2023-05-09 21:52:19
One step forward, two steps back. This is how we can summarize the housing situation in this country. Although the entire battery of measures being promoted by the Executive branch are in the right direction and signify a paradigm shift, we are now taking a step back with the measure that the Socialist Party has approved by hype and cymbal in the Council of Ministers without the support of any progressive partner: the granting of public guarantees to cover the mortgage loan for families with dependent children and young people with a certain income. A measure that seems well-intentioned at first sight and that at first glance seems to be positive for young people to access property. However, it is not a new measure. Already there is ample evidence at the national and international level of the disastrous effects that. Canada, the United Kingdom, Australia or New Zealand have carried it out for decades (the so-called Help to Buy), while in Spain, autonomies such as Andalusia, Madrid or Galicia have also put it into practice. And here the literature is clear: it is a harmful measure. Let’s see.It is an inflationary aid. By artificially reactivating mortgage credit and giving a signal to the market, increasing expectations of revaluation of assets, house prices could increase, both for purchases but also, due to drag effect, for rentals. In a context of rigid supply, the endorsement of the ICO as a demand policy generates inflation.It is a regressive measure. Although there are income limits to access this guarantee. This ceiling is very high for the average Spanish income. We are talking about €37,000 for one person and €74,000 for a couple. Since the bank is the one who ultimately grants the mortgage, it will select the profiles with the highest income and lowest risk, leaving the most vulnerable behind. A measure that, by benefiting people with higher incomes, ends up harming the most vulnerable due to the rise in real estate prices.
It is aid to banks disguised as social policy, given that the measure privatizes the benefits, but socializes the losses. The State assumes the risk of non-payment while the bank keeps all the benefits. It is a measure that repeats the worst of the 2008 real estate crisis: subsidizing a safe business, without risk, because later, the banks will be too big to fail (too big to fail).Alternatives for guarantees
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He role of public guarantees it doesn’t have to be detrimental. But this they must be conditioned and molded to the market so that it produces public goods, as the economist Mariana Mazzucato argues. Here an opposite: give guarantees to housing developers on the condition of building, buying or rehabilitating affordable housing. This will make it possible to increase the supply of affordable housing more quickly to meet the 20% affordable housing in 20 years promised by the housing law, the only measure that is deflationary and also reactivates the economy and creates employment.
This is so because in Spain what is needed is strongly boost supply, not so much subsidize demand. Demand-side policies can be useful, especially if what is achieved is to decompress demand, instead of inflating it. For this reason, along with the proposal for guarantees to promoters of affordable housing, a good idea would be, in stressed markets, to limit the purchase of housing unless it is to live or reside. The real problem is that large funds drive families out of the market by having much more purchasing power. If it is limited, as is already done in Canada, the Netherlands or New Zealand, a much more effective result is achieved.The biggest inconsistency is that if the President of the Government announced that he wanted to put an end to neoliberalism in housing policy, now he approves a measure that the Popular Party has promoted in its autonomous governments and that at an international level has been the banner of Margaret Thatcher’s policy in the United Kingdom. One step forward and two back. As Alfred Adler said, “it is easier to fight for principles than to live according to them.” Let’s hope this is not a sign that will take us back to the failed model of housing.
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