Squatters versus landlords: the battle lines are drawn as this once-in-a-lifetime crisis threatens to create a whole new generation of olvidados.
Spain’s center-left government last week unveiled a controversial draft law that has incensed right-wing media pundits and political parties. The proposed law seeks to halt the eviction of squatters from the properties they have occupied until May 9, when Spain’s State of Alarm is scheduled to end. Most of the properties that will be affected belong to banks or other large institutional landlords.
The proposed change in law has added fuel to a national debate that has been raging since early summer. Government sources say the draft law is needed to protect squatters who are in socially vulnerable situations. They include victims of gender violence, minors and other dependents. Evicting them — or non-paying tenants in general — in the midst of a global pandemic would be a disaster, they argue.
That said, evictions of squatters can still go ahead in two exceptional circumstances:
- If the property in question is a primary or secondary residence belonging to “a natural or legal person” (i.e. not a landlord).
- If squatters use “violence or intimidation” to occupy a property. This is virtually unheard of given that squatters almost always target empty premises.
Unsurprisingly, most landlords are less than pleased with the proposed legislation. They already feel that Spanish property law overly protects the rights of squatters, largely at their expense. Thanks to a change of law in 1995, if a squatter occupies a property that is not being used as a main residence, including on rare occasions second homes, they are charged with ocupación (squatting) as opposed to breaking and entering, for which the punishment is much more severe.
This has given rise to a burgeoning black market, as enterprising criminal gangs have begun specializing in locating and breaking into vacant apartments. Once they find a place, they break in, change the locks and rig the apartment to the neighbors’ gas, water and electricity supplies. They then “sell” the flat to a squatter, or group of squatters, for between €1,000-€2,000.
When a landlord discovers a property has been occupied, he, she or (more often than not) it can try to recover the property through the civil courts, which means hiring a lawyer, paying court fees and often waiting a long time. Or they can take the penal route, which is free of charge and can sometimes be faster. But the outcome depends largely on the efficacy of the police officers involved. Even at the best of times, the process is usually long and slow. With Covid raging, these are not the best of times.
As a police officer from Barcelona who specializes in evicting okupas told me for a previous article I wrote on this issue, removing squatters from properties belonging to private equity funds is a particularly messy, drawn out process, largely because of the difficulty of identifying the actual owner of the property — Blackstone, for example, operates in Spain through dozens of different subsidiaries — and then tracking down a representative with whom to liaise. “This takes up a huge part of our day-to-day work,” he said.
Reversal of Fortunes for Landlords
Before the pandemic hit, most residential landlords in Spain had enjoyed six or seven bumper years. After the bursting of Spain’s gargantuan housing bubble, in 2008-09, rents rose as demand for rental accommodation surged. The explosion of Airbnb rentals in popular tourism destinations heaped further pressure on an already tight supply. In some places (Barcelona, Madrid, Malaga, Palma de Mallorca…) rents rose by over 50% from 2013 to 2020, while wages stagnated.
But the good times ended in mid-March 2020, with the first lockdown. The stock of rental housing has since exploded as many tenants have abandoned their apartments. In the almost total absence of tourists, short-term rentals were put on the long-lease market. As supply surged, demand fell. In 2020, rents fell by almost 10% in Barcelona, by 7.3% in Madrid, 6.2% in Palma and 5.6% in Malaga.
Landlords are also facing a surge in the number of non-paying tenants, as the virus crisis continues to lay waste to jobs and businesses in the wider economy. Many small-time landlords depend on this source of income to service their own debts.
In December, the government passed a law that makes it all but impossible for landlords to evict non-paying tenants during the State of Alarm. Now, if this new law passes, they won’t be able to evict squatters either. According to the Association of Construction Promoters (APCEspaña) and the Association of Rental Homeowners (Asval), this risks providing legal protection for those who occupy empty homes. Some fear that it will encourage more people to turn to squatting.
“This change may be a rallying call for the occupation of a certain type of property and could even be an advance warning about the intentions of part of this Government to expropriate empty houses”, said José Ramón Zurdo, general director of real estate agency Agencia Negociadora del Alquiler.
Empty Homes Everywhere
Since the collapse of Spain’s housing bubble in 2009, squatting — the unlawful occupancy of uninhabited buildings or unused land — has flourished. By 2019, following a 58% surge in cases in five years, close to 100,000 properties were occupied by okupas (squatters), according to estimates by the Insititut Cerdá. The number does not include dwellings occupied by tenants who have simply stopped paying their rent, since this does not count as squatting.
Large as that number may seem, it pales against the number of properties lying empty in Spain. In the last census, of 2011, the government registered a total of 3.4 million empty residential properties — equivalent to almost a third of all of Europe’s empty housing stock at the time. Since then, the number has gone down but no one knows by how much.
Most of these vacant properties belong to banks’ property arms, private equity funds or wealthy investors, many of whom are not interested in renting out all of their properties; they just hold onto them to make money on the capital gains — or at least they did while prices were generally rising. That stopped happening in every region of Spain last year, according to real estate appraiser Tinsa’s house price index.
Roughly 70% of the properties that are illegally occupied belong to banks, according to the non-profit Obra Social Barcelona. Another ten percent belong to large institutional landlords and 5% to small private landlords.
Second homes or vacation homes that are left vacant for long periods of time are only very rarely targeted by squatters. It’s much easier and legally safer to break into and occupy a vacant property belonging to, say, a bank. That said, the rare cases that do happen tend to attract a disproportionate amount of press coverage, presumably because the public is far more likely to empathise with the plight of a second homeowner than with a bank or Wall Street fund.
Who Are the Okupas?
This is not an easy question to answer given the paucity of official data and the polarised nature of the debate. According to Obra Social Barcelona, 78% of the squatters it surveyed were families. Fifty-eight percent have minor children. Many of them lost their mortgaged home in the last housing crash. At that time, all mortgages in Spain were “full recourse.” As such, even after the bank had repossessed a home, the borrower was often left on the hook for thousands, if not hundreds of thousands, of euros of debt. Other squatters were evicted from rental homes in more recent years. For all of these people, squatting is a desperate last resort.
For a small minority it is a lifestyle choice or even a political statement. My home town of Barcelona is ground zero of Spain’s squatter movement. It attracts squatters from all over Europe. In recent years, more and more young locals who have been priced out of the rental market or who simply don’t want to pay the inflated rents have also turned to squatting.
The irony is that Spain’s written constitution contains an article that enshrines the right of all citizens to decent and adequate housing. Yet Spain has less rented social housing, which usually charges cheaper rents, than almost any other EU country. After the last crisis, many social housing projects were sold off to international funds belonging to Wall Street giants like Goldman Sachs and Blackstone. Rented social housing now accounts for a paltry 2.5% of all residential property, down from 3.5% in 2005. That compares to 30% in the Netherlands, 24% in Austria, 21% in Denmark and 17% in France.
Rents are still way too high for many, even after the recent falls. The level of home ownership has sunk to its lowest level in 35 years. To reverse this trend, Spain’s biggest bank, Santander, is pressuring the government to subsidise home purchases for first-time buyers, much as the UK government did with its Help-to-Buy scheme. If the UK’s experience is any guide, such a scheme would benefit those who least need the help, including lenders, home builders and high income earners.
The biggest problems are not in the housing market; they are in the job market. Spain has the highest level of youth unemployment (41%) in the EU. That’s seven percentage points higher than Greece’s. Most of the jobs that young workers do are temporary and/or (often both) poorly paid. Many of them were in the now-dormant tourism industry. Now, this virus crisis threatens to create a whole new generation of olvidados. According to Oxfam, 800,000 more Spaniards have been plunged into severe poverty since March.
To cushion the impact, Spain’s government — like other governments in Europe — is considering bringing back rent controls, much to the horror of landlords and investors alike. Catalonia’s regional government has already taken the plunge. The battle lines are being drawn. If Spain fails to get a grip on this emerging crisis even as it continues to grapple with the consequences of the last one, the legions of squatters will only increase in number.