The New Spanish Housing Crisis

by Ferran Masip-Valls
Contributing Writer

Suppose you purchased a home on a loan in 2005 with an estimated value of $500,000. Fast forward to May 2013 and the home has been devalued to a measly $100,000. Yet, your monthly mortgage payments reflect the initial value of the home and you are no longer able to afford them due to unemployment.  Eventually, you must approach the bank and hand over the keys of your apartment, accepting that you are now just another unemployed and homeless Spaniard, amongst hundreds of thousands. Sounds all too familiar for those in similar predicaments living throughout the Western world. According to the current Spanish banking system, after giving back the goods you mortgaged for the loan, you still must pay the remaining sum. For all the previous homeowners, this means the remainder of the “original” value back to the bank—plus interest. This is the all too common scene in Spain: unemployed, homeless, and owing hundreds of thousands to a bank that also owns your apartment.

A key factor in understanding the current housing crisis in Spain is to understand its history. This bubble, that began in 1985, became known as the “Spanish Miracle”: a process that placed a post-dictatorship country with a third world economy into the top ten economies in Europe over a few short years. However, with the bubble-burst in 2008, it became painfully clear that most of the “Spanish Miracle” was just smoke.

When the collapse of an economy is directly related to a basic need, there are always direct consequences for the general population. At the end of 2012, the Land Registry Information Service announced that an eviction happened every 15 minutes throughout Spain, which is outright alarming for a country with less than 50 million inhabitants. According to the National Institute of Statistics of Spain, the Spanish now boast 3.4 million empty houses, 13.7% of the total housing available.

Even after the damaging effects of the mortgage crisis, the Spanish banks continued to provide loans. One must understand that they too had their own assessment and taxation companies that allowed the banks to establish the prices for homes. In short, the banks were encouraging individuals to buy and invest beyond their means. Money has stopped flowing, unemployment has reached astronomic levels (27% in the overall population with 57% of youth unemployed) and the general Spanish population is struggling to pay the unrealistic mortgages. Common sense (and European law) states that when one cannot pay one’s mortgage, one must give the apartment or home that one bought to the bank that issued the loan. The debt is then paid. Nevertheless, in Spain, the banks thought differently.

This irregularity is attributed to the set-up of Spain’s political, legal, and economical forces having the same faces. CEOs and other figures inside the corporate and banking system were politicians beforehand, and vice versa. The same happens within the legal system. This leads to a lot of “friendships”: which in practical terms mean an astonishingly high level of corruption and impunity to certain individuals and private companies. All the while, one out of five Spaniards live below the poverty line.

In response, a gathering of common people who want to take action against those unfair evictions and current circumstances came about: “Plataforma de Afectados por la Hipoteca” – “Platform of those Affected by the Mortgage” (PAH). It is neither politicized nor centralized and it does not have legal status or clear leadership. Separate groups in various cities have been able to gather more than 1.5 million signatures to change the mortgage laws to make evicted people debt-free after eviction. This is a group of dedicated people who advocate for rationally using the estimated 3.44 million empty homes and apartments, now owned by banks, as social rents. Further, the PAH engage in “escarche”: going to a prominent politician’s house who is related with the origin of this problem and putting protest stickers on his door while holding a small demonstration.

The absurdity of it all becomes strikingly clear when observing the People’s Party, who have held the majority in government since the crisis began, and their reactions to such “escarche” movements. This April, Maria Dolores de Cospedal, Secretary of the People’s Party, made accusations such as “escarche is pure Nazism,” “the People’s Party voters would rather go hungry before stopping to pay their mortgages.” Other People’s Party members have gone to the extent of relating the PAH to terrorist groups.

In the streets of Spain, evictions occur every day; however, so do social movements. For example, on April 13, the PAH occupied a brand new, but vacant, 40-apartment building in the city of Sabadell owned by Caixa Penedes (a Spanish bank). The PAH opened its doors to homeless families after employing a selection process to grant homes to those most in need. Shortly after opening its doors, the police arrived and the peaceful occupation came to a screeching halt through an irregular procedure. Initially, one of the PAH’s lawyers was there to provide representation and act as a mediator to smooth the process should the police arrive, and did so when it happened. Everything seemed to proceed as planned. The surprise arrived the following day when two of the PAH’s members learned that they were facing criminal charges. The police also charged the lawyer, a third party, with disobedience and resistance to the authority. The lawyer is now facing trial, with the police seeking to place her behind bars for six months to one year. In defense of the lawyer, stand the PAH members as well as other “formal” organizations such as the Lawyers Guild and the City Council of Sabadell. Housing is currently a pressing issue in Spain—with the unaffordable mortgages and high unemployment, one must question when this social crisis will transform into a mass revolt. On the other hand… Hey! It’s cheaper to buy a house now! So invest, invest, and invest! I’ll lend you the money, because, well, I’m telling you, it has to work, it’s perfect, and it can’t fail!

Then, one wonders, why people in Spain are not happy.

Ferran Masip-Valls is currently living and working in his native Spain. He is a part of the unemployed under 30 crowd, even after having worked on four continents and completed five university degrees. He most recently completed a MA from Teachers College – Columbia University.