By Diego Sánchez de la Cruz, Head of Research at the Instituto Juan de Mariana and author of The Madrid Model
On Monday, Pedro Sánchez dissolved parliament and called a snap general election for 29 November. He did so three days after Congress threw out the two emergency housing decrees on which he had staked the final weeks of his mandate. The election closes eight years in power that would have ended most European premierships several times over.
Start with the courts. José Luis Ábalos, Sánchez’s former transport minister and party organiser, was sentenced in June to 24 years in prison for taking kickbacks on pandemic contracts. Santos Cerdán, who succeeded Ábalos as the Socialists’ number three, spent months in pre-trial detention in the same affair. Last November, Spain’s attorney general became the first holder of that office in Spain’s democratic history to be convicted, for leaking confidential data about a political rival’s partner. In July, the prime minister’s brother was barred from public office for nine years over a job tailor-made for him. Meanwhile, Sánchez’s wife is expected to face a jury next spring on separate corruption charges.
José Luis Rodríguez Zapatero has also recently become the first former prime minister in Spanish democracy to be formally investigated. Sánchez’s Socialist predecessor, and one of his most vocal defenders, is under investigation for influence peddling, criminal organisation and forgery over the €53 million state bailout of the airline Plus Ultra. When police searched his office in May, they found a safe holding jewellery that a court-ordered valuation put at €1.3 million. The judge has since opened a separate line of inquiry into the jewels, adding suspected tax fraud and smuggling.
Then there is what the press has dubbed the Socialist Party’s ‘sewer’, an alleged off-the-books operation to dig up dirt on the journalists, judges, prosecutors and police officers investigating Sánchez’s inner circle. Beatriz Biedma, the judge who investigated the prime minister’s brother and sent him to trial, has asked to join the case at Spain’s National Court as an injured party. She alleges that she was spied on and harassed. Her filing also alleges that the network contacted members of a Badajoz drug clan in order to act against her. According to press reports, one intermediary offered the clan a deal in which prosecutors would drop its cases if it helped ‘eliminate’ the judge. Spain’s anti-corruption prosecutors have backed her request to be treated as a victim.
There is also the price Sánchez paid to stay in office. He first pardoned and then amnestied the Catalan separatist leaders behind the unconstitutional 2017 attempt to break away from Spain. The Supreme Court had convicted them of sedition and misuse of public funds. The amnesty, which also wiped out embezzlement charges, was negotiated with the very parties whose leaders benefited from it, in exchange for the votes that returned Sánchez to power in 2023. Meanwhile, a Constitutional Court with a majority of judges appointed under Sánchez, and presided over by Zapatero’s former attorney general, has overturned the convictions of two former Socialist presidents of Andalusia, Manuel Chaves and José Antonio Griñán, in the ERE affair. In that scheme, €680 million earmarked for laid-off workers was run for a decade as an illegal slush fund. To date, it remains Spain’s largest corruption case.
Sánchez’s economic record is no better. The Instituto Juan de Mariana, the free-market think tank where I serve as Head of Research, has counted some 140 increases in taxes and social security contributions approved by Sánchez’s governments since 2018. Spain’s tax burden now stands at its highest level ever recorded, and inflation has made matters worse through bracket creep: because income tax brackets have not been indexed, rising nominal wages push workers into higher bands even when their real income has not grown. As a result, real purchasing power has barely improved in years. Headline GDP has grown, but largely because the population has: the number of residents born abroad has risen from 6.2 million in 2018 to 10.3 million today, an increase of more than four million people. The government has also lost control of the borders. On the night of 30 July, close to 80,000 people, most of them Moroccans, crossed illegally into Ceuta, Spain’s North African enclave, in the largest irregular entry the city has ever recorded.
Since 2018, Sánchez has relied on the most radical partners available. In 2020, he formed Spain’s first coalition government since the restoration of democracy with the far-left Podemos, whose founders had worked as paid advisers to Hugo Chávez’s government in Venezuela. Since 2023, he has governed with Sumar, which includes the Spanish Communist Party. In parliament, he has depended on the Catalan separatists of ERC and Junts, and on EH Bildu, the political heir of Batasuna, which Spain’s courts outlawed as the political arm of the terrorist group ETA.
With the Socialists polling at 25.9 per cent, their lowest of this parliament, surveys favour the two parties of the right, the Popular Party and Vox. Recent polls give them around 200 of the 350 seats in Congress, comfortably above the 176 needed for a majority.
The ‘Maricarmen saga’
Yet the contest is not settled. Sánchez is betting everything on housing, the one issue on which voters’ anger can be turned against landlords and ‘vulture funds’ rather than against the government. The strategy has worked elsewhere. In Berlin’s state election on 20 September, Die Linke came first with 25.7 per cent, more than doubling its 2023 share, on a campaign built around rents and the expropriation of large landlords. Sánchez hopes to do the same in Spain. He thought he had found the face of that campaign in an 87-year-old woman named Maricarmen.
On 23 September, police evicted Maricarmen from the Madrid flat where she had lived since 1956. Within hours, she had become a national symbol. The government’s version was simple: Spain’s homes had been seized by ruthless corporations that throw pensioners onto the street. A week later, the cabinet approved two emergency decrees named after her in all but law. They extended rental contracts by two years, capped rent increases at 2 per cent, suspended evictions until 2030 and made leases renewable automatically. A landlord who declined to renew would owe the tenant twelve months’ rent.
The facts are less convenient. Maricarmen’s lease was signed by her father under Franco-era rental law, which froze rents and let tenancies be passed down through families. The contract legally expired in 2007, when the last succession allowed by the 1994 rental reform ran out. Spanish courts confirmed this as early as 2022. According to the owner, she continued for years to pay roughly €200 a month plus charges in one of Madrid’s most expensive neighbourhoods, where comparable flats rent for more than €2,500. Madrid’s city council offered her a range of alternatives, from assisted living to municipal housing. She declined them all.
Her story is certainly not one of predatory capitalism. It shows what happens when the state freezes prices for seventy years. The adjustment does not disappear; it is postponed, and then it lands all at once on one person, usually the most fragile. It also says something about Spanish politics that the government’s response was to build a new system of frozen, inheritable, indefinite tenancies. On Friday, parliament voted down both decrees, by 178 votes to 172 and 184 to 166. On Monday, Sánchez took the fight to the voters.
A shortage made by policy
Spain’s housing crisis is real. Since 2015, house prices have risen by 80 per cent, compared with 27 per cent for consumer prices. The median rent now exceeds the median wage of a young worker. Only 15 per cent of Spaniards aged 16 to 29 live away from their parents, the lowest share on record. Housing tops the list of national concerns in official surveys.
The cause is no mystery. Between 2021 and late 2025, Spain added more than 1.16 million households but completed only about 465,000 new private homes, a shortfall of nearly 700,000. Spain now starts 2.7 homes per 1,000 inhabitants, half the rate of the early 1990s.
Builders are not lazy, and capital is not scarce. Spain simply makes building close to impossible:
Land: 95.7 per cent of the national territory is classified as non-developable. Converting rural land into a buildable plot takes ten to fifteen years. Public administrations own around 58 per cent of Spain’s undeveloped urban land and sit on it.
Permits: Municipal permits routinely take more than a year. EY and the Madrid developers’ association estimate that the delay adds €18,000 to the cost of every new home.
Taxes: Housing-related taxes raise €52.2 billion a year, and nearly a quarter of the price of a new home goes to the taxman.
Squatting: Evicting a squatter with no legal title takes close to two years in court, twice as long as when Sánchez took office. More than 100,000 homes are currently affected.
On top of all this sits rent control. Sánchez’s 2023 Housing Law allowed regions to cap rents in ‘stressed’ areas, and the results are exactly what the economics profession predicted:
Barcelona: Rental contracts signed fell 43 per cent from their 2021 peak.
Navarre: Contracts in capped zones fell 44 per cent in two quarters.
A Coruña: Contracts halved in five months.
Meanwhile, Madrid, which refused to apply the caps, has three times as many flats listed for rent as Barcelona. But even Madrid could not escape national rules: as soon as the ‘Maricarmen decrees’ were announced, several thousand rental listings disappeared within hours.
None of this is new. Before Germany’s constitutional court struck it down, Berlin’s 2020 rent freeze cut supply five times as much as it cut prices. That record did not stop Berliners voting for more of the same last month. Stockholm’s waiting list for a rent-controlled flat is more than eleven years long. Where cities let supply respond, rents fall. In the US, Austin built at a record pace and saw rents fall by around 22 per cent from their peak. In New Zealand, Auckland upzoned in 2016, and family rents ended up roughly 30 per cent lower than they would otherwise have been. Argentina saw a similar boom in rental supply after Javier Milei’s government scrapped rent controls.
The demand side nobody wants to discuss
Any honest account must also look at demand. Spain’s population reached a record 49.8 million in July 2026. All of the growth came from people born abroad, who now number 10.3 million, or one resident in five. Between April and June alone, the population grew by 104,000, the largest quarterly increase on record. The Spanish statistics office’s 2025 Living Conditions Survey shows that more than half of all tenants were born abroad.
Whatever one’s view of immigration, the arithmetic is clear. A country cannot add a million residents every couple of years while blocking new construction, taxing every transaction and scaring landlords out of the market, and still expect rents to hold. Sánchez has defended rapid immigration as the answer to Spain’s ageing workforce and pension gap. That may or may not be sound policy, but pairing it with a supply freeze guarantees a collision in the housing market. The government has chosen to blame landlords and ‘vulture funds’ for that collision rather than acknowledge its own role in it.
What would actually work
The alternative is neither radical nor untested:
Land: All land not specifically protected for environmental or heritage reasons should be buildable as of right, not by political favour.
Permits: Ordinary projects should be able to proceed on a certified declaration by an accredited independent technician, and complex projects should face a 30-day deadline for a decision.
Taxes: Abolish the municipal construction tax and the municipal capital gains levy on property, and cut transfer taxes.
Squatting: A judge should be able to order the eviction of a squatter with no title within 24 hours, with social services notified when children or vulnerable people are involved.
Rent control: Repeal the caps entirely.
Public housing: Any home built with public support should be held as permanent rental stock rather than sold off at a discount to whoever wins the lottery.
Protecting genuinely vulnerable people like Maricarmen is a legitimate public task. But it is the state’s task, not that of whichever private owner happens to hold the deed. Spain has spent seventy years asking landlords to act as an unpaid welfare system, and the result is a country where too few people want to be landlords.
Sánchez wanted Maricarmen to be the face of market failure. She is the face of seventy years of government failure. On 29 November, Spaniards will decide whether to hand another term to the man who, faced with that failure, tried to repeat it.