In Spain, two cities face the same crisis, but are responding in fundamentally different ways. Over the past decade, the cost of housing in Madrid and Barcelona has soared – with rents rising by about 60% and sale prices by 90% – leaving young people, working families and retired people struggling to stay in their homes or even find one.
Yet, while one city is betting everything on construction and giving free rein to big investors, the other is cautiously trying to steer the housing market towards the public good, despite political and institutional constraints.
This is more than a national contrast. It’s a story of two cities and two competing visions now taking root across Europe.
While Spain’s economy continues to grow on paper, the reality on the ground tells a different story – one of worsening inequality and housing exclusion. In the past decade, more than half of all homes have been bought without a mortgage, a sign that many are being acquired not by those in need of housing but by those who already own property. The number of people who own at least 10 homes has jumped by 20%.
This is what I call the great housing grab. Since the mortgage crisis of 2008, more than 1.3m units have entered Spain’s rental market. They weren’t newly built, but homes lost by working-class families and scooped up by investors, including large private equity firms. The conservative government in power between 2011 and 2018 not only handed out tax breaks and public money through a massive bailout of the banks, but also rewrote tenancy laws to turn tenants themselves into profitable assets for those institutions.
The ideal of a middle-class society of homeowners is collapsing. Those already asset rich are buying up more homes and outcompeting working families. And those families, if lucky, now rent those same homes back at inflated prices, enriching the wealthy. For many, the only hope is to inherit, assuming their parents don’t have to sell their home to live out their later years with dignity.
The current crisis didn’t appear overnight. It’s the product of decades of government intervention designed to turn housing into a financial asset. Since the 1980s, Spain has followed a familiar playbook: dismantling social housing (now barely 2-3% of all homes), removing rent controls for new contracts, offering tax breaks to owners and fuelling massive mortgage debt.
This model triggered successive construction booms that were accompanied by steep price increases. As long as everyone seemed to benefit from ever-rising asset values, few questioned the model. But it eventually proved unsustainable, pushing younger and poorer households out of the market. The 2008 crisis became a stark reminder that the neoliberal recipe had ultimately failed.
Since the great meltdown, those left behind have fought back in successive waves. After years of tenant mobilisation, the Spanish government – led by a progressive coalition – finally passed a new housing law in 2023. For the first time, it gave regional and local authorities the power to cap rents, raise taxes on vacant homes and ban agencies from charging tenants fees. Additional measures in 2024 and 2025 have marked a shift away from neoliberal orthodoxy, such as extending the social housing system, ordering the removal of unlicensed Airbnb listings, or opening proceedings against real-estate companies that charge unlawful fees.
Despite the new law, loopholes and tax rules that encourage speculative investment are still in place, undermining efforts to reshape the housing market in the public interest. And, while the central government partly sets the framework, it is in the regions and cities where the real battle is fought – and their responses could not be more different.
Madrid, long governed by the conservative People’s party, has openly boycotted the new law. Its leaders present the whole urban region as a haven where developers and funds face “no limits, no intervention”. The regional president, Isabel Díaz Ayuso, has personally courted global investors at events organised by the Blackrock investment company, assuring them, “You are in the best place, at the best moment, to invest.”
These words are not empty rhetoric. Madrid has sold off public housing to private equity funds, opposed rental regulation and is promoting mass construction. Under the mantra of “build, build, build”, it hopes supply alone will solve the crisis, easing land-use rules and fast tracking permits, claiming that red tape is to blame. Yet this approach has a track record of failure in Spain and beyond. Recent studies show that supply constraints do not explain house prices, and that simply building more does not guarantee affordability.
Some 400 miles to the northeast, in Catalonia, the approach couldn’t be more different. The Catalan government quickly adopted the new rules and the first results suggest they are having an effect: average rents for new contracts in Barcelona have fallen by 6.4%, whereas in Madrid they have continued to rise.
However, the law contained a loophole: mid-term contracts (up to 11 months) and room rentals were left unregulated. As anticipated, many landlords and brokers have exploited this gap, converting standard leases into temporary ones, quadrupling rents and charging exorbitant fees. Despite repeated announcements, no new legislation or effective sanctions have followed.
At the same time, the Catalan government has recently approved new measures to curb speculation and strengthen social housing. These include a ban on tourist rentals in 140 municipalities – a move Barcelona has also committed to, to be implemented by 2028; tax reforms that deter large-scale speculation and help first-time buyers, provided the homes they purchase remain price-capped in the future; and the public acquisition of private homes through the right of first refusal. A growing share of new developments are also being designated as permanently protected housing, ensuring long-term affordability for both public and private housing.
Barcelona and Madrid represent not just different policies, but different futures.
One builds under public-interest rules, requiring part of new developments to remain permanently affordable, and combines this with rent controls and tax measures that aim to curb speculation. The other builds under the banner of “abundance” and increasing supply, loosening land regulations, speeding up permits and cutting taxes for developers.
It’s too early to say which model will prevail, but experience and research show that simply building more and leaving housing to the market does not bring prices down.
Barcelona’s story shows that regulation matters, but it is not enough. Without strong enforcement, and without tackling the incentives that reward the use of housing as a financial asset, even the most well intentioned reforms fall short.
These two cities offer a choice between two paths: one where housing remains a source of unlimited profit, and another that tries – though so far inconsistently – to rebuild it as a social good.
Because, at its core, this is not just about housing. It is about whether we stop the spiral of inequality that enriches the few while eroding the living standards of a growing majority, and the future of the cities we live in.