Housing Crisis in Spain and Italy: More Than Just the Holiday Rental Boom

Individuals living in Spain and Italy, two of Europe’s top vacation spots, are finding it challenging to manage their finances amid a severe lack of affordable long-term housing.

According to research by the European Central Bank and the Bank of Spain, the housing dilemma in Spain traces back to the collapse of the real estate market in 2008, followed by a construction slowdown that persisted until 2023.

In examining Italy’s housing issues, economics professor Alex Tabarrok from George Mason University identifies fiscal policies from the pandemic as a significant contributor to the sustained rise in building material costs.

Rental prices have surged as many property owners choose to cater to short-term vacation renters.

Residents are sharing their experiences regarding the challenges of securing housing and the struggle to keep their expenses manageable.

A few metro stops away from Madrid’s renowned Gran Via, Andres Fernandez feels a mix of excitement and anxiety about relocating to Spain’s capital.

Related Stories

“There are plenty of jobs here, which makes it logical to move. But housing prices are outrageous,” Fernandez shared with The Epoch Times.

Originally from Barcelona, Fernandez and his family had spent the last decade in Argentina. The 26-year-old returned to Spain after completing his university studies, believing that his career opportunities in civil engineering are brighter back home than in Latin America.

“Job quality and pay are better here [in Spain], but the high rental prices are overwhelming,” he stated.

Since he cannot afford to live alone, Fernandez shares an apartment with two roommates in Chueca district. It’s not uncommon to find shared apartment listings on social media due to exorbitant rental prices in Spain.

While young professionals like Fernandez are attracted to Madrid’s dynamic job market and tech industry, the cost of living acts as a significant deterrent.

As indicated by real estate site Idealista, Madrid holds the record for the second-highest rental fees in Spain, trailing only behind Barcelona.

Supply and Demand in Spain

Both renters and homeowners in Spain are feeling the squeeze as rental prices, property costs, and expenses rise while availability dwindles.

Long-term rental listings in Spain have decreased by 56 percent since December 2020, with rental prices increasing by 30 percent in that same timeframe due to heightened demand.

Specifically, Madrid’s housing market index revealed that the availability of rental properties dropped by 71 percent between 2020 and 2024, with rental prices soaring by 44 percent during that same period.

Prospective homeowners are encountering similar obstacles.

Data from 2024 revealed a 10 percent spike in home resale prices as of November last year, with prices reaching around $2,400 per square meter—the largest increase since 2006.

Fernandez mentioned he pays $450 monthly for a private room in a shared apartment outside the city center but within convenient commuting distance. His portion of the rent does not cover electricity, water, or internet costs.

Utility expenses are also becoming an increasing burden for the population in various Spanish cities, especially impacting property owners who run businesses.

“Electricity bills are increasingly astronomical,” expressed Camila, a hotel owner in Pamplona, to The Epoch Times.

Camila, identifying herself only with her first name, noted her family owns two properties in the historic Pamplona area: a boutique hotel and a backpacker hostel close to the famous Camino de Santiago pilgrimage.

She reported having to strictly monitor electricity usage across both establishments: “We have to keep air conditioning and heating at fixed temperatures when used by guests, and we ask them to turn off lights and AC when they leave their rooms.”

While Camila and her family prefer not to impose limitations on guests, escalating electricity costs necessitate such measures.

“Everything is more expensive now, so our expenses as owners translate into higher room rates. There’s truly no sustainable way to own a hotel here without facing financial ruin,” she remarked.

Camila also noted that the cost of providing internet services for guests has surged over the past year.

In 2021, Spain’s government enacted a law to reduce the country’s VAT on electricity to 10 percent, provided that the market price stayed above $51 per megawatt-hour.

This law served as a much-needed relief for residents regarding electricity costs.

However, the discount program concluded in March last year, as market prices fell below the stipulated minimum, and the VAT reverted to the standard 21 percent.

The Venice Example

Italy faces a parallel challenge with affordable housing, stemming from shortages of long-term rentals and rising utility expenses. Many Italians have expressed that wages do not match the cost of living.

Venice, one of the country and the world’s leading tourist destinations, exemplifies this issue.

“For locals, living in Venice is nearly impossible,” remarked Daniel Marino to The Epoch Times.

Originally from suburban Milan, Marino resides and works in Venice, which attracts around 20 million tourists annually.

“If you’re a local, finding an apartment is challenging, and if you do, expect to pay 900 euros or more for even the tiniest room, and that won’t be a ‘nice’ room,” he stressed.

Marino feels fortunate, having arrived in Venice through a university internship program that provided dormitory housing and a monthly stipend of 1,000 euros.

“Without financial assistance, my entire monthly allowance would go to rent,” he noted. “This is a significant challenge for locals. If you work in Venice, affording housing is tough.”

He suggested that the only locals who can afford to stay are those from Venetian families who already own properties.

Like other cities, Venice has mainland neighborhoods where Marino says he would reside if not for his internship housing in an area like Marghera, Campalto, or Mestre.

“But rentals there are still pricey, and you must be cautious; while the island is safe, some mainland suburbs have less desirable areas,” he cautioned.

To add to the financial burden, Marino mentioned that Venice imposes the highest waste management tax in Italy, a fact that often surprises newcomers.

The Trouble With Tourists

Marino pointed out that even for those who can afford high rental prices, many property owners prefer short-term leases to tourists.

“From a business perspective, it’s logical. If I own a flat here [in Venice], why would I rent it for 900 euros a month to someone local when I could earn that amount in a week from tourists?”

As the number of long-term rentals diminishes in Spain and Italy, the short-term rental market is thriving. The rise of remote work and a trend moving away from conventional hotels toward cost-effective self-service apartments has led to skyrocketing demand for short-term rental units in both countries.

This phenomenon has stirred significant debate and incited protests in both nations. Recently, thousands of Spanish residents took to the streets in over 40 cities to protest the soaring housing costs tied to enduring demand for vacation rentals.

In response to the housing market strain, cities like Malaga, Madrid, Seville, and Alicante have implemented regulations or outright bans on short-term rentals.

Italy has faced similar unrest regarding the lack of affordable housing amid a surge in short-term rentals. In November 2024, reports surfaced in Rome about frustrated residents damaging realtor lock boxes used for holiday rentals, with comparable actions taken against tourist rental lock boxes in Florence and Milan, leading to a governmental prohibition on self-check-in vacation rentals.

Unseen Factors

Tourist rentals have borne the brunt of resident, government, and media scrutiny amid Spain and Italy’s housing crises, and it’s easy to understand why. The influx of vacationers opting for short-stay apartments over hotels has been rising steadily over the years.

Last year, Spain experienced more than a 9 percent uptick in tourist accommodations over 2023, while Italy noted a 6.8 percent increase in non-resident overnight stays.

However, both Marino and Camila believe the explosion in short-term rentals is merely a symptom of a larger, systemic issue that has been festering for years.

“New construction has failed to keep pace with the persistent demand for housing,” Camila remarked.

This concern is prevalent even in her comparatively small town of Pamplona, where the rising demand for short-term rentals adds further strain to the housing market.

The housing landscape in Spain saw significant expansion from 1995 to 2008, then experienced a “bust” that persisted until 2015.

Simultaneously, new households outpaced new residential developments until 2023, leading to a projected housing deficit that may reach 600,000 by 2025.

Italy’s housing affordability challenges are intertwined with a sizeable population of existing homeowners. With over 75 percent of households owning homes, inflated repair and renovation expenses pose serious challenges for property owners.

Current aspiring homeowners in Italy can expect to pay approximately 16 percent more for housing compared to 2019.

This is compounded by the same challenges of inflated construction costs facing Spanish homebuyers.

Marino does not think there’s a simple solution to Italy’s affordable housing crisis.

“Italy isn’t just under-built; the high costs of maintaining older homes have become untenable due to inflation. Many people hesitate to restore beautiful historic homes, but they also can’t afford new homes,” he explained.

He concluded, “You can tax foreign buyers and renters all you want; it doesn’t change the reality that prices are exorbitant because related costs are equally high. This is a complex issue with no straightforward answers.”