Spain is facing a housing shortfall of up to 750,000 homes, according to a stark new warning from the Bank of Spain, which says the country’s chronic lack of housing is becoming one of its biggest economic and social challenges.

In its latest Annual Report, the central bank estimates that between 700,000 and 750,000 additional homes would have been needed between 2021 and 2025 to meet the current demand.

The figure highlights the growing gap between the number of people looking for homes and the number of properties entering the market.

According to the report, several factors are driving demand higher, including population growth, rising employment, increasing household incomes and improved access to finance.

At the same time, supply remains constrained by planning delays, land availability issues, labour shortages in construction and what the bank describes as structural inefficiencies in Spain’s housing system.

The result has been soaring property prices and growing difficulties for both buyers and renters.

Tourist flats in the spotlight

The Bank of Spain argues that restrictions on tourist accommodation and short-term rentals could help ease pressure in the most heavily affected areas.

It suggests local authorities may need to impose temporary and targeted limits on holiday lets and seasonal rentals in neighbourhoods where housing shortages are most acute.

However, the institution stopped short of backing blanket restrictions.

Instead, it warned that such measures should be carefully monitored because they can have knock-on effects for sectors including tourism, hospitality, retail and even higher education.

The report stresses that limiting non-residential uses of housing may provide short-term relief but cannot solve the underlying problem alone.

‘The real issue is supply’

Bank officials were clear about where they believe policymakers should focus their attention.

David Lopez Salido, the institution’s Director General of Economics, said Spain will take a long time to eliminate the housing deficit at current construction rates.

He argued that the housing crisis can only be solved by significantly increasing supply.

That means addressing issues such as land availability, planning regulations, public tenders, infrastructure and coordination between different layers of government.

The report highlights the complexity of Spain’s planning system as one of the key obstacles preventing new homes from being built quickly enough.

Call for less bureaucracy

The Bank of Spain also called on national, regional and local authorities to work more closely together to speed up housing development.

It said excessive bureaucracy and fragmented decision-making continue to delay projects and reduce the number of homes reaching the market.

The warning comes as housing affordability remains one of Spain’s most pressing political issues, with rents and property prices continuing to rise in many cities and coastal areas.