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Blaming foreigners for housing prices is misdirected. The real culprit is slow bureaucracy & zoning laws making it impossibly slow to get a permit to build anyt

Blaming foreigners for housing prices is misdirected. The real culprit is slow bureaucracy & zoning laws making it impossibly slow to get a permit to build anything in both Spain and Portugal. Both of these countries for example have so many abandoned houses needing to be renovated, and so many foreigners coming in with money to do it - but they can never do it because you can't get a permit in literally forever... I don't know about Spain, but another problem in PT is the building companies too, are unreliable, and typically don't deliver houses in less than 3-5 years if you decide to build new. Increase the supply, and the prices will go down.

WorkerBee28474 2y ago
No, that argument assumes you can only blame 1 thing at a time. Even if the bureaucracy is the worst offender, every foreigner buying a house still results in 1 less house for Spaniards. Sure, fix bureaucracy, but don't pretend foreign purchases have zero effect.
- AuthorizedCust 2y ago
  If you’re in oversupply, as the parent comment suggested, then is the effect of additional buyers meaningful?
  - WorkerBee28474 2y ago
    If you have extra supply of houses needing renovation, as in the comment, and renovations require labor and/or materials to complete, having foreigners pay to renovate houses to be livable will decrease the ability of Spaniards to renovate houses to be livable. For example, let's assume renovations are 100% completed by local crews. Any crew working for a foreigner is working for them because A) the foreigner is paying more than a local for the work B) the foreigner is paying enough to make a profit and the local isn't (which is a subset of A). There is no situation in which adding foreign money results in more houses for locals. If you eliminate the ability for foreigners to renovate, the renovation crews will take the money that the locals can pay. There will be fewer renovation crews, because some crew will not be profitable at the lower rate, but more crews working to renovate houses for Spaniards. Similarly, for materials, given supply and demand curves (and assuming that the marginal units added won't cause economies of scale) eliminating the ability for foreigners to buy materials for renovations will move the curve intersection down to a lower price and volume.
    - JumpCrisscross 2y ago
      > There is no situation in which adding foreign money results in more houses for locals Assuming fixed supply, yes, it's (probably) a zero-sum game. > eliminating the ability for foreigners to buy materials for renovations will move the curve intersection down to a lower price and volume Assuming a frictionless market and no economies of scale, yes. In reality, you'll have a smaller set of options for locals at a slightly (but not dramatically) lower price. (Again, for an example look at all the markets foreign investors shun.) > will be fewer renovation crews, because some crew will not be profitable at the lower rate, but more crews working to renovate houses for Spaniards You absolutely cannot conclude this from first principles. You make valid points. They just need to be followed up with data. The systems you're talking about are too sensitive to generalise like this.
- louison11 2y ago
  I'm not saying it has zero effect. I'm saying it's a misdirected effort that would cause them more harm than good. Spain isn't exactly in the fittest economic position. It needs to attract foreigners to cultivate its growth - hence their Beckham law and other benefits for foreigners. You can deter people from coming and see the country stagnate/go down, or you can actually match the demand and foreign dynamism, and use that as an opportunity for the whole place to grow and modernize.
  - delroth 2y ago
    How does allowing *non-residents* to buy real estate help in attracting foreigners and cultivate growth?
    - iforgot22 2y ago
      In a hot real estate market, there will be more market pressure to fix the dilapidated properties in good areas. Say they instead keep values artificially low so an EU resident can buy a property for cheap, and it stays cheap. What's the benefit?
      - fabrice_d 2y ago
        The benefit is that more people can afford to buy houses? Really surprising to see a country taking care of their people, and not just the wealthy ones! All the hypotheses claiming that "the market pressure will improve things for all" have been proven false at this point. We have decades of data, and this is only widening the inequality gap.
        iforgot22 2y ago
        I don't see why this is better than people renting and investing their savings elsewhere, which is how it works with apartments anyway. So you own a house, it makes basically no return, now what?
        2y ago
- gruez 2y ago
  So would you say it's fair game to blame "migrants" for crimes? After all, you can't steal something if you're not in a country, so letting someone into a country strictly increases the crime rate. Even if migrants commit crimes at a lower rate than the local population, unless it's exactly zero, it'll still increase the crime rate. edit: downvoters, I'm not actually endorsing blaming migrants. It's only used as an example.
  - llamaimperative 2y ago
    Do crimes have a liquid market with supply and demand mechanics? If so, then sure, you can blame every criminal for x% of every crime, I guess.
    - gruez 2y ago
      The comment was in reply to: >Even if the bureaucracy is the worst offender, every foreigner buying a house still results in 1 less house for Spaniards. It's pretty clear that supply and demand isn't a consideration here, and the commenter is strictly focusing on the aspect that one house is being removed from the housing supply.
      - llamaimperative 2y ago
        If you remove a house from the supply, by any method, there is one fewer house in said supply.
  - d4704 2y ago
    > Even if migrants commit crimes at a lower rate than the local population, unless it's exactly zero, it'll still increase the crime rate. But that assumes you do not count the person who commit the crime as part of the population count. In this example, “crime per capita” goes down if they commit crime below the average crime rate of population before they joined that population.
    - gruez 2y ago
- ETH_start 2y ago
  Every foreigner buying a house is supplying capital for one additional house to be built, and some portion of those additional houses will be unoccupied by the foreigner most of the year and available on the rental market for locals. Even if it's just short term rentals, that means more affordable vacations and temporary housing for the domestic population.
  - mkoubaa 2y ago
    This is one of those arguments that at face value seems quantitatively sound but doesn't survive first contact with reality
    - ETH_start 2y ago
      And your claim that it doesn't survive first contact with reality is based on you correlating high volumes of foreign investment with lack of housing affordability and assuming that the former is causing the latter, when the correlation is really due to a confounding factor.
      - iforgot22 2y ago
        Even if it's causing it, the city isn't vacant. There are people who can afford to live there. Only the people who can't afford it complain.
  - mytailorisrich 2y ago
    The issue not mentioned because it is a very politically charged topic is that, as I understand, net migration to Spain is at an all time high. This is bound to push housing prices up. Hitting foreign investors is easier politically but may not have much effect.
- JumpCrisscross 2y ago
  > every foreigner buying a house still results in 1 less house for Spaniards In a very limited scope, sure. What that foreign capital also does is lower risk and thus capital costs for development and improvement. (In the event of a limited crisis, for lenders as well.) Whether the net effect goes one way or another is more complicated than what you describe. Put another way, if foreigners could only buy unbuilt units, would you still say they're resulting in fewer houses for Spaniards? Do the countries shunned by foreign investors have affordable housing?
  - rgtank108 2y ago
    What is this contrarian sophistry? In Europe foreigners often buy the most expensive historical real estate they can lay their hands on. If they do build something, it is office buildings for investment that take up space and often remain empty (Chinese are good at that). These investments still take up space and drive up real estate prices. Where do you even live?
    - JumpCrisscross 2y ago
      > In Europe foreigners often buy the most expensive historical real estate they can lay their hands on Source? (I'm generally hugely sceptical of uniform statements about how capital behaves across the EU, let alone Europe.)
      - ryan_lane 2y ago
        Where's the source for your assertion? You're making a claim that foreign investment is beneficial with no source, but then requiring one when someone disagrees with you?
        sadeshmukh 2y ago
        A theoretical argument was countered with an assertion - it's plausible that investment -> lower risk, but there is no reasoning to get "foreign investment is focused on X area".
- ptero 2y ago
  Foreigner purchase effects are complex. While a unit sold does immediately reduce the supply by 1 unit, new demand and foreign funds can also stimulate more building and, especially important, can prevent areas falling into disrepair and becoming ghost towns. It really depends on the specific area and situation. My 2c.
- klipt 2y ago
  You could also argue that every Spaniard moving from the countryside to the cities takes away houses from Spaniards born in the cities. Seems like an argument for internal visas like China's household registration system to prevent excessive migration to the cities. The countryside is mostly emptying out so no need to prevent people moving or buying there.
  - JumpCrisscross 2y ago
    > Seems like an argument for internal visas like China's household registration system to prevent excessive migration to the cities With the big difference being the Chinese citizen being denied Beijing hukou is still a Chinese citizen. Madrid should properly first concern itself with Spaniards' wellbeing. (This isn't an argument for or against this policy. Just clarifying why restricting non-EU home purchases is different from hukou.)
    - Gvaskas 2y ago
      [flagged]
      - JumpCrisscross 2y ago
        > over being called 'racist' by hateful strangers Straw man [1]. You're the only one in this thread levelling this charge. [1] https://en.wikipedia.org/wiki/Straw_man https://en.wikipedia.org/wiki/Straw_man
        Gvaskas 2y ago
        [flagged]
        JumpCrisscross 2y ago
        > What other motivation do they have for selling out their own family and people then? Not wanting to be the next Venezuela, for one. Reflexive protectionism is emotionally satisfying. It rarely delivers the promised relief. I could absolutely see such a tax e.g. taking out a small Spanish bank or two, or, at best, knocking out develoopers' financing such that new-home construction contracts. More likely: it becomes the only thing this government can work on as Spain gets mired in years of EU litigation. > It is trendy to participate in the destruction of your own descendants' homelands and future To the extent anyone is trend following, it's the populists making these sort of black-and-white claims. Again, you're the only one arguing against this imagined anti-racist commenter. Policy written to annoy an imagined foe is going to be predictably bad.
- surgical_fire 2y ago
  > Even if the bureaucracy is the worst offender, every foreigner buying a house still results in 1 less house for Spaniards. Just to be pedantic, it's not about foreigners buying property, it is about non-resident buying properties. A foreigner that actually resides in Spain would not be taxed, if I understand correctly. I don't think that limiting property ownership to residents is a bad thing. I do think, however, that it will not have that much impact in the properties the average people actually need and want.
- creer 2y ago
  > every foreigner buying a house still results in 1 less house for Spaniards Absolutely not. For example my impression is that foreign demand has been great for the construction industry, both small and large, both in Spain and Portugal. Paying lots of people directly and still more indirectly. The presence of all these buildings that needed renovation (or demolition) shows that the population previously could not afford to use them. Dumping money in the economy causes some inflation, yes, but it also pays many people and allows still more to enter the field.
- Gibbon1 2y ago
  I have various thoughts. The rough one is that investors driving up the cost of housing increases the countries labor costs. Which harms it's competitiveness. Reduces workers standard of living. Which also causes headaches for political leaders. Foreign investors rub salt in the wound by moving their gains outside the country. And the real risk that they will flee when there is any sort of downturn making it worse. My opinion giving those guys the middle finger isn't unreasonable.
- alecco 2y ago
  But the foreign investors are doing it because the housing market has an artificial supply shortage. They are buying into a cornered market. Of course, full deregulation is not a fix as seen with the condos built in ridiculous locations back in the sub-prime mania. It would be good to have a reasonable plan. Sadly the plans for making livable neighborhoods was hijacked by the "15 minute city" WEF-style politicians. The Netherlands had some very interesting projects that went pretty well.
vivekd 2y ago
I donno if it entirely wrong to blame foreigners. If you have a bunch of silicon valley digital nomads flying to Spain and buing and selling houses to each other I can see how that could easily leave locals out of the housing market. That seems like something that government should control against if locals can't affording housing. I imagine that if a bunch of rich people decided to treat Spanish homes like stocks (holding and flipping) it would be pretty easy to get high prices and bubbles. Doesn't it follow from suppy and demand? >Increase the supply, and the prices will go down. what's wrong with tackling both demand and supply. Why shouldn't spain do both - build more homes to tackle supply while also curbing foreign home ownership to tackle infalted demand
honestSysAdmin 2y ago
Bloated/unnecessary bureaucracy is essential to the bribe collection process.
motorest 2y ago
> Both of these countries for example have so many abandoned houses needing to be renovated, and so many foreigners coming in with money to do it - but they can never do it because you can't get a permit in literally forever... Are these hypothetical houses located in the places these hypothetical foreigners want to live or invest? Because getting a small apartment in Barcelona is a small feat, and Soria is not exactly an alternative.

WorkerBee28474 2y ago

No, that argument assumes you can only blame 1 thing at a time. Even if the bureaucracy is the worst offender, every foreigner buying a house still results in 1 less house for Spaniards. Sure, fix bureaucracy, but don't pretend foreign purchases have zero effect.

AuthorizedCust 2y ago
If you’re in oversupply, as the parent comment suggested, then is the effect of additional buyers meaningful?
- WorkerBee28474 2y ago
  If you have extra supply of houses needing renovation, as in the comment, and renovations require labor and/or materials to complete, having foreigners pay to renovate houses to be livable will decrease the ability of Spaniards to renovate houses to be livable. For example, let's assume renovations are 100% completed by local crews. Any crew working for a foreigner is working for them because A) the foreigner is paying more than a local for the work B) the foreigner is paying enough to make a profit and the local isn't (which is a subset of A). There is no situation in which adding foreign money results in more houses for locals. If you eliminate the ability for foreigners to renovate, the renovation crews will take the money that the locals can pay. There will be fewer renovation crews, because some crew will not be profitable at the lower rate, but more crews working to renovate houses for Spaniards. Similarly, for materials, given supply and demand curves (and assuming that the marginal units added won't cause economies of scale) eliminating the ability for foreigners to buy materials for renovations will move the curve intersection down to a lower price and volume.
  - JumpCrisscross 2y ago
    > There is no situation in which adding foreign money results in more houses for locals Assuming fixed supply, yes, it's (probably) a zero-sum game. > eliminating the ability for foreigners to buy materials for renovations will move the curve intersection down to a lower price and volume Assuming a frictionless market and no economies of scale, yes. In reality, you'll have a smaller set of options for locals at a slightly (but not dramatically) lower price. (Again, for an example look at all the markets foreign investors shun.) > will be fewer renovation crews, because some crew will not be profitable at the lower rate, but more crews working to renovate houses for Spaniards You absolutely cannot conclude this from first principles. You make valid points. They just need to be followed up with data. The systems you're talking about are too sensitive to generalise like this.
louison11 2y ago
I'm not saying it has zero effect. I'm saying it's a misdirected effort that would cause them more harm than good. Spain isn't exactly in the fittest economic position. It needs to attract foreigners to cultivate its growth - hence their Beckham law and other benefits for foreigners. You can deter people from coming and see the country stagnate/go down, or you can actually match the demand and foreign dynamism, and use that as an opportunity for the whole place to grow and modernize.
- delroth 2y ago
  How does allowing *non-residents* to buy real estate help in attracting foreigners and cultivate growth?
  - iforgot22 2y ago
    In a hot real estate market, there will be more market pressure to fix the dilapidated properties in good areas. Say they instead keep values artificially low so an EU resident can buy a property for cheap, and it stays cheap. What's the benefit?
    - fabrice_d 2y ago
      The benefit is that more people can afford to buy houses? Really surprising to see a country taking care of their people, and not just the wealthy ones! All the hypotheses claiming that "the market pressure will improve things for all" have been proven false at this point. We have decades of data, and this is only widening the inequality gap.
      - iforgot22 2y ago
        I don't see why this is better than people renting and investing their savings elsewhere, which is how it works with apartments anyway. So you own a house, it makes basically no return, now what?
        2y ago
gruez 2y ago
So would you say it's fair game to blame "migrants" for crimes? After all, you can't steal something if you're not in a country, so letting someone into a country strictly increases the crime rate. Even if migrants commit crimes at a lower rate than the local population, unless it's exactly zero, it'll still increase the crime rate. edit: downvoters, I'm not actually endorsing blaming migrants. It's only used as an example.
- llamaimperative 2y ago
  Do crimes have a liquid market with supply and demand mechanics? If so, then sure, you can blame every criminal for x% of every crime, I guess.
  - gruez 2y ago
    The comment was in reply to: >Even if the bureaucracy is the worst offender, every foreigner buying a house still results in 1 less house for Spaniards. It's pretty clear that supply and demand isn't a consideration here, and the commenter is strictly focusing on the aspect that one house is being removed from the housing supply.
    - llamaimperative 2y ago
      If you remove a house from the supply, by any method, there is one fewer house in said supply.
- d4704 2y ago
  > Even if migrants commit crimes at a lower rate than the local population, unless it's exactly zero, it'll still increase the crime rate. But that assumes you do not count the person who commit the crime as part of the population count. In this example, “crime per capita” goes down if they commit crime below the average crime rate of population before they joined that population.
  - gruez 2y ago
ETH_start 2y ago
Every foreigner buying a house is supplying capital for one additional house to be built, and some portion of those additional houses will be unoccupied by the foreigner most of the year and available on the rental market for locals. Even if it's just short term rentals, that means more affordable vacations and temporary housing for the domestic population.
- mkoubaa 2y ago
  This is one of those arguments that at face value seems quantitatively sound but doesn't survive first contact with reality
  - ETH_start 2y ago
    And your claim that it doesn't survive first contact with reality is based on you correlating high volumes of foreign investment with lack of housing affordability and assuming that the former is causing the latter, when the correlation is really due to a confounding factor.
    - iforgot22 2y ago
      Even if it's causing it, the city isn't vacant. There are people who can afford to live there. Only the people who can't afford it complain.
- mytailorisrich 2y ago
  The issue not mentioned because it is a very politically charged topic is that, as I understand, net migration to Spain is at an all time high. This is bound to push housing prices up. Hitting foreign investors is easier politically but may not have much effect.
JumpCrisscross 2y ago
> every foreigner buying a house still results in 1 less house for Spaniards In a very limited scope, sure. What that foreign capital also does is lower risk and thus capital costs for development and improvement. (In the event of a limited crisis, for lenders as well.) Whether the net effect goes one way or another is more complicated than what you describe. Put another way, if foreigners could only buy unbuilt units, would you still say they're resulting in fewer houses for Spaniards? Do the countries shunned by foreign investors have affordable housing?
- rgtank108 2y ago
  What is this contrarian sophistry? In Europe foreigners often buy the most expensive historical real estate they can lay their hands on. If they do build something, it is office buildings for investment that take up space and often remain empty (Chinese are good at that). These investments still take up space and drive up real estate prices. Where do you even live?
  - JumpCrisscross 2y ago
    > In Europe foreigners often buy the most expensive historical real estate they can lay their hands on Source? (I'm generally hugely sceptical of uniform statements about how capital behaves across the EU, let alone Europe.)
    - ryan_lane 2y ago
      Where's the source for your assertion? You're making a claim that foreign investment is beneficial with no source, but then requiring one when someone disagrees with you?
      - sadeshmukh 2y ago
        A theoretical argument was countered with an assertion - it's plausible that investment -> lower risk, but there is no reasoning to get "foreign investment is focused on X area".
ptero 2y ago
Foreigner purchase effects are complex. While a unit sold does immediately reduce the supply by 1 unit, new demand and foreign funds can also stimulate more building and, especially important, can prevent areas falling into disrepair and becoming ghost towns. It really depends on the specific area and situation. My 2c.
klipt 2y ago
You could also argue that every Spaniard moving from the countryside to the cities takes away houses from Spaniards born in the cities. Seems like an argument for internal visas like China's household registration system to prevent excessive migration to the cities. The countryside is mostly emptying out so no need to prevent people moving or buying there.
- JumpCrisscross 2y ago
  > Seems like an argument for internal visas like China's household registration system to prevent excessive migration to the cities With the big difference being the Chinese citizen being denied Beijing hukou is still a Chinese citizen. Madrid should properly first concern itself with Spaniards' wellbeing. (This isn't an argument for or against this policy. Just clarifying why restricting non-EU home purchases is different from hukou.)
  - Gvaskas 2y ago
    [flagged]
    - JumpCrisscross 2y ago
      > over being called 'racist' by hateful strangers Straw man [1]. You're the only one in this thread levelling this charge. [1] https://en.wikipedia.org/wiki/Straw_man https://en.wikipedia.org/wiki/Straw_man
      - Gvaskas 2y ago
        [flagged]
        JumpCrisscross 2y ago
        > What other motivation do they have for selling out their own family and people then? Not wanting to be the next Venezuela, for one. Reflexive protectionism is emotionally satisfying. It rarely delivers the promised relief. I could absolutely see such a tax e.g. taking out a small Spanish bank or two, or, at best, knocking out develoopers' financing such that new-home construction contracts. More likely: it becomes the only thing this government can work on as Spain gets mired in years of EU litigation. > It is trendy to participate in the destruction of your own descendants' homelands and future To the extent anyone is trend following, it's the populists making these sort of black-and-white claims. Again, you're the only one arguing against this imagined anti-racist commenter. Policy written to annoy an imagined foe is going to be predictably bad.
surgical_fire 2y ago
> Even if the bureaucracy is the worst offender, every foreigner buying a house still results in 1 less house for Spaniards. Just to be pedantic, it's not about foreigners buying property, it is about non-resident buying properties. A foreigner that actually resides in Spain would not be taxed, if I understand correctly. I don't think that limiting property ownership to residents is a bad thing. I do think, however, that it will not have that much impact in the properties the average people actually need and want.
creer 2y ago
> every foreigner buying a house still results in 1 less house for Spaniards Absolutely not. For example my impression is that foreign demand has been great for the construction industry, both small and large, both in Spain and Portugal. Paying lots of people directly and still more indirectly. The presence of all these buildings that needed renovation (or demolition) shows that the population previously could not afford to use them. Dumping money in the economy causes some inflation, yes, but it also pays many people and allows still more to enter the field.
Gibbon1 2y ago
I have various thoughts. The rough one is that investors driving up the cost of housing increases the countries labor costs. Which harms it's competitiveness. Reduces workers standard of living. Which also causes headaches for political leaders. Foreign investors rub salt in the wound by moving their gains outside the country. And the real risk that they will flee when there is any sort of downturn making it worse. My opinion giving those guys the middle finger isn't unreasonable.
alecco 2y ago
But the foreign investors are doing it because the housing market has an artificial supply shortage. They are buying into a cornered market. Of course, full deregulation is not a fix as seen with the condos built in ridiculous locations back in the sub-prime mania. It would be good to have a reasonable plan. Sadly the plans for making livable neighborhoods was hijacked by the "15 minute city" WEF-style politicians. The Netherlands had some very interesting projects that went pretty well.

vivekd 2y ago

I donno if it entirely wrong to blame foreigners. If you have a bunch of silicon valley digital nomads flying to Spain and buing and selling houses to each other I can see how that could easily leave locals out of the housing market. That seems like something that government should control against if locals can't affording housing. I imagine that if a bunch of rich people decided to treat Spanish homes like stocks (holding and flipping) it would be pretty easy to get high prices and bubbles. Doesn't it follow from suppy and demand? >Increase the supply, and the prices will go down. what's wrong with tackling both demand and supply. Why shouldn't spain do both - build more homes to tackle supply while also curbing foreign home ownership to tackle infalted demand

honestSysAdmin 2y ago

Bloated/unnecessary bureaucracy is essential to the bribe collection process.

motorest 2y ago

> Both of these countries for example have so many abandoned houses needing to be renovated, and so many foreigners coming in with money to do it - but they can never do it because you can't get a permit in literally forever... Are these hypothetical houses located in the places these hypothetical foreigners want to live or invest? Because getting a small apartment in Barcelona is a small feat, and Soria is not exactly an alternative.