CONFERENCE “HOUSING FINANCE:

PROPERTY BUBBLES OR SOCIAL & ECOLOGICAL RESILIENCE? IT’S A CHOICE!”

THE LONG-TERM COSTS OF THE HOUSING CRISIS DRAWING THE LESSONS FROM SPAIN.

Javier Buron Cuadrado, Housing Policy Expert & Director of URBANIA ZH GESTION Spain

11 / 5 / 2014. Royal Library of Belgium, Brussels

1.- CAUSES and effects of crisis in Spain (impacts and social impacts) and recommendations for the future

“HOUSING FINANCE: PROPERTY BUBBLES OR SOCIAL & ECOLOGICAL RESILIENCE? IT’S A CHOICE!”

FROM THE 60’ TO CURRENT TIMES, IN SPAIN, HOUSING PUBLIC POLICIES ARE MAINLY DEVOTED TO PROPERTY ACCESS BY THE USE OF TAX DEDUCTIONS AND FINANCIAL PUBLIC AIDS, WITH ONLY MARGINAL PUBLIC BUDGETS FOR ACTIVE HOUSING POLICIES. (“TIPOS DE INTERÉS SUBSIDIADOS POR EL ESTADO”, “DEDUCCIONES FISCALES A LA COMPRA” AND “VPO EN PROPIEDAD DESCALIFICABLE”, ).

THE OBJETIVE TO ACHIVE IS ECONOMIC GROWTH AND EMPLOYMENT, RATHER THAN TO EASE SOCIO-ECONOMICALY THE ACCESS TO ADEQUATE HOUSING FOR MIDDLE AND LOW INCOME FAMILIES. SOCIO-SPATIAL BALANCE AND URBAN FOOTPRINT FOR DECADES ARE ALMOST NOT TAKEN INTO ACCOUNT.

THE LONG-TERM COSTS OF THE HOUSING CRISIS. DRAWING THE LESSONS FROM SPAIN.

“HOUSING FINANCE: PROPERTY BUBBLES OR SOCIAL & ECOLOGICAL RESILIENCE? IT’S A CHOICE!”

THE LONG-TERM COSTS OF THE HOUSING CRISIS. DRAWING THE LESSONS FROM SPAIN.

THE OVERPRODUCTION OF MARKET HOUSING IN THE PAST DECADE IT WOULD HAVE BEING COMPLETELY IMPOSSIBLE WITHOUT THE INVESTMENT AND FINANCING COMING FROM OTHER EU COUNTRIES. Especially Germany and France were allocating surplus liquidity in Spanish real estate products with an extraordinary short-term profit rate. This raises the question of liability of the irresponsible borrowers and lenders.

1.- Causes and EFFECTS of crisis in Spain (impacts and social impacts) and recommendations for the future

1) HYPERPRODUCTION (2.5/20/45 NEW UNITS PER 1000 INHABITANS vs. 2/6 IN MAIN

EU MEMBER STATES).

• 47 MILLIONS OF INHABITANTS; 25.5 MILLONS OF HOUSING UNITS; AROUND

540 UNITS/1000 INHABITANTS (ONE OF THE HIGHEST AMONG BIG EU MMSS).

• (OFFICIALLY) MORE THAN 10% OF VACANT UNITS (2/3/6 MILLIONS … PLUS

10% OF SECOND HOMES).

• The Basque exception: steady 7/1000, lower vacant housing rate.

2) SEVERE LAND CONSUMPTION: 0.4 MILLIONS OF HECTARES OF ARTIFICIALIZED

LAND (1987-2010); IN THE PREVIOUS 12.000 YEARS 0.8.

• LAND ACQUIRED FOR 2.8 MILLION HOUSING UNITS WAITING TO BE

PROCESSED. HALF OF IT, ALMOST IMPOSIBLE TO DEVELOP IN THE COMING

YEARS OR DECADES.

• “URBANIZED DESERTS “, HOUSING AND INFRASTRUCTURES WITH NO USE

IN A CONTEXT OF SOCIO-SPATIAL SEGMENTATION AND FAMILY

REGROUPMENT.

• The Basque exception: small use of greenfields and heavy of brownfields.

.

“HOUSING FINANCE: PROPERTY BUBBLES OR SOCIAL & ECOLOGICAL RESILIENCE? IT’S A CHOICE!”

THE LONG-TERM COSTS OF THE HOUSING CRISIS. DRAWING THE LESSONS FROM SPAIN.

3) SOCIO-ECONOMIC INACCESSIBILITY TO HOUSING:

• 1997-2007: HOUSING PRICES ROSE MORE THAN 200% ON AVERAGE. LAND

MORE THAN 500%.

• 2007-2012: HOUSING PRICES DECLINE 20% ON AVERAGE. LAND 80%

• 7-9 ANNUAL SALARIES NECESSARY TO BUY A HOUSE AT THE PEAK OF THE

BLUBBLE, 6 NOW IN CRISIS TIMES; MAIN EU MMSS 3-4.

• The partial Basque exception: in areas of great public intervention the synthetic

price of housing is lower and accessibility better.

4) FAMILY HYPERLEVERAGE AND RESIDENTIAL EMERGENCY:

• MILLIONS OF OVERMORTGAGED FAMILIES.

• MILLIONS OF UNDER WATER MORTGAGES.

• SINCE THE BEGINNING OF THE FRAUD/CRISIS, FORCE EVICTIONS

(MORTGAGES), PLUS EVITED TENANTS. REACHED = 0.5 MILLIION EVITED

FAMILIES.

• The Basque exception: in areas of great public intervention the synthetic leverage

level is lower.

THE LONG-TERM COSTS OF THE HOUSING CRISIS. DRAWING THE LESSONS FROM SPAIN.

“HOUSING FINANCE: PROPERTY BUBBLES OR SOCIAL & ECOLOGICAL RESILIENCE? IT’S A CHOICE!”

5) RISE OF UNEMPLOYMENT: FROM 10% IN THE LAST DECADE TO MORE THAN 20%

IN FRAUD/CRISIS, PARTIALLY DUE TO REAL ESTATE DINAMICS.

• The Basque exception: housing construction has low impact in employment.

6) OWNERSHIP IMPOSED “CULTURE”:

• MORE THAN 80% OF OWNERS; NO MORE THAN 15% OF TENANTS; ONLY

125.000 SOCIAL RENTAL UNITS (LESS THAN 0.5%).

• IN THE 60’s MORE THAN HALF OF THE POPULATION LIVED ON RENTAL.

• MARKET AND STATE PROMOTION OF OWNERSHIP: “TO RENT IS A WASTE OF

MONEY” (“ALQUILAR ES TIRAR EL DINERO”).

• No Basque exception: even though public rental and right of surface/use had being

largely introduce, the cultural situation towards ownership (not to public intervention)

is almost the same.

7) STILL DEPENDANT ON REAL ESTATE SOCIO-ECONOMIC “COLLECTIVE DRUG”:

60% OF BANK CREDIT FOR PRODUCTIVE ACTIVITIES WENT AND GOES TO REAL

ESTATE; TODAY REFINANCING, RATHER THAN FINANCING NEW URBAN

DEVELOPMENTS OR OTHER PRODUCTIVE ACTIVITIES

• The partial Basque exception: financial institutions are more willing to lend money

to a wide variety of economic activities.

“HOUSING FINANCE: PROPERTY BUBBLES OR SOCIAL & ECOLOGICAL RESILIENCE? IT’S A CHOICE!”

THE LONG-TERM COSTS OF THE HOUSING CRISIS. DRAWING THE LESSONS FROM SPAIN.

8) SYSTEMIC ECONOMIC RISK DUE TO

FINANCIAL IRRESPONSABILITY: 150

BILLIONS IN REAL ESTATE

“DOMESTIC” TOXIC ASSETS (15%

SPANISH DGP).

• The Basque exception: financial

institutions are almost not

contaminated by real estate toxic

assets. The Basque public shaving

banks are the only healthy ones, and

according to the last EU stress tests,

the most robust bank os Spain.

9) BAILOUT OF THE FINANCIAL

SYSTEM: so far, 225 billions (without

taking into account ECB and MEDE aid).

SPANISH AND BASQUE HOUSING PUBLIC POLICIES FROM GROWTH TO CRISIS

1.- Causes and effects of crisis in Spain (impacts and social impacts) and RECOMMENDATIONS FOR THE FUTURE

• OVERCOMING THE CURRENT SITUATION, AVOIDING TO FALL IN THE FUTURE IN THE SAME PRIOR MISTAKES: ONLY WITH PUBLIC AND CITIZEN INTERVENTION. • THERE IS A NEED TO CLAIM THE ROLE OF THE PUBLIC-STATE. NO DOUBT. • BUT ALSO THE ROLE OF THE COOPERATIVE AND NONPROFIT PROFESSIONALIZED

SECTOR (THE SELF-ORGANIZED CIVIL SOCIETY)

• DESPERATED NEED FOR A NEW PPP: PUBLIC SECTOR + COOPERATIVE SECTOR + CERTAIN PRIVATE ACTORS (GETTING PAID FOR THEIR WORK – MAINLY MANAGERIAL- WITHOUT GAINING ACCESS TO THE PROFITS OF THE INTERVENTIONS, THAN MUST REMAIN 100% PUBLIC OR COOPERATIVE) TO REHABILITATE, RENOVATE, REGENERATE, MOVILIZE, CONVERT, REUSE, RENT….

• THE KEY IS NOT PROPERTY (PRIVATE vs. PUBLIC) BUT GENERAL URBAN/RESIDENTIAL INTEREST (STATE, PUBLIC, COMMUNITY, CIVIL, COOP, NONPROFIT PROFESSIONAL, COMMERCIAL, ETC).

SPANISH AND BASQUE HOUSING PUBLIC POLICIES FROM GROWTH TO CRISIS “HOUSING FINANCE: PROPERTY BUBBLES OR SOCIAL & ECOLOGICAL RESILIENCE? IT’S A CHOICE!”

THE LONG-TERM COSTS OF THE HOUSING CRISIS. DRAWING THE LESSONS FROM SPAIN.

• WE MUST DEFEND THE “HEALTHY BRICK”: SOCIAL, GREEN, PUBLIC, COMMUNITARIAN (NO ALWAYS STATE RUN), PROFESIONAL (NOT ALWAYS PROFIT ORIENTED) AND, ABOVE ALL ALREADY EXISTING (REHABILITATION + RENEWAL + RENTAL).

• WE NEED A MORE DIVERSIFIED AND LONG TERM ORIENTATED FINANCIAL SECTOR

• PRIVATE BANKS: SPLIT COMERCIAL AND INVESTMENT INSTITUTIONS. • PUBLIC FINANCIAL SECTOR.

• COOPERATIVE BANKS.

• A NEW SET OF FINANCIAL TOOLS TO PROMOTE

• POWERFULL AND CITIZEN ORIENTATED PUBLIC HOUSING POLICIES • AFFORDABLE HOUSING PRIVATE INSTITUTIONS CAPABLE TO

COUNTERBALANCE THE MARKET AND TO COLLABORATE WITH THE STATE.

SPANISH AND BASQUE HOUSING PUBLIC POLICIES FROM GROWTH TO CRISIS “HOUSING FINANCE: PROPERTY BUBBLES OR SOCIAL & ECOLOGICAL RESILIENCE? IT’S A CHOICE!”

THE LONG-TERM COSTS OF THE HOUSING CRISIS. DRAWING THE LESSONS FROM SPAIN.

13

14

15

16

17

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1.5 TRILLIONS (balance of the Spanish financial system)

- 100 BILLIONS

- 40 BILLIONS

- 1.4 BILLION

- 1 BILLION

Blog LEOLO Email javier@urbaniazhgestion.com Web http://urbaniazhgestion.com Twitter @URBANIA_GESTION @javierburonc Skype Javier Burón Cuadrado