By Yannis Misirlis
- President of the Real Estate Development Association
Spain is currently offering us a particularly useful example of just how complex tackling the housing crisis can become when housing supply fails to keep up with demand.
ΣΧΕΤΙΚΑ ΑΡΘΡΑ
Pedro Sánchez’s government attempted to respond to intense social pressure with a package of emergency measures that included increased protection for vulnerable tenants against evictions, longer lease terms and automatic lease extensions, compensation for tenants in specific cases of non-renewal, restrictions on certain speculative housing markets, as well as tax incentives for more affordable rents. The Spanish Parliament ultimately rejected the measures, with part of the opposition arguing that some of the provisions could drive landlords out of the rental market and thus further limit supply.
The debate is particularly interesting because behind the political confrontation lies a very specific economic problem. The Banco de España itself acknowledges that constraints on the growth of housing supply are a key factor behind the country’s current housing affordability crisis. Demand grew much faster than the production of new housing, creating a cumulative shortfall of hundreds of thousands of units.
This is perhaps the most important lesson for Cyprus as well. When there is a genuine supply shortage, we cannot solve the problem simply by redistributing or differently regulating the housing stock that already exists.
Protecting vulnerable households is essential. Preventing abuse is also essential. However, tenant protection, rent control, or restrictions on landlords do not, by themselves, create a single new housing unit. In fact, if a regulation reduces the willingness of landlords or investors to make housing available for rent, it may achieve the opposite of the intended result.
In Cyprus, we are fortunately in a different situation, but the underlying problem is similar. We need more actual supply, both for purchase and for rent, especially where demand is highest.
The government has already taken steps in this direction. It has announced the construction of 258 new affordable housing units through the KOAG, in addition to the 180 already under construction, approximately 500 units on state-owned land in collaboration with the private sector, while it estimates that urban planning incentives and the “Build to Rent” program could lead to approximately 2,000 additional units. At the same time, the “Renovate – Rent” program aims to bring vacant or unused housing back onto the market. These are steps in the right direction because they address the supply side.
The question now, however, is how we will move from policies and permits to the actual delivery of housing.
First, we need a much faster and more predictable permitting process. A building permit represents potential future supply, not a home in which a family can live. We need to track how many units are started, how many are completed, and how many ultimately enter the market.
Second, we must seriously develop the long-term rental market. “Build to Rent” can be an important tool, provided that the right conditions are created for institutional and private capital to invest in large-scale residential developments that will remain in the rental market. If we want more rental housing, we must make its construction and ownership financially viable for investors.
Third, we need to make better use of the existing housing stock. Incentives for renovating and bringing vacant homes back onto the market are helpful. We could even consider, based on very specific criteria and with exceptions, an additional levy on homes that remain genuinely and unjustifiably vacant for long periods of time. The goal should not be to penalize property ownership, but to activate the idle housing stock.
Fourth, we must address the constraints on the construction sector’s own productive capacity. We cannot simultaneously demand more housing while accepting shortages of skilled workers, delays in approvals and infrastructure development, or procedures that continually drive up costs. Housing policy is directly linked to employment policy, access to a skilled workforce, urban planning, taxation, and infrastructure.
Finally, government support for demand must be targeted. If we simply increase households’ purchasing power without simultaneously increasing supply, part of that support risks translating into higher prices. A truly sustainable affordable housing policy must primarily strengthen the market’s ability to produce more housing at a lower final cost.
Europe now seems to recognize this reality. The discussion is increasingly shifting toward increasing supply, stimulating investment, streamlining procedures, and making better use of the existing housing stock. This was, after all, the focus of the recent European discussion on housing during the Cypriot presidency.
The lesson from Spain is not that we should not protect tenants. It is that we must not confuse protection with solving the problem. Housing policy must protect those who truly need it, without discouraging those who can add new housing to the market.
Because in the end, the housing problem will not be judged by the number of measures we announce, nor by how strict a law may seem. It will be judged by how many more families we are actually able to house.
