Spain’s New Housing Tax Should Target Behavior, Not Nationality

Spain is preparing to push forward with a 100% tax on non-European Union homebuyers to curb a housing crisis. But targeted reforms should address the real culprits: vacancy and speculation. Taxing short-term flipping and penalizing empty housing stock while requiring meaningful residency would better address the problem while preserving Spain’s openness to foreign investment.

Spain’s housing crisis isn’t just a policy shortcoming; it’s a potential political time bomb. Rents in cities such as Barcelona have exploded, with increases north of 60% in just five years. This has caused city governments to suspend and phase out apartment rental licenses.

The public is now demanding that the government curb housing speculation, reduce rents, and stop allowing neighborhoods to be turned into real estate portfolios for absentee owners. The Spanish government is likely inclined to pass something they can point to as a fix.

Into this crisis enter Prime Minister Pedro Sanchez and his proposal to tax non-EU homebuyers 100% of their purchase price. The policy logic is relatively simple if one accepts the premise that foreigners, particularly non-Europeans, are inflating housing prices and hollowing out communities.

At first blush, the tax seems like a king’s cure for all the Spanish housing ills. But the policy is economically crude, legally questionable under EU law, and at the very least symbolically charged. It misdiagnoses the problem and risks distracting from more effective and less incendiary reforms.

The real issue isn’t who is buying homes—it’s how the homes are being used. The good news is that if policymakers stop aiming at the wrong target, they’ve got better and less risky tools already at hand.

Residential buildings stand on the city skyline in Barcelona.

Photographer: David Ramos/Getty Images

Spain is a member of the EU. And although the tax specifically targets non-EU buyers to sidestep internal community rules, it still risks violating broader investment treaties and principles of non-discrimination. Beyond intracommunity legal issues, there may be a diplomatic and global trade price to pay—Canada has faced blowback for similar moves but with a much lower tax rate.

Also, the economics just don’t check out. If non-EU buyers accounted for just 27,000 property purchases in 2023, even completely curtailing all those purchases—and assuming they were all purchased for speculation—the policy would barely dent a housing market with over 27 million units.

The proposed policy would be poorly treating a minor secondary symptom and ignoring the underlying systemic disorder. It doesn’t add housing inventory; it just tries to shift who purchases the stock that is made available.

It doesn’t rehabilitate vacant homes scattered across Spain or make it easier for young families to buy or rent in their home cities. It’s the worst of both worlds: relieving political pressure and enabling policymakers to say they did something without actually solving anything.

If housing speculation leading to diminished inventory is the problem, then taxing speculation directly would be more efficient. Spain could introduce a resale tax on properties flipped within a short holding period—say five years. The tax could be graduated such that the faster the sale, the steeper the tax.

Such an approach would target the behavior policymakers oppose while ensuring retirees who want to live quietly in Barcelona or skilled non-EU workers relocating for jobs aren’t penalized. The tax could be structured to fall on opportunistic buyers who treat housing as a fast-moving commodity rather than a social good—and can’t be identified by looking at the issuing country on their passports.

Spain is facing the twin issues of housing affordability and housing usage. According to the Bank of Spain, there are as many as four million entirely vacant or underutilized homes across the country.

By some analyses, as much as 57% of the total housing stock in Spain are owned by investors. Some homes are likely owned by banks—remnants of the last housing crisis, which saw Spain suffer through a higher foreclosure rate than any other European country.

Regardless of the underlying cause, every vacant property represents a supply withheld from a person who needs a place to live. A progressive vacancy tax, levied annually, would directly target this underutilization. It would change investors’ calculi regarding sitting on housing stock waiting for appreciation and would likewise encourage bank owners to make productive use of their holdings.

The tax could be tailored so that it becomes higher the longer the property sits empty. Exemptions could be carved out for legitimate delays in utilization, such as from renovations, inheritance issues, or health-related absences.

The tax wouldn’t need to be structured to be punitive but merely could be corrective. It could nudge property owners to rent out or sell homes that are otherwise removed from circulation by making it marginally more expensive to hold onto underutilized property. At the same time, it would create a revenue stream that could be earmarked to expand housing inventory and affordability—from social housing construction to tenant benefits.

Crucially, such approaches would be agnostic to nationality. It doesn’t matter if a piece of property is owned by a German retiree, a Spanish bank, or an American hedge fund. If it’s rapidly flipped or sits vacant, it’s part of the problem.

Spain is facing a perfect storm where housing demand is high, supply is frozen, and speculation thrives at the intersection of the two. Revenue from vacancy and resale taxes could be channeled directly into affordable housing construction. Housing policy shouldn’t be a functional border wall—it should be a blueprint for guided investment and smart development.

Andrew Leahey is a tax and technology attorney, principal at Hunter Creek Consulting, and practice professor at Drexel Kline School of Law. Follow him on Mastodon at @andrew@esq.social

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