Why is Spain considering a 100% tax on homes bought by non-EU buyers?

MADRID (AP) — Spain is planning a raft of measures to address its brewing housing crisis, including an up to 100% tax on properties bought by people who are neither citizens nor residents of the European Union.

Spanish Prime Minister Pedro Sánchez announced the plan this week to tackle housing affordability and high rents in the Southern European nation. He said that the overall goal was to provide “more housing, better regulation and greater aid.”

“The West faces a decisive challenge: To not become a society divided into two classes, the rich landlords and the poor tenants,” Sánchez said as he announced the plan.

However, it remains unclear if the plan put forth by Sánchez’s minority coalition will pass in parliament. Here's a look at what's happening:

Spain's housing affordability crisis

Like most rich countries, Spain is in the throes of a growing housing affordability problem. Skyrocketing rents are particularly acute in cities like Barcelona and Madrid, where incomes have failed to keep up, especially for young people. Housing prices are also steadily rising, especially in cities and coastal areas.

Rental prices have also been driven up by short-term contracts mainly offered for tourists. Spain sees more tourists than almost any country in the world, having received more than 88.5 million visitors in 2024. Tourism is one of the country's key economic drivers.

The negative aspects of mass tourism have caused tension at times between visitors and residents concerned about rising costs, the proliferation of short-term rentals on platforms like Airbnb, and water supplies that can be stretched in some parts of the country, including the Canary and Balearic Islands.

Last year, protesters took to the streets on various occasions across the country to express their frustrations about the growth of tourism and high rents. Barcelona’s town hall has pledged to completely eliminate all short-term rentals to tourists in the coming years.

“What citizens expect from us here is action,” Spanish housing minister Isabel Rodríguez told reporters on Tuesday about the plan.

Curbing foreigners from buying houses in Spain

Spain plans to limit the number of homes foreigners purchase by raising taxes by up to 100% on properties bought by people who are not EU citizens and do not reside in an EU country — often buyers of investment or vacation properties.

Sánchez didn’t provide a timeline or details on how he plans to implement the tax.

“This would be massive,” said Sarah Conroy, an English real estate agent who has been working in realty in the upscale Marbella market in southern Spain for over three decades. She didn't give figures on how many non-EU clients she had, but said they included post-Brexit British buyers as well as clients from Saudi Arabia and Dubai.

“They need to do something because the people living here can't really rent anything because it is so expensive," Conroy said. "Personally speaking, around 80% of the people I sell to are buying second homes.”

Last year, Spain announced that it was scrapping its so-called “golden visa” program that allows wealthy people from outside the EU to obtain residency permits by investing more than half a million euros (roughly 515,000 dollars) in real estate.

Joan Carlos Amaro, a real estate analyst and professor of economics at the Esade Business School in Barcelona, said that while Spain is suffering a housing crunch, he can’t see how the tax will lead to homeowners or real estate promoters guaranteeing that these normally high-end properties end up in the hands of middle-class Spaniards.

“Anything that puts up barriers and stops the market from functioning ends up hurting everyone," Amaro said in Barcelona. “These foreigners that come, they spend money, the houses they live in have to be built and that creates jobs.”

Amaro added that he saw it more as a political move than one with a sound economic rationale.

Some of the other measures put forth

Spain plans to build more public housing and allocate around 2 million square meters (21.5 million square feet) of residential land to a newly created public housing agency.

Other proposed measures include higher taxes on holiday rentals, tax breaks and protections for landlords who provide affordable housing, and amending laws to speed up construction processes and expand the availability of land for private construction.

Why is housing politically important in Spain?

The rising cost of living has driven voter discontent across many wealthy countries in recent years, including the United States.

But as one of Europe’s leading Socialist politicians, the housing crunch is a crucial question for Sánchez 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 enjoy a "decent and adequate” home. In theory, at least, the government has a duty to allow citizens to exercise that right.

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Wilson contributed from Barcelona.