Spain has announced plans to address its growing housing crisis by introducing a 100% tax on property purchases made by non-European Union residents. The measure aims to curb foreign investment in real estate, which many believe is contributing to skyrocketing housing prices and a lack of affordable homes for locals.

Spain’s warm climate and stunning beaches have long made it a favorite destination for British and other international buyers. However, the surge in foreign property ownership has fueled tensions between local communities and the government. By significantly increasing the cost for non-EU buyers, the government hopes to prioritize housing for Spanish residents.

Prime Minister Pedro Sánchez detailed the proposal on Monday, emphasizing the need to prevent a society divided into “rich landlords and poor tenants.” In 2023, non-EU residents purchased approximately 27,000 homes in Spain. Sánchez criticized these acquisitions as speculative, arguing they were made for profit rather than residency.

In addition to the proposed tax, Sánchez outlined other measures, such as offering tax breaks for landlords providing affordable housing and increasing taxes on properties used for short-term tourist rentals. However, specifics about when these policies would take effect or their exact implementation remain unclear.

Spain’s housing crisis is dire. The central bank estimates that 550,000 new homes are needed over the next two years to meet demand. Over the past decade, house prices have risen by 48%, with urban centers and tourist hotspots seeing the most significant increases. Meanwhile, wages have only grown by 17% over the same period.

A shortage of land ready for development exacerbates the problem. Although cities have land available, complex processes delay its use. Rafael Doménech of BBVA Research highlighted this issue in a July report, pointing out that lengthy bureaucratic hurdles are a major barrier.

Tourism is another critical factor. While it remains a cornerstone of Spain’s economy, the preference for short-term rentals has pushed local tenants out of the market. This has sparked protests and growing anti-tourism sentiment across the country. Cities like Valencia and Barcelona have already taken steps to limit short-term rentals, citing social issues and reduced housing availability.

The housing crisis has been a persistent issue for Spain, compounded by the 2008 property market crash and the global financial crisis. Over nearly two decades, successive governments have struggled to address the imbalance between housing costs and incomes. With property prices soaring 82% in the last 10 years, the gap continues to widen.

Sánchez’s plan is ambitious, targeting systemic issues that have plagued Spain for years. However, its success will depend on swift parliamentary approval and effective implementation. For now, the country’s housing market remains a contentious and urgent challenge.