Foreigners in Spain facing a 100% tax on homes as the country battles a housing crisis

As Spain continues dealing with a nationwide housing crisis, its government has proposed an unconventional fix to the problem — and one that will not please foreigners. Spain has announced plans to implement a 100% tax on homes purchased by non-European Union residents, a shift that the government hopes will alleviate pressure on Spanish homebuyers.

Spain is "facing a serious problem, with enormous social and economic implications, which requires a decisive response from society as a whole, with public institutions at the forefront," Spanish Prime Minister Pedro Sánchez said in a press conference. Housing is "one of the main challenges facing European societies, such as the Spanish one." Along with the 100% tax, Sánchez also announced several other proposals to lower housing costs.

Why is Spain in a housing crisis?

Spain, as with most Western nations, is in the "throes of a growing housing affordability problem," said The Associated Press. The biggest issue is rent affordability, particularly in the country's major cities like Madrid. This is largely due to wages not keeping up with surging rents, but prices "have also been driven up by short-term contracts mainly offered for tourists," as Spain "sees more tourists than almost any country in the world."

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Foreigners accounted for 15% of all real estate purchases in Spain in the third quarter of 2024, according to the country's registrar — more than 24,000 properties. These foreigners "often are buyers of investment properties" and do not reside in the EU. These people purchase properties "not to live, but to speculate, to make money with them, something that in the context of scarcity we cannot afford," Sánchez said.

This has led to a "difficulty of finding affordable housing to buy or rent as property prices soar and new construction lags far behind demand," said the Financial Times. Further compounding the issue is "housing prices in Europe have surged 48% in the past decade, almost double the increase in household income over the same period."

What does Sánchez's plan involve?

Sánchez's plan involves 12 measures to address Spain's housing crisis. The most notable of these is a government tax reform which means the "purchase of homes by non-resident foreigners from outside the EU will be limited," said the prime minister's office. For foreigners who do get approved for a home, the "tax burden they will have to pay in case of purchase will be increased to 100% of the value of the property." This is "in line with countries such as Denmark and Canada," the office noted.

Also in the works is a "creation of a system of public guarantees that will protect both owners and tenants involved in affordable rentals," said the prime minister's office, as well as the proposal of a "personal income tax exemption for homeowners who rent their homes." This is not the first time Spain has restricted home ownership among foreigners. Sánchez's government said last year that it "would abolish the 'Golden Visa' program, introduced in 2013, that granted residency rights to foreigners who invested in Spanish real estate," said CNBC.

These proposals are the "latest in a series of headline-grabbing events provoked by Spain's growing housing crisis," said Forbes. However, these proposals would need to pass in Spanish Parliament, and there is "no knowing if or when they might become a reality." The proposals themselves are "unlikely to ease 'tensions' in the housing market," as foreign-bought homes are a "drop in the ocean" compared to the total number of houses in Spain, Antonio de la Fuente, manager at real estate investment group Colliers, said to the Financial Times.