged and the park will age?

— Before the regulation, many homes already had serious habitability problems. The problem is that landowners and rental property owners now have no incentive to improve their homes. Price regulation will not incentivize renovation, but the very dynamics of rentism do not incentivize renovation either. The only renovations we've seen are of entire buildings because they allow for very significant price increases. And they involve emptying the buildings.

In the book, you also contrast real estate investment with productive investment. Is housing a problem for the future of the economy?

— To the extent that those who have capital, instead of investing it in productive activities, invest it in rent-seeking activities—that is, in buying assets and extracting rent—we are entering a zero-sum game. Those who cannot buy assets in relative terms become impoverished. We are encountering the problem that the Western world encountered a century ago.