Like Malta Labour Party leader Alfred Sant, Spain’s Socialist Prime Minister José Luis Rodríguez Zapatero is promising cash handouts to young people in search of their first home.
But rather than subsidise home buyers, Zapatero wants to encourage young people to rent a home rather than buy one.
Zapatero, like Sant, proposes cash handouts to young people as a remedy to rising property prices. But like Alternattiva Demokratika, the Spanish government is putting its money on reviving a stagnant rent market.
Zapatero, known for liberal policies such as introducing gay marriages in a traditionally Catholic country, is no stranger to breaking with tradition. Spain is by far a country of homeowners rather than renters, and a red-hot market has seen house prices treble in the past decade, although the market is now cooling off. House ownership is a much cherished value in Spain, where 80 per cent own their homes. The ownership feeling was inculcated by General Franco’s right-wing dictatorship in the 1960s and 1970s, as the way to follow for an “honest” family. A similar mind-frame was promoted in Mintoffian Malta, where vast tracts of countryside in a tiny country were opened to development for a new class of settlers.
Like Malta, Spain has one of the highest percentage of vacant properties in the European Union, with 15.5 per cent of all Spanish properties standing empty, compared to the EU average of five per cent. Approximately 3 million of Spain’s overall housing stock of 21 million properties are empty. The 1995 census states that 15 per cent of Maltese properties are permanently vacant while a further eight per cent consists of holiday homes.
Spanish landowners like their Maltese counterparts are also reluctant on putting out their property investments for rent, mainly due to laws protecting tenants. Although rents for properties introduced in the market after 1995 are completely liberalised, landowners in Malta are still reluctant to rent.
The property boom in Spain has also resulted in environmental havoc with 57 per cent of the Andalusian coastline and 80 per cent of Malaga’s coastline already built up with residential developments, marinas and hotels. Property investment absorbs 50 per cent of all Spain’s private investment thus penalising the growth of other sectors of the economy.
The Spanish government now wants to help young workers pay their rent under a plan announced last month that aims to end Spain’s status as the slouch of Europe when it comes to emptying the family nest.
The handout — EUR210 a month for four years — is the latest in a series of spending packages unveiled by the Zapatero government as it starts unofficial campaigning for general elections expected in March of next year.
The legislation also calls for a EUR600 loan for workers aged 22 to 30, to put down as deposits for rental housing and letting low-income people of any age deduct part of their rent from their income tax.
To qualify for the handout and the loan, one must be aged between 22 and 30, be employed, earn no more than EUR22,000, and have been living in Spain for the past four years. Eight of 10 Spanish young workers stand to benefit from the measure.
People of any age are eligible for the tax deduction if they earn no more than EUR24,000. The tax break will cost the government an estimated EUR348 million a year in lost revenue. The aid to young renters will cost around EUR436 million in new spending.
The Spanish government wants to encourage mobility in the labour market by getting more Spaniards to rent instead of buy.