Spain Acts to Stem Repossessions, Create Bank of Cheap Housing
Spain’s government passed a decree to prevent low-income families being evicted for defaulting on their mortgages, and plans to create a stock of homes that can be rented out cheaply.
The two-year freeze on evictions applies to families earning less than 1,600 euros ($2,048) per month that also meet other conditions such as having a child under three, at least three children, a disabled dependent or being unemployed without benefits, Deputy Prime Minister Soraya Saenz de Santamaria said today after a Cabinet meeting in Madrid.
The government will also negotiate with banks, including state-controlled lenders to “make available” foreclosed homes they own to a facility that will let them at affordable rents to people who have lost their homes, Economy Minister Luis de Guindos said. He gave no more detail on the so-called social- housing fund.
Spain’s government is trying to respond to outrage over foreclosures while not endangering a financial system still reeling from a five-year property crash at a time when taxpayers are already shouldering the costs of a bank bailout. Tens of thousands of people marched in Spain late yesterday to back the second general strike this year as support for the government slumps amid spending cuts, tax increases and record unemployment.
“Our aim is that no one loses their home,” de Guindos, who negotiated the nation’s 100 billion-euro European bank bailout, told reporters. The measures affect a “very specific” part of the market, don’t change the nation’s mortgage law, and won’t increase the default ratio on residential mortgages, which at 3.1 percent “is low and will remain low.”
The decree goes into effect immediately, Saenz de Santamaria said. The government will also send a bill to Parliament for debate on broader changes to rules on mortgages, including preventing abuses in contracts, she said.
The People’s Party administration had tried to reach an agreement on the measures with the opposition Socialist party. After three nights of talks, negotiations broke down late yesterday as demonstrations raged in Madrid in support of the strike that the Socialists had backed. Prime Minister Mariano Rajoy pledged to take urgent steps to prevent repossessions last week after a woman facing eviction committed suicide.
Spain’s banking association pre-empted the government on Nov. 12 by announcing a two-year freeze on repossessions in cases of extreme need for “humanitarian reasons.” Lenders already signed up in March to a voluntary code designed to reduce evictions.
Some 400,000 homes have been foreclosed on in Spain since the collapse of the real-estate boom. The Bank of Spain, whose data show the mortgage default rate at about a third of the 10.5 percent level for lending as a whole, expects bad loans to keep rising after unemployment reached a record 26 percent in September. Banks in Spain have more than 600 billion euros of mortgage loans outstanding.
To contact the editor responsible for this story: Craig Stirling at email@example.com
Bloomberg moderates all comments. Comments that are abusive or off-topic will not be posted to the site. Excessively long comments may be moderated as well. Bloomberg cannot facilitate requests to remove comments or explain individual moderation decisions.