Overcoming the trauma of the bubble to solve the housing crisis: why aren't we building?

BarcelonaWhen the cranes suddenly stopped, much of Catalonia was left scarred. Concrete skeletons, empty sidewalks, unfinished streets. Many of the scars of the housing bubble on the urban landscape remain intact. But that bursting also left a less visible, even poisonous, legacy. In 2007, Catalonia built 80,000 homes, the highest figure in recorded history, in a year that saw more than 100,000 sales. Last year, around 13,000 homes were completed, far fewer than 18 years ago—although the number of transactions was almost the same—but above all, fewer than the number of households created. Specifically, 2.77 times more homes should be being built than are being finished, that is, about 30,000. In Catalonia, out of a population of 8 million, it is projected that up to 355,000 households will be excluded from the housing market in the next 15 years, according to the Sectoral Territorial Housing Plan (PTSH).

The question is clear: why isn't more being built? Why hasn't more been built until now, given the evident lack of housing in Catalonia? The experts' answer is multifactorial and goes far beyond the housing bubble: while the bubble did generate a certain aversion to building, as Jorge Galindo, author of the book, explains... Three million homesThe boom of the 2000s led to increased regulation of a process that was already slow and complicated due to heavy bureaucracy and often outdated regulatory frameworks. But above all, if they point to one specific issue, it is the lack of developable land.

Public administrations now have two options for managing the housing crisis: the regulatory approach, focused on managing the existing housing stock with measures to facilitate access to housing—such as rent caps, direct subsidies, and, currently under study in Catalonia, limitations on speculative purchases—and the construction of new housing. In this second area, there is a broad consensus: the main problem is the lack of available land. And the Catalan government has already taken action with the first registry of building plots – that is, land ready for construction – to promote 50,000 social rental apartments by 2030, and to develop 214,000 across Catalonia by mobilizing land – that is, land not yet ready for construction – that was previously pending. "The first thing is to generate building-ready land; if an urban development plan is even moderately successful, it can take two years to implement," Guifré Homedes, CEO of Amat Immobiliaris, told ARA. For the 50,000 apartments, the Catalan government has received an initial batch of 600 available plots – building-ready land suitable for construction – from public and private entities, half of which are small – for building just a few dozen homes – and others large enough to attract major developers. Since most of these plots of land do not yet have a developer, the solution devised by the Government is to create plot lots: developers will be able to manage, under a surface rights agreement and for 75 years, the housing they build in packages of several plots from the public tender. Furthermore, to incentivize the construction of subsidized housing, the Generalitat (Catalan Government) plans to compensate developers for the difference between the rent that future tenants will pay and the minimum they expect to receive for the project to be viable and, above all, profitable. Thus, if the tenant pays less than €10.65 per square meter, the Catalan administration will compensate the developer with the difference up to that figure. For example, in area 4, the housing will have a rental price of €6.64, and the Generalitat will contribute a subsidy of €4.01. The interminable land red tape

"To build 214,000 homes, you need urban planning procedures that, from start to finish, take an average of seven to nine years. Therefore, we have a medium-term housing construction problem," explains Francisco Diéguez, general director of the Institute of Construction Technology of Catalonia (Itec), to ARA. "In Spain, the average time to make land available and suitable for applying for a building permit is 16 years. Therefore, if we put all the empty apartments on the market tomorrow and people wanted to move in, the day after tomorrow we would still need many apartments to meet the new realities that arise," says Xavier Vilajoana, a construction entrepreneur and president of APCE (Association of Construction Companies of Catalonia) and also of Spain. But what does the construction process consist of?

Broadly speaking, there are three phases: planning, urban development management, and urbanization. The first phase, approved by the full city council and ratified by the Catalan government, establishes the land uses and obligations: density, building height, the allocation of green spaces, and the general regulatory framework. In the best-case scenario, this first phase lasts between one and three years, following a public consultation process.

"When planning, the benefits of building housing must be balanced with green spaces and roads; you have to create streets and green areas," Guim Costa, dean of the College of Architects of Catalonia, explained to ARA. And this sometimes makes certain projects unfeasible. "An extreme example: if one of the requirements for building 8,000 apartments is a train tunnel, it's very expensive. And even if you build 8,000 apartments, the planning and management won't be cost-effective, plus about 3,000 or 4,000 of them must be social housing," he added.

"Urban planning is a state matter; the land law is stalled in Congress. It's a very technical amendment to prevent all planning documents from being invalidated if a report is missing, as the deficiency cannot be corrected and the process has to start all over again," says Vilajoana. He refers to the fact that, for example, if a plot of land has a plan drawn up twenty years ago with specific density and uses, such as a height limit of one ground floor plus one upper floor, and suddenly you want to build apartments because the town's needs have changed, you have to modify the plan that regulates the area. "Many ready-to-build plots are not suited to current demand: they are designed for terraced houses, and now smaller apartments are needed," Joan Franquesa, a businessman and lawyer specializing in urban planning, explains to ARA. "If you have a plot of land in Hospitalet or Badalona that is buildable, there's sure to be a crane there. The demand for land is exhausting. As soon as a plot becomes available, finding a builder is no problem," he adds.

If during the bubble, financially fueled entrepreneurs rushed to buy land—which was much cheaper back then—now this task has been relegated to government agencies and large corporations. "There should be a mechanism to simplify it. It's the phase that takes the longest to get started. The developer or owner faces a great deal of uncertainty about when this process will end," explains Franquesa. "Most land is owned by individuals. Urban planning is so lengthy that there are many companies that only focus on generating land: you know you're putting in the first euro, but not when it will be ready. When you analyze urban development plans, many are for small landowners," says Vilajoana.

For land to be ready for development—meaning it's suitable for building homes—the second phase must also be completed: urban planning, which implements what the plan has defined. It includes elements such as the land readjustment plan, which redistributes rights and obligations among owners—establishing which plot each receives and what portions of land each cedes for green areas or streets—and the urbanization plan, which specifies how the works to develop the land should be carried out.

The third and final phase is purely executive: the works defined in the urbanization plan are carried out: streets, sewage, lighting, water, gas, and fiber optics. Then, with the subsequent approval of the city council, the land changes from undeveloped land to a building plot. It also requires permits and municipal oversight.

The challenge of construction

With all this in mind, it's time for construction, which first requires a building permit, also known as a construction visa. "Sectoral reports must be taken into account, as they significantly slow down the permit process. These permits have to go through the Catalan Water Agency (ACA), Heritage, and Environment departments," says Costa. "The regulations governing this must be clear and unambiguous. There shouldn't be any differences between municipalities, and resources should be allocated to smaller municipalities to expedite the permit processing," adds Josep Antoni Martínez Zaplana, president of the Barcelona Construction Guild. In this regard, the dean of the architects says that regulatory simplification and a reduction in procedures are needed. This bureaucratic overload also has an impact at the local level: when municipal architects receive the projects, they are sometimes overwhelmed by the sheer volume of paperwork. "They have to comply with the accessibility, habitability, structural safety, and fire safety codes. And the municipal architect has to sign off on it and has a responsibility. This is creating a problem. If no one considers the cross-cutting nature of these regulations, when we try to combine them, we go crazy," says Costa. For example, an accessibility code and fire safety regulations can be excellent, but they can contradict each other. So many regulations to justify, and they're contradictory. "It can happen that the firefighters' need for rapid access clashes with what a person with accessibility issues needs to reach the third floor. And that ends up putting architects, who are responsible for the project, in complicated situations," he adds. But what situation is the construction sector facing now?

In statements to ARA, the president of the Guild explains that the sector has been recovering from the bursting of the bubble, but not completely. “We won’t deny that the sector was lucky when many investors came in with money and gradually built up. In the last five years, we’ve suffered a slowdown due to excessive regulation: 30% in Barcelona, ​​for example. Developers complain about the 30% measure, which made it impossible for them to make a profit,” he explains. In fact, BBVA Research, in last year’s report, Reasons behind the limited housing supply in Spain The report notes that "housing legislation has undergone significant changes, destabilizing the development plans of developers, builders, and rental companies." The same report indicates that the construction sector's productivity is 25.4% below the average for the Spanish economy, and the size of the largest companies has stagnated, while it has grown in the rest of the economy. Furthermore, it is the sector where the number of unfilled vacancies has increased the most: between 2016 and 2023, the volume has practically tripled. Although Martínez Zaplana acknowledges that the sector would not be able to suddenly resume massive construction because it has shrunk considerably—from representing 10% of GDP to around 5%—he believes it can adapt quickly. One of the subsectors poised to respond to the crisis is industrialized construction, which involves carrying out a large part of the work in a factory. The Spanish government has allocated up to €1.3 billion to promote this sector within the framework of the PERTE housing plan, but Martínez Zaplana points out that it only represents 2% of the entire sector. "We are asking for stability and a long-term vision. A factory should last at least thirty years," he says, referring to the legal certainty necessary for projects to be established. This construction method allows for shorter construction times, decarbonizes the process, and reduces costs—one of the other factors that has hampered construction—provided that a large number of houses are built, making it dependent on sustained demand. "Furthermore, the technological advancement of construction is more inclusive; you can have both men and women," Costa concludes. "Construction costs since the war in Ukraine have increased by 40%: mortar by 90%, structural steel by 57%, earthworks by 20%, bricks by 47%, plasterboard by 40%, ceramics by 43%, and granite by 20%." Vilajoana warns about the rising price of materials.

The political challenge

But for him, the real bottleneck in all of this comes before construction even begins. "It's a combination of many factors, but the one thing that's clear is: what are buildings built on? On land. The raw material is land. There's nothing else," he says. "A century ago, if there was no wool, there was no spinning. The raw material we need is land. What should be a two-month permit process has sometimes taken up to 14 months," adds Franquesa, using the same analogy.

They also agree on the political dimension and the country's model needed to resolve this crisis. "If the local councils are the root of the problem, the regional government needs to step up, push forward, and force them to work and open their eyes: a land inventory and let's see," says Vilajoana, regarding the latest obstacle the sector may encounter: municipal opposition. "At the end of all this, the question is: what kind of country do we want? Where do we focus on development? Do we also need an infrastructure policy?" says Franquesa. "We will encounter resistance at the municipal level: a major dialogue is needed, for the larger city councils to help the country before the Generalitat acts with absolute power," he concludes.