Spain built fewer than 400,000 homes between 2021 and 2025 while absorbing 1.9 million migrants, a mismatch that has left the country short of about 750,000 homes and pushed housing to the centre of its politics, according to a Reuters analysis published on 26 October.

Prime Minister Pedro Sanchez has called a snap election for next month, and the Bank of Spain has urged looser planning permissions to tackle the shortfall. Housing has topped voters' concerns for three years, Reuters reported earlier in October, after an attempted eviction of an 87-year-old Madrid woman triggered nationwide protests.

Why building stalled

The deeper problem, the analysis argues, is that building homes is often no longer profitable enough without the credit and asset bubbles of the past. Spain's construction industry generated a return on equity of 4 percent in 2024, compared with 10 percent before the financial crisis, according to BBVA analysts cited by Reuters. Mortgage volumes have halved to 30 percent of gross domestic product, while construction loans have fallen to 10 percent from 40 percent.

Banks that once financed redevelopment early now tend to step in near the end and demand pre-sales of 80 to 90 percent, consultancy Tinsa told Reuters. Materials and labour inflation has pushed costs up 50 percent since 2008, making return targets harder to hit without leverage.

A pattern beyond Spain

The result is that Spain now builds about two dwellings per 1,000 people a year, against 6.6 in Australia. Homes beyond wealthy suburbs are the ones going unbuilt, the analysis says, while demand increasingly depends on lower-income buyers who cannot climb the property ladder. The pattern is not unique to Spain: big cities in several richer countries are growing upward rather than outward, and rising incomes now mostly feed into prices instead of new construction.

Sources: Reuters Breakingviews analysis; Reuters housing crisis reporting.