It’s for today! Solutions to solve the housing problem before it’s too late.
“The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again.”
John Maynard Keynes
This post is the second and final part of a masterclass on understanding the global housing problem. If you have not already done so, you may want to start with the first part:
Here we go with the second one. From a comment by Jesús Zamora Bonilla, I have picked out a question that is a big debate (in some forums).
Does Housing Produce Value?
No. “Having value” and “producing value” are not the same thing. Things have the value that people assign to them — but that does not mean they produce a distinct value of their own. A gold bar may have value, but it produces no more value than it holds as an asset. It creates nothing new.
Neither does housing.
Those who build and finance the construction of homes — developers, contractors, banks, investors — produce value. Those who buy a completed property in order to sell or rent it are not creating anything new. The built home would exist whether or not it changed hands. And putting it on the market is not, as we have seen, some act of generosity — insofar as homes are an administrative title conferring the right to enjoy a portion of the city, keeping them in active use is an obligation.
We might acknowledge some residual value in maintenance — though in reality this is not a voluntary act of value creation: the granting of the license requires that properties be maintained, on pain of having it revoked. This also reveals who the true owner of the licenses is: if the property owner failed to fulfil this duty, the state — as the real titleholder — would step in to keep the property in the necessary condition.
Stretching the argument considerably, someone might argue that buying a property frees up the previous owner’s capital and contributes to a larger pool of builders and developers. But this is absurd, because as long as licenses remain capped by the consensus of existing owners, there is no shortage of builders relative to what can actually be built. On the contrary, the capital circulating in the real estate market does nothing but concentrate, accumulating ever more homes in ever fewer hands.
Perhaps the most compelling argument that the buying, selling, and renting of housing generates no value is offered, paradoxically, by those who defend rentierism by insisting that it is not a business activity at all — merely an informal practice by “ordinary people” who “supplement” their pension with a rental income. Both things cannot be true at once. Either housing is a service that generates value — in which case there must be entrepreneurs or workers behind it actually doing something — or these are helpless elderly people, in which case no value generation is possible.
I lean toward the second.
So why are they being revalued?
To understand why housing appreciates, the company share analogy reasserts itself with full force. It is not the shares that appreciate — it is the company. It is cities; it is countries that grow and accumulate ever more capital. That capital takes the form of public services, roads, transport networks, universities, technology parks, communities, cultural movements, national brand and tourist appeal, and the concentration of human capital.
When cities appreciate, their shareholders — the homeowners — see the value of their titles rise without doing anything at all.
To make this clearer, consider an example that is by no means science fiction — similar things have happened in many places. Imagine a developer who built two identical residential towers during the property boom, but only had a license for one of them. When the works come to be legalized, the local authority grants the residents of Block A their license, but not those of Block B. Block A therefore has street lighting, electricity, sanitation, internet connection; its children can enrol in the local school and visit the neighbourhood health centre. Its residents can also register their homes and sell them if they wish.
Without a license, Block B sits empty and abandoned.
In Block A, the homes are worth half a million euros. In Block B they are worth nothing — they cannot even be sold, because they have no license and are not registered in the property registry.
One day, a particularly clever lawyer rummaging through an archive finds a document. The original developer’s license referred not to Block A, but to Block B. He goes before a judge and succeeds in having Block A’s licenses revoked and transferred to the owners of Block B.
Nothing about the buildings has changed. The owners are the same people. Which flats are now worth half a million?
If you think it is Block B’s, then you understand perfectly that housing has no intrinsic value — only the value of the city in which it sits.
This is why the appreciation of housing, absent any change to the properties themselves or the construction of new ones, is considered “paper wealth” — a form of patrimony that arises from the revaluation of assets, not from the creation of new value, but from a mismatch between supply and demand for a rigid good whose supply cannot be expanded by the market alone. It is a well-known, widely acknowledged, and extensively studied phenomenon.
Can Property Tax Be Made Progressive Based on the Number of Properties Owned?
Yes — and in fact it already is, in some places. France applies different property tax rates to second and third homes. And the United Kingdom charges higher stamp duty on second homes and on purchases by non-residents.
Can Short-Term Tourist Rentals Be Prohibited?
Not only can they be — they already are, in effect. To operate any accommodation business, a license is required that the vast majority of tourist flats do not hold. The problem is that public authorities, for reasons that defy understanding, do nothing to enforce this. And so we have a proliferation of unlicensed mini-hotels — without insurance, without the most basic guarantees — operating in the heart of our cities.
Which is a shame, because the Airbnb model could have been something genuinely valuable for cities, had it been properly regulated. As it stands, it has become a free-for-all for companies of dubious ethics operating in an unregulated space.
Why Have REITs Not Been Abolished?
Because, as we have seen, rising property prices and a market with strong demand for those titles of ownership are features of the system, not bugs. REITs were invented precisely to stimulate demand and drive prices up. They remain for that reason. In reality, no one actually wants to deflate the market.
Can Empty Homes Be Penalized?
They can be penalized, and in my view they should be prohibited. All licensing systems include a provision ensuring that if you do not use your license, you lose it. This is the case with taxis, shellfish harvesting permits, pharmacies, notaries, and any other activity that depends on a public license.
That said, I think the idea that there are large numbers of empty homes in major cities is a myth. The small percentage that appears in statistics likely belongs to people who split their time between two locations, or who have a property temporarily vacant because a tenant has moved to a care home, and so on. Given the stratospheric returns available from renting, it makes no sense for an investor to buy a property for profit and then leave it empty.
Empty homes are, however, a serious problem in smaller towns and villages. Consider the absurdity: the state makes an investment; buyers acquire the properties but leave them vacant, squandering the public investment they represent. This is not science fiction — it happens in every village in Spain.
Paradoxically, empty homes are also a significant problem at the luxury end of the market. London has suffered severe abandonment in its wealthiest neighbourhoods, because foreign investors — Russians, Saudis — have bought up entire streets purely as financial assets, without spending a single night in them. “Foreign investors,” ran one headline, “are using the capital’s finest homes like a life-sized Monopoly board.”
It is a perfect illustration of what happens when a country’s shares are turned into an “asset” that foreigners can buy.
Can Developers Be Required to Build on Serviced Land?
Absolutely — they can be, they should be, and the law already provides for it, at least in Spain. But as with tourist flats, it is never monitored or enforced. Developers who sit on serviced plots without building on them are effectively holding on to a portion of a country-company’s shares.
Is Squatting a Problem?
Many people have pointed out that squatting rates are negligible. But I would like to offer a different argument. Anyone who rents out a property is a business owner — regardless of whether they are a helpless elderly person. They have entered into business. And all businesses have to deal with non-payment. It is part of the risk of doing business. Sometimes you sign a contract with someone who seemed solvent and turns out not to be. Sometimes you serve a table of ten and they walk out without paying. Sometimes a dispute arises between client and supplier and they decide not to pay. It is commonplace.
So commonplace, in fact, that most businesses “provision” for these losses — they factor into their accounts in advance that a certain percentage of customers will not pay.
By the same logic, the fact that 0.05 % of tenants do not pay seems entirely normal for a business sector. Quite low, actually. By way of comparison, Madrid’s most prestigious luxury hotel openly acknowledges unpaid debts of 1.8 million euros, and no one seems remotely troubled by it.
“But other businesses aren’t forced to keep providing their service.”
Actually, they are. All businesses providing services deemed essential are subject to special obligations, even when customers do not pay. Energy companies, for example, cannot cut off supply to households where minors or vulnerable people live. The same applies to water, healthcare, and basic telecommunications.
This is not an arbitrary or capricious intervention by the state. It is a direct consequence of constitutional architecture. In modern democracies, rights are not all equal — there is an implicit hierarchy among them. The right to property is not absolute; it is limited by other rights considered superior or more fundamental, such as human dignity, physical integrity, and the right to life. When these rights come into conflict, the legal order prioritizes the most important ones: the protection of the vulnerable and social cohesion over the strict logic of the market.
Housing, in this sense, is not merely an asset or a private contract. It is a space where economic rights and fundamental rights collide. And when that happens, the state logically intervenes — on the side of what it deems indispensable for a society to remain viable.
Nor is this an anomaly unique to renting. All businesses are required to absorb costs arising from rights that do not answer to market logic. An employer pays wages when a worker is on sick leave, when they take parental leave, when they accompany a child to a medical appointment, or when they suffer a prolonged incapacity lasting months or even years. From a strictly commercial standpoint, those costs are not the company’s to bear. But from a legal and political standpoint, they are the price of living in a society that has decided certain rights take precedence over economic efficiency.
Renting operates within that same architecture: it is not a contract between equals in a moral vacuum, but an economic activity subordinated to an order of rights that limits what the market can — and cannot — do.
That said: investing in housing is not compulsory. If a business owner dislikes this sector, they are always free to move to another. What is not acceptable is wanting the returns of a startup with the protections of government bonds — and without lifting a finger.
How Can It Be Fixed?
Let us first define what “the problem” actually is. This is not a habitability problem — it is an intergenerational conflict over the distribution of collective capital: country-capital. The solution cannot therefore consist of renting as a model for one portion of society while the other continues to own. Not at any price. That “solution” leads us toward a feudal world, where some pay — little, a lot, or something in between — simply for the right to till someone else’s land.
Moreover, citizenship remains tied to homeownership — as does people’s financial security. What we need, therefore, is a system through which everyone can access those country shares.
The solution is a mechanism by which all generations can access the same portion of a society’s capital with the same level of effort.
Furthermore, this is a problem that today threatens to tear society at the seams. Proposals such as “building a public housing stock” — which would take decades to materialize — are not real solutions. They are empty gestures.
The housing problem can and must be fixed within the next five years.
Housing as a Country’s Share Capital
One option would be to retain the idea that housing represents a country’s shares, and to ensure that everyone has access to homeownership. To achieve this:
New issuances of country shares: The state should be obligated to expand the supply of housing licenses in line with population growth — that is, to increase the permitted density of urban land and accept that buildings must be extended or demolished to make way for new ones. At present, the opposite is happening: masterplans are barely touched, and the buildable capacity of plots never changes. So when the population grows, the only option offered to new generations is to move ever further out. But if some hold capital at kilometre zero and others at kilometre one hundred, we are not distributing that capital equitably.
A country’s shares in the hands of its citizens: Purchases by institutional investors and by non-resident foreigners should be prohibited. It is absurd that a country’s shareholding should be held by private companies and foreign owners.
Licenses in active use: If properties are left empty — that is, closed indefinitely and unused, which is distinct from an owner splitting their time between two homes — the license should be forfeited. If the owner wishes to use the property again, they should have to reapply.
A license to rent: To convert a property into a rental business — whether short-term tourist or long-term residential — a specific accommodation license should be required, equivalent to that held by hotels. Exactly as would be the case if someone wished to open any other kind of business in the city, urban lettings should be regulated by the relevant authority, to ensure they match actual demand and meet a minimum set of requirements — safety, sanitation, and so on — that are not even demanded today.
An Idea Worth Considering
As is so often the case in this world of abundance, creative solutions that go beyond what is currently on the table can resolve problems that seem intractable.
I have on occasion proposed an idea that has always struck me as genuinely virtuous. Since the majority of the housing stock was built in the postwar years, every country has entire neighbourhoods constructed in a period of great scarcity, with very low quality. These are poorly insulated buildings with little natural light, entirely out of step with the expectations of twenty-first-century life. As a result, these neighbourhoods routinely become pockets of poverty.
A measure that would activate the private sector to build far more housing in a very short time would be to increase the permitted density of these plots — so that where four homes exist today, eight could be built tomorrow, for example. This could even be time-limited to force owners and developers to act quickly.
When a private developer constructs a building, they are in effect exploiting an urban resource, and are therefore required to make “contributions” to the state — surrendering a portion of what they build. For decades, the norm has been to “monetize” these contributions: rather than handing over flats, the developer paid the state in cash and retained 100 percent of the building.
But it does not have to work this way. Entire neighbourhoods could be expanded — or demolished and rebuilt — creating millions of new homes across Europe, with the state contributions yielding a public housing stock in very little time. All of this without resorting to state-led construction, and without spending a single euro of public money, by harnessing the mechanisms of the market.
It is one of those rare ideas that achieves multiple things at once: regenerating neighbourhoods, making them more sustainable, injecting resources into the most disadvantaged sections of society, and creating both market-rate and public housing — in very little time.
But you have to want to do it, of course.
If you are interested in housing issues, don’t miss Hijos del optimismo (Children of Optimism). This book explains how the housing crisis is the result of the immense transformations we are currently undergoing.
It is my first book, the big brother of this newsletter, and a project I have been working on for many years.
You can already order Hijos del Optimismo on Amazon, La Casa del Libro, El Corte Inglés and the publisher’s website, Debate.
You can also read more about me and the story that inspired me to write it
