While Spain's economy benefits from immigration, its housing supply has failed to keep up. With 140,000 new households formed annually but only 80,000 homes built, the resulting shortage disproportionately affects young people, delaying family formation and depressing the fertility rate to one of the world's lowest.
Related Insights
When the economic system, particularly the housing market, makes it impossible for the youth to get ahead, it guarantees the rise of populism. Desperation leads them to vote for any promise of change, however destructive, such as socialist policies that ultimately collapse the economy.
A key driver of recent rent inflation, especially for lower-cost housing, was the population increase from mass immigration. Citing a Wharton study, the speaker claims a 1% population increase in a city leads to a 1% rent increase, presenting a direct, quantitative link between immigration policy and housing affordability.
Despite the current affordability crisis, underlying demographic trends from young millennials and Gen Z create a massive, long-term structural demand for housing. This will require approximately 18 million new units through 2030, irrespective of short-term market cycles.
Housing scarcity is a bottom-up cycle where homeowners' financial incentive is to protect their property value (NIMBYism). They then vote for politicians who enact restrictive building policies, turning personal financial interests into systemic regulatory bottlenecks.
The significant drop-off in population size with Gen Z and Gen Alpha will lead to a sharp decline in household formation. This demographic shift is projected to cause a 25% peak-to-trough reduction in single-family home building by the early-to-mid 2030s.
A major driver of today's housing scarcity is that homeowners, particularly Boomers, who refinanced into sub-3% mortgages have no financial incentive to ever sell. This seemingly positive economic condition has had the negative side effect of locking vast amounts of housing inventory in place, worsening the supply crisis.
Analyst Michael Howell's research shows a strong correlation between rising gold prices (a proxy for monetary inflation) and falling fertility rates in advanced economies. The mechanism is inflation driving up housing costs, which forces families to delay or forgo having children, leading to demographic decline.
The number of 25-34 year olds living with parents has doubled from 10% to 20% since 2000. This represents a significant "housing deficit" of unformed households, which will drive strong demand for new housing as soon as affordability improves.
While local policies like zoning are often blamed for housing crises, the problem's prevalence across vastly different economies and regulatory environments suggests it's a global phenomenon. This points to systemic drivers beyond local supply constraints, such as global capital flows into real estate.
Research shows new immigrants are absorbed into the housing market faster than the labor market. A policy shift towards border shutdowns and deportations would therefore likely ease shelter inflation more quickly than it would ease wage pressures, creating an unintuitive economic effect.
