Why is Spain considering a 100% tax on homes bought by non-EU residents?

[January 14, 2025] 

MADRID (AP) — Spain is planning a raft of measures to address its brewing housing crisis, including an up to 100% tax on properties that non-European Union residents buy.

Spanish Prime Minister Pedro Sánchez announced the plan this week which will tackle housing affordability and high rents in the Southern European nation. He said the overall goal was to provide “more housing, better regulation and greater aid.”

However, it remains unclear if the plan put forth by Sánchez’s minority coalition would pass in Parliament.

Here's a look at what's happening:

Spain's housing affordability crisis

Like most rich countries, Spain is in the throes of a growing housing affordability problem. Skyrocketing rents are particularly acute in cities like Barcelona and Madrid, where incomes have failed to keep up, especially for young people. Housing prices are also steadily rising, especially in cities and coastal areas.

Rental prices have also been driven up by short-term rentals mainly offered for tourists. Spain receives more tourists than almost any country in the world with more than 88.5 million people having visited the country in 2024.

The negative side to tourism, or “overtourism,” has at times sparked tension between visitors and residents concerned about rising rental prices, the proliferation of short-term rentals on platforms, like AirBnB, and water supplies that can be stretched in some parts of the country, including the popular Canary and Balearic islands.

Last year, protestors took to the streets on various occasions across the country to raise concerns about the growth of tourism and high rental prices. Barcelona’s town hall has pledged to completely eliminate all short-term rentals to tourists in the coming years.

 A block of flats, which is under threat of eviction, is photographed in downtown Barcelona, Spain, Wednesday, July 10, 2024.The banner in the center reads in Catalan: "temporary rental housing: neighbours evicted". (AP Photo/Emilio Morenatti, File)

Curbing foreigners from buying houses in Spain

Spain plans to limit the number of homes foreigners purchase by raising taxes on homes bought by non-European Union residents by up to 100%.

Non-EU residents bought 27,000 properties in Spain in 2023, Sánchez said while announcing the plan, “not to live in” but “to make money from."

Sánchez did not provide a timeline or details on how he plans to implement the tax.

Some of the other measures put forth
Other measures proposed include higher taxes on holiday rentals and a tax break for landlords who provide affordable housing in high-rent areas.

Why is housing politically important in Spain?

The rising cost of living has driven voter discontent across many wealthy countries in recent years, including the United States.

But as one of Europe’s leading Socialist politicians, the housing crunch is a crucial question for Sánchez to resolve as he tries to keep his left-wing minority coalition afloat after winning four-year another term in 2023.

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