Not in the city, not in the countryside: In Spain, rental pressure leaves tenants with nowhere to go

Renting a home is getting increasingly complicated in Spain. Rental prices have been growing for years and, faced with this reality, there has been no shortage of advice recommending tenants to look beyond the city centers for more affordable accommodation. But this solution is not always possible. The oil stain effect with which many experts reflect the behavior of housing prices has long since reached the peripheries. And in some places it goes further: four regions exceed the recommended rental effort threshold even outside their urban areas, according to the latest annual report from the Bank of Spain. In its analysis, the supervisor differentiates between three types of zones: the centers of urban areas, the peripheries, and the zones “outside urban areas.” In Andalusia, the Balearic Islands, the Canary Islands and Cantabria, the average rental price exceeds 30% of the net income of households everywhere.

Erico García, 30, is well aware of this fact. He has just moved with his partner, also 30, to the small village of Herrera de Ibio, in the northern region of Cantabria. Living all year round in his native Comillas (population 2,300), had become unsustainable given the price of rent. The touristification of northern Spain has multiplied the demand for summer accommodation, and property owners find in travelers an opportunity to make some money out of their real estate. The natives of Comillas who want to move out of the family home have to contend with unaffordable rental prices, or resign themselves to looking elsewhere. The couple has two children and they are now renting a house with a garden for €500 ($540) a month. For that amount, the listings website Idealista only shows one apartment in Comillas, and it is only available in the summer. “[In Comillas] there are only rentals available for the summer, or else from September to June,” notes García.

García, who works in a supermarket warehouse, sighs: “In my circle of friends, almost everyone lives with their parents, there are nine of us and only three have been able to move out, and none in Comillas.” The summer boom leaves residential estates looking empty in the winter. And the economic tension has been spreading throughout the region, as previously unburdened towns like Cabezón de la Sal, which is not by the sea, are becoming saturated as they receive tenants expelled from the coastal towns. García and his partner lived there for a while “in an old apartment, without heating, with horrible windows, for €450 [$480] a month.” After a year of searching, they found their current residence. Their former apartment, he says, was occupied by an acquaintance of his, and the landlady demanded €500 a month without having made any improvements to the property.

“We are experiencing a process of soft gentrification,” says Sergio Nasarre, former director of the UNESCO Housing Chair at the Rovira i Virgili University of Tarragona. “For three or four years we have been witnessing a second gentrification of people who were already expelled from the city centers to the periphery and now find themselves expelled from there to a second circle or even beyond.” The Bank of Spain report links the locations with the highest rentals with “tourist activity.” And Nasarre underscores a fact that does not seem coincidental to him: “In 2023, all records for home purchases by foreigners were broken, whose market share has multiplied by four since 2009.”

An analysis of the Bank of Spain report shows the evident difficulty faced by tenants in Spain. Only two regions, Aragón and La Rioja, maintain a rent-to-income (RTI) ratio that does not amount to overexertion anywhere (which does not exclude that individually, these situations will occur in many cases). On the contrary, in many places it far exceeds 30%, such as in the center of the urban areas of the Madrid region, where the RTI ratio is 44.3%, the highest in the country. The Spanish Law for the Right to Housing considers that “affordable conditions” exist when housing expenses do not exceed 30% of household income. This legal criterion also includes basic utilities (electricity, water, internet...).

The most dramatic situation, however, is taking place in Spain’s two island regions. With economies that are heavily based on tourism, a scarcity of land and a large population, both the Balearic Islands and the Canary Islands are places where the RTI ratio is in excess of 38%, even in rentals that are outside urban areas. This housing pressure was one of the main reasons why thousands of Canary Islands residents took to the streets in April to demonstrate against touristification. The sociologist Eugenio Reyes, a spokesperson for this protest movement, says that “the development of vacation tourism has caused the price of rentals and housing to skyrocket. We have the most expensive rural land in all of Spain. You might think that the population can take refuge from the prices in the peripheries or rural areas, but that makes it more difficult for the population.” Meanwhile, he complains that in the archipelago “there are some 211,000 empty homes, according to Treasury data.” Spain has long been one of the European countries where most tenants exceed the effort rate of 40%, which is the scale used by the European Union statistics bureau Eurostat.

María Eugenia Rivero, 26, does not want this to happen to her. She would like to become independent and go live with her boyfriend. But she says that things “are awful” in her hometown of Medina Sidonia (population 11,738) in the southern province of Cádiz. “In three years, prices have risen a lot. As it is located 30 minutes from the beach, in summer it is in high demand, and there are tourist apartments that are only available for the academic year. Right now, a long-term rental is impossible,” she says. A one-bedroom, she says, costs “about €450,” a price that in other locations may sound like a bargain. But in Cádiz, the province with the worst employment data in Spain, Rivero and her boyfriend currently have part-time jobs. Together they make about €1,200 ($1,290) a month, and “with those salaries, if you add the cost of living, in the end it is impossible to pay that rent.” It is the kind of situation that she had never imagined: “This is a recent trend: as the coast has become more crowded, people have been coming to the nearest towns.”

Ángel Sánchez, 38, who runs two real estate agencies in the province of Málaga, describes something similar. One of his agencies is located on the coastal city of Fuengirola, and the other one is 16 miles (26 kilometers) further inland, in Coín. They were two worlds apart years ago, but have now merged. Since the pandemic, he has noticed a growth in what he calls “bounced customers.” This is because “they start searching in the center of Málaga, then get bounced off to the city outskirts, and end up searching in neighboring towns until they reach Coín, which is not even a neighboring town.” Sánchez admits that “people who come from abroad may have raised prices a little,” but above all he describes changes in the clientele (“with remote work, I know people who have come over from Germany and Dublin”) and in the listings: “The houses in town are usually offered for traditional rentals, but lately we are seeing some room rental options, which were not at all common in a town like this.”

Low-income tenants, under more pressure

In short, the rental problem is spreading. And that may be because, regardless of geographical location, the Bank of Spain detects a relationship with the purchasing power of households. “The problems of overexertion associated with spending on rent are observed in the main European economies, although in Spain these problems are especially intense among households with lower incomes,” says the supervisor’s annual report. While the general RTI ratio decreased from 25.5% to 22.5% between 2011 and 2022, in the same period it increased for low-income households. The 20% of families with the lowest revenues allocated on average almost 45% of their income to rent.

“Housing is only affordable for those who are in very high percentiles and not for the rest,” says the economist Ignacio Ezquiaga. “This hinders demand, which [...] means that houses are not built and that causes many young people to stay at home,” he adds. This expert believes that Spain is witnessing “a bubble of unaffordable prices” and notes that “the system no longer finances bubbles that allow people to get neck-deep into debt.” But the fact that banks no longer lend in such a carefree manner does not prevent, and could even be said to be reinforcing, “a very serious problem of access to housing.”

This occurs because there is a kind of vicious circle in which families with fewer resources, who rent more frequently than the rest because they cannot afford to buy, end up under more pressure to pay more. The Bank of Spain describes a “risk premium” that “could be associated with the fact that landlords perceive a greater relative risk when they rent their homes to tenants with lower purchasing power.” That is, the tenants are squeezed more on the price, which causes rentals in areas where people with lower purchasing power live to create “greater profitability” for landlords, according to the supervisor. And judging by its latest analysis, it is increasingly difficult to escape this market logic. Not even with a house in the countryside.

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