Seeking Private-Sector Solutions for Southern Europe’s Housing Shortage

The leaders of two Southern European cities have called on commercial property investors to help them increase resilience against mounting pressures of housing supply shortages.

Rui Moreira, Mayor of Porto, the second largest Portuguese City and Dr Joan Clos, who twice served as Mayor of Barcelona, told the ULI Europe conference in Madrid (5-8 June) that opportunities existed in both cities to help provide badly needed homes.

“We are unable to cope with [improving] supply not only because of the usual problems with government resources but because we are unable to face the heavy costs of buildings homes,” Moreira told delegates.

Moreira attributed Porto’s population growth - which increased by 0.33 percent in 2022 to 1.3 million people - to an influx of technology companies in the city, as well as graduates returning from overseas universities to their home city.

The major, who is serving his third consecutive term, explained: “Students who left during the [global financial] crisis and have been since working in Britain and in Germany, they now want to come back because there is employment. There are all these pressures we have to deal with.”

He added that there was an acute shortage of homes for the middle class population, as well as the younger generation, which were finding themselves struggling with affordability. In response, Moreira said, the city has altered its municipal plan to allow private investors to build in the city.

In February, Porto’s City Hall introduced a plan to incentivise private development, which included the greater densification in some areas of the city, as well as the reduction of fees and taxes. Moreira also explained that the city is providing rental guarantees to developers as it is sub-letting the housing to tenants.

Dr Joan Clos, former mayor of Barcelona, who served two terms as mayor from 1997-2006, said that lack of supply of affordable homes was presenting “social challenges” for the Spanish city, a situation that had not been helped, he said, “by previous crises”.

Clos said: “In 2006, in Spain, we were building more houses than the rest of Europe put together. In the global financial crisis, our financial institutions suffered a lot and it has been difficult for us to recover. The Spanish government created a bad bank to sanitise the accounts of the banking sector and still now, it is not doing very well and it has recently received central government money to help balance the books.”

As a result, Clos said, Barcelona’s real estate housing crisis “hadn’t been important”, adding that the city was now facing a “dramatic” situation to boost supply. “This means a lot of work needs to be done,” he added.

The lack of supply, he explained, was being intensified by the fact that Barcelona was attracting increasing numbers of residents from overseas, who are drawn to the southern European climate and quality of life. “We are becoming the Florida of Europe and this is presenting challenges for us,” Clos said.

Shared Challenges

But the speakers also outlined recent investments in the city’s infrastructure, designed to tackle both environmental and social sustainability.

Porto explained the city had taken ownership of the buses from central government, allowing it to provide cheap or free public transport - on a bus fleet that is increasingly powered by clean energy.

It is also tackling energy poverty, Moreira said, by renovating municipal housing to make them more energy efficient.

“If we don’t guarantee social sustainability then we won’t be able to weather the storm [of climate change],” he said, adding that public space was also crucial in this respect, saying: “We can’t steal the public space.”

Alexander Joseph, senior property development manager at Transport for London, who chaired the panel, added tackling social inequality had “rightly” become focus in terms of improving cities’ resilience in the future.

She said: “Our recent experience of covid has shown us the pandemic was not this great social leveller we initially talked about. In reality, people’s lived experiences and life chances vary dramatically according to the quality of their immediate and wider urban environment.”

TFL, a U.K. government body responsible for most of London’s transport network, is one of the city’s largest landowners and has recently established a property company to deliver 20,000 homes. The move is designed to help the city’s Mayor, Sadiq Khan, to meet his targets to increase supply of affordable housing and generate revenue to improve the transport network.