Spain could impose a 100% tax on foreign homebuyers, as tourism drives up housing costs

Spain plans to take a range of measures to tackle the worsening housing crisis, including imposing a tax of up to 100 percent on properties purchased by non-EU residents.

Spanish Prime Minister Pedro Sanchez announced the plan this week to address housing affordability and rising rents in the southern European country. The overall goal, he said, was to provide “more housing, better organization and greater assistance.”

However, it remains unclear whether the plan put forward by Sánchez’s minority coalition will be passed in parliament.

Here’s a look at what’s happening:

Housing affordability crisis in Spain

Like most rich countries, Spain has a growing housing affordability problem. Rents are rising particularly sharply in cities like Barcelona and Madrid, where incomes have failed to keep up, especially for young people. Housing prices are also rising steadily, especially in cities and coastal areas.

Rental prices have also increased due to short-term contracts offered mainly to tourists. Spain sees more tourists than almost any country in the world, receiving more than 88.5 million visitors in 2024. Tourism is one of the country’s main economic drivers.

The negative aspects of mass tourism have sometimes caused tension between visitors and residents who are concerned about rising costs, the proliferation of short-term rentals on platforms like Airbnb, and water supplies that could stretch in some parts of the country, including the Canary Islands and Comoros. Balearic Islands.

Last year, protesters took to the streets on various occasions across the country to express their frustration over tourism growth and rising rents. The Barcelona municipality has pledged to completely abolish all short-term rentals for tourists in the coming years.

“What citizens expect from us here is work,” Spanish Housing Minister Isabel Rodriguez told reporters Tuesday about the plan.

Preventing foreigners from buying homes in Spain

Spain plans to limit the number of homes bought by foreigners by increasing taxes on properties bought by non-EU residents by up to 100 percent.

Announcing the plan, Sanchez said non-EU residents would buy 27,000 properties in Spain in 2023, “not to live in” but “to make money from.”

Sanchez did not provide a timeline or details on how he plans to implement the tax.

Some other measures are on the table

Spain plans to build more public housing and allocate about two million square meters of residential land to a newly created public housing agency.

Other proposed measures include increasing taxes on vacation rentals, tax breaks and protections for property owners who provide affordable housing, and amending laws to speed up construction and expand the availability of land for private construction.

Why is housing politically important in Spain?

The high cost of living has dissatisfied voters in many rich countries in recent years, including the United States.

But as one of Europe’s leading socialist politicians, the housing crisis is a crucial issue for Sanchez to resolve as he tries to keep his left-wing minority coalition afloat after winning another four-year term in 2023.

Also, according to the Spanish Constitution, all Spaniards have the right to a “decent and suitable” home. In theory, at least, the government has a duty to allow citizens to exercise this right.