The housing deficit: how will major cities face the future shortfall of 2.7 million homes?
The housing deficit in Spain is one of the most pressing challenges for the future of major cities. A combination of rising land costs, accelerated demographic shifts, and excessively slow urban planning processes has created a scenario in which new housing construction falls far short of growing demand.Santiago Martínez, Head of Economic and Financial Analysis at Ibercaja, points out that the main factor behind the housing deficit is the imbalance between supply and demand:
“Demand has started growing again due to demographic factors, as the population of emancipation age is increasing after fifteen years of decline. However, supply has remained stagnant at very low levels. While the excess stock from the housing bubble was being absorbed, this was not a problem. But now, we have reached a housing shortage that will be difficult to reverse.”
Additionally, recent studies, such as the one conducted by Colliers and APCE, warn that without structural interventions, the deficit could exceed 2.7 million units in the coming decades. Given this outlook, it is essential to analyze the causes of this imbalance, understand its impact on both the economy and society, and explore comprehensive strategies that combine regulatory reforms with innovative financing tools for new housing developments, such as real estate crowdfunding through platforms like Urbanitae.
Causes of the housing deficit
The housing deficit stems from multiple and complex factors that can be grouped into three main areas.
First, the high cost of land in high-demand areas has become a major barrier to new housing projects. This issue is further exacerbated by rising construction costs, which are directly driven by increased material prices and the limited availability of skilled labor. As a result, profit margins for developers shrink, discouraging investment in new residential developments.
Secondly, Spain’s land transformation process is highly complex, as converting rural land into urban land requires numerous administrative approvals and coordination between various government entities (municipalities, regional governments, and the national government). According to Martínez,
“The time required to increase housing supply is very long due to the need for urban planning, bureaucratic procedures, and construction times. Additionally, the construction sector has shrunk since the Great Recession, making it harder to respond to increasing demand.”
Impact on the economy and society
The mismatch between housing supply and demand significantly affects both the economy and society.
On the one hand, limited housing availability leads to a continuous increase in both home prices and rent costs, which reached record highs last year. The Ibercaja expert explains:
“This shortage is driving a sharp rise in prices, making homeownership increasingly difficult, particularly in high-demand regions like Madrid, the Mediterranean coast, and the Canary Islands.”
This rising cost makes housing access challenging, especially for lower-income families who must allocate a substantial portion of their earnings to mortgage payments or rent.
This phenomenon creates a domino effect on the real estate market. When land and construction costs surge, projects become more expensive and, consequently, less attractive to investors. The high upfront capital required forces financial institutions to demand stronger guarantees and evaluate project risks more cautiously. This restricts access to credit, as banks are reluctant to finance projects with lower profit margins and higher risk levels.
Furthermore, the high investment needed reduces expected profitability, leading many developers to postpone or cancel new projects.
This slowdown in the construction sector further impacts the broader economy. Martínez warns:
“A larger share of household income going toward housing reduces spending in other sectors, slowing economic growth, even though a boost in construction could positively impact GDP and employment.”
From a social perspective, the housing crisis exacerbates territorial polarization. Major metropolitan areas and high-tourism zones experience accelerated price growth, forcing populations to relocate to peripheral areas, sometimes leading to segregated neighborhoods with lower-quality housing.
These trends widen social inequality, as differences in housing quality and accessibility translate into increasingly stark disparities between socioeconomic groups. According to the latest Household Financial Survey (EFF) by the Bank of Spain, Spain’s intergenerational wealth gap has worsened, with those born between 1986 and 1995 accumulating five times less wealth than their predecessors at the same age, largely due to rising housing costs and job market instability.
Legislative strategies and solutions
To address this issue, measures must be implemented to accelerate housing production and facilitate access to urban land.
One of the top priorities is streamlining and digitizing urban planning processes. Reducing approval times through updated regulations and better coordination between government bodies would allow urban land to become available more quickly.
The Colliers-APCE report highlights the need to create an online platform to speed up the issuance of reports, enhance legal security, and reduce urban planning approval times.
On this point, Martínez emphasizes the importance of industrializing part of the construction process to enable off-site production instead of on-site building, leveraging new technologies to increase efficiency despite labor shortages.
Additionally, he highlights the crucial role of the public sector in promoting affordable housing, either through direct production or by incentivizing the construction of subsidized housing for private developers.
The role of the real estate market and crowdfunding
The new-build real estate market plays a vital role in expanding housing supply, but developers often struggle to secure sufficient financing to launch new projects.
According to the Ibercaja expert:
“A healthy financial sector like ours is essential to increase real estate financing. While there is appetite for expanding credit, it is crucial to avoid past mistakes that led to the housing bubble.”
He also notes that the recent stabilization of interest rates is boosting the profitability of real estate investments, making private investment an increasingly key driver for new housing developments.
Beyond traditional real estate funds, which have historically provided stable financing for the sector, new alternatives such as real estate crowdfunding have emerged.
Urbanitae, for instance, developed nearly 2,500 housing units in 2024, with 87% of them in Spain, closing the year with €213 million in funding—60% more than the previous year.
This demonstrates not only the potential of these new investment alternatives but also reinforces expectations that this upward trend will continue. As real estate crowdfunding establishes itself as a key tool for driving the sector forward, it opens new financing channels in an increasingly demanding market that requires innovative and accessible solutions.