2023-07-30 02:14:05
It is a fact that new housing in Spain is a rare and expensive commodity. According to the recent Bank of Spain report “The mismatch between housing supply and demand and its relationship with prices”, the volume of homes expected to be produced this year and next represents half of the expected formation of households , which, in round numbers, shows a deficit of about 100,000 units. Building new housing is not only slow but also expensive. And not only because of the price of raw materials, you shoot up in many cases due to the effects of the pandemic and the war in Ukraine; or labor, which is scarce and, therefore, also more expensive; but also due to another factor that is not usually in the public debate on housing, taxes. An element in which the Housing Law has not entered and which, according to the analysis “A new course for housing policy” published by the Fedea analysis center, is one of the most feasible components to intervene to reduce its price.
The author of the report, Benito Arruñada, professor at Pompeu Fabra University, Affiliated Professor at BSE and associate researcher at Fedea; He assures that building new housing in Spain is “very expensive because suitable plots are scarce” and, furthermore, there are what he calls “conservationist exaggerations” on the part of environmental groups that make everything more complicated. In this regard, the report bets that there is an “urban planning aimed at ensuring that there is land available to build.” A suggestion in line also with that of the Bank of Spain reportwhich suggests that, in order to expedite the production of new housing and help correct the imbalance between supply and demand, it might be convenient “to review the procedures for managing developable land so that the production of housing can respond more quickly to the needs existing”.
But in addition to pointing to the difficulties and high costs to promote land as one of the causes of the high price of new housing, Arruñada adds that this activity supports what he calls a “fiscal overload.” Especially, she says, on land, due to a whole series of “chain taxes, and expropriatory land reserve coefficients.” Not to mention, he adds, the necessary cost to “obtain planning licenses and overcome the various blockades that all real estate developments face today in various administrative instances.”
Taxes
The analysis ensures that the construction of new housing supports, in terms of taxes that end up being transferred to the buyer as part of the price, 6 to 11% when buying the plot from an individual (due to property transfer tax); 4% on the value of the work, when requesting the municipal license (Municipal Tax on Constructions, Installations and Works); 1.2% on the value of the work, when declaring said new work; 1.2% on the total value of the farm, when practicing the division in horizontal property; and 1.2%, when constituting the developer’s mortgage (by documented legal acts); and, if it takes time to build, the capital gains tax on the lots (approximately 1% of the cadastral value of the land for each year of permanence), plus the real estate tax on the farms during the time they are yours.
According to an estimate made by the employers’ association of Madrid developers, Asprima, for LA RAZÓN in the middle of last year, for the purchase of a new home with a sale value of 140,000 euros, the different administrations -local, regional and state- they pocket more than 37,000 euros between direct and indirect taxes. This transaction bears charges on municipal fees and taxes such as building permits, first occupancy or construction permits of 4,772.34 euros, to which must be added another 3,382.53 euros of regional taxes such as the qualification fee provisional or final. To all this we must add VAT, which in the case of this good is 10% and amounts, therefore, to 14,000 euros. In total, 22,104 euros in direct taxes. To them would be added another 15,490 euros in indirect taxation derived from corporate tax, personal income tax or Social Security.
Unfortunately, regrets the analysis, the new Housing Law “does not alleviate these difficulties.” In addition, he adds, one of the least attended aspects in his discussion has been precisely the one that raises the land reserve coefficients for public housing by no less than ten percentage points, “an increase that significantly makes all new construction more expensive,” he warns.
used housing
Arruñada also considers that the taxation of used housing plays against the real estate market and is an obstacle. The professor assures in this regard that in Spain “we tax tenure little, since the IBI is relatively low; but a lot on sales”. As he details, the transfer tax (ITP) is between the 11% that can be reached in Barcelona and 6% in Madrid. The Federation of Real Estate Associations (FAI) assured in a report published at the beginning of the year that buyers of a second-hand house in Spain pay an average of 7.5% for the ITP compared to 4.5% of the European average.
Both the figures for Madrid and Barcelona are much higher “than the 1% that they already consider exorbitant in the United States,” explains the report published by Fedea. Hence, as he explains, the average American moves house every seven years, which makes their job market more flexible. “Add the tax on fictitious capital gains generated by inflation, and you will begin to understand that the fundamental responsible for the price of housing is none other than the public treasury,” he concludes.
The consequence of this high tax on sales compared to ownership is that, warns Arruñadas, homes “not only remain empty but also underused. Our middle class has multiple residences and many huge flats are still inhabited by one or two people. Before sell, we wait to inherit”.
#voracity #public #finances #true #high #price #housing