Apartment development is stagnating and only covers 20% of current demand.

Spain is developing housing at a meager pace of 127,000 apartments annually, making it impossible to solve the problem of access to decent housing in the coming years. The Bank of Spain currently estimates the deficit at around 600,000 units, but it will continue to increase because the development sector cannot build more. Therefore, there is a lack of supply, and the current supply barely covers 20% of demand.

Housing development levels in Spain have grown slightly in recent years, although they are far from the bubble's peak. The peak of recent permits was reached in 2024, with the aforementioned 127,000, and the pace for the current year is similar, with 56,000 permits approved through May, according to construction figures provided by the Ministry of Transport based on information from the associations of technical architects. The peak year for the sector was 2006, when 865,000 properties were authorized for construction. Currently, therefore, barely 15% of the homes built two decades ago are being developed. Throughout 2024, permits were the same as in September 2006.

Developers complain that the Land Law is slowing down and making construction more expensive.

Currently, developing a residential project involves a demanding process that can extend for years. Pedro Fernández-Alén, president of the National Construction Confederation (CNC), states that "urban development in Spain takes an average of seven to nine years, although in some cases it can take up to twenty." In other words, even if the construction sector can accelerate and approach figures similar to those at the beginning of the century to absorb the high demand, new homes would reach the market in the next decade at the earliest.

The president of the Spanish Association of Construction Developers (APCE), Xavier Vilajoana, points to the Land Law as one of the main obstacles. "Currently, the regulations not only prevent you from moving forward if a report is missing or there is a problem, but they also return the urban planning to its original state. It doesn't allow you to correct it and continue," laments the CEO of Euroconstruct. As a result, housing development slows down and construction is more expensive because companies have to leverage to finance the land, which they end up passing on to the buyer.

Vilajoana adds that the lack of political will is not only focused on the processing of the Land Law (the PP and PSOE veto their rival's initiatives in Congress), but is also felt in regional and municipal governments. "If you can't grow horizontally, you can grow vertically; however, there is no consensus to modify local regulations to expand vertically," he notes. To unblock housing development, the businessman points out that there are also existing solutions on the table, such as the Interior Reform Areas (ARE), although they need updating. Another political issue is infrastructure investment. "Pressure is growing in large cities, and that drives their metropolitan regions. We need to improve mobility so that people's commutes to work don't take up excessive time," Vilajoana concludes.

While housing production hasn't picked up, the market is heating up with its best figures ever, at the level of the real estate bubble. In the first six months of the year, 360,000 homes were sold (up 20%). And housing pressure will grow even further because household generation continues to rise. The National Institute of Statistics (INE) estimates that there will be almost 3.7 million more families in Spain over the next 15 years if current population growth rates, driven by immigration, continue. Madrid and Barcelona are two of the European cities with the greatest population growth, according to Eurostat.

The new demand also poses challenges in terms of housing characteristics. The INE (National Institute of Statistics and Census) indicates that the snapshot of the country's residential future shows that by 2039 there will be 7.7 million single-person households, a third of the total. The housing stock being built today remains unchanged from 2006, as in both cases, 80% of the permits are for apartments located in blocks of flats, and the average size has even grown compared to the bubble, exceeding 100 square meters.

The construction sector also suffers from a labor shortage. In its heyday, the sector employed 2.5 million workers; today, it's 1.5 million, and the number of registered unemployed is approaching 200,000, according to the Labor Force Survey. "The number of workers needed is so large that the problem can't be solved overnight," laments Daniel Cuervo, corporate general manager of the property developer Vía Ágora.

To try to move toward solutions, the government approved the Housing Industrialization Plan (PERTE) in May, endowed with 1.3 billion euros. The sector advocates promoting the construction of parts of the property (facades, walls, or bathrooms) in factories, as Aedas Homes and Vía Ágora already do. But developing this industry also takes time, given the increasing need for housing.