This article is written in conjunction with the IE Law Society.By Paulette Freixas
IE and the Cost of Living Increase
Segovia suffered from Spain’s highest rent increases in 2023, with rent doubling in the last seven years and its most significant increases occurring in the last three years. “This substantial rent increase is even more evident when looking at Plaza Mayor, the city center and popular housing hotspot for IE students, with a 41% increase since 2021 there. This article will be analyzing the reasons for this drastic change and IE students’ role in this, along with proposed legal solutions.
According to Guillermo San Juan, councilor of “Segovia en Marcha” (Podemos-Alianza Verde) under the City Hall of Segovia, this can be attributed to “lack of housing policies and the scarcity of these in both rent and purchase, together with the pressure that sectors with high purchasing power such as IE students put on prices,” which, in turn, is making it “impossible” for Segovians to access affordable housing in their city. In fact, some landlords will only rent to IE students, as they know they are willing and able to pay more. Segovians’ general sentiment is that it is one of, if not, the most pressing issue the city is currently facing.
Rent for a single bedroom apartment in the Segovia’s center of Plaza Mayor where most IE students reside is 900 euros monthly, on average, which is 50% higher than the city’s average rent prices. These are what many are labeling “Madrid prices.” As a matter of fact, the increase in the real estate market has been generating such significant appeal that it has attracted investments from firms in Madrid.
With regards to the rising rents, Segovian locals have not been able to keep up with the change. Their salaries have remained below the national average, at 27,000 euros annually. This isn’t just a problem for Segovian families; it also affects the local economy. San Juan explains that if people spent less of their income on rent, they could spend more in the local economy, which would boost overall growth.
There are, of course, other contributing factors to skyrocketing rent besides the main one of IE students: tourism, people moving from Madrid to Segovia during the pandemic, and real estate investment have added to the growing crisis.
What Can Legally be Done to Prevent This?
A possible solution, which has already been proposed by Podemos, a left-leaning Spanish political party, is to declare Segovia a “stressed residential zone.” A stressed residential zone, per the Ley de Vivienda [Housing Law], enacted in February 2022, is “an area in a large city where cost of rent or mortgage exceeds 30% of the average income of families in that area. It also has to do with areas in which rent has increased by 5% compared to the Consumer Price Tax (IPC) in the last five years.” Cities can retain this status for a maximum of three years, with the possibility of annual renewal if conditions do not improve. Once a city is declared a stressed residential zone, “rental prices will be controlled by the administrations responsible for those areas. They will have to develop a plan of measures to correct the imbalance in rental prices during the three years of validity. The autonomous communities are responsible for implementing the new Housing Law, although the central government can create a common framework for all and help with different measures, such as increasing the supply of social housing, aid to the state housing plan or the reduction of rental prices.”
Segovia technically meets these aforementioned legal requirements to be categorized as a stressed residential zone. However, Podemos’ proposal was blocked by PP and Vox in city hall. San Juan claims that the proposal would save families 200 to 300 euros on rent monthly. San Juan affirms that, had Segovia been granted this status, the increase would have been capped at 3 percent, and it would have collectively saved Segovian families 4.6 million euros. He wrote a formal letter in March 2024 to the mayor and the territorial delegate of Segovia’s Junta [Board], to reconsider their position and put a stop to the “exorbitant” rent increases. In addition to the prevention or end to these increases, San Juan believes it lies within the government’s power and responsibility to lower the prices if the owners’ rental housing is a part of larger holdings such as investment funds.
On the other hand, the College of Real Estate Agents of Segovia holds that Segovia does not, in fact, meet the requirements to become a stressed residential zone because of the type of rent causing the increases: annual student contracts. They claim that the definition of a tensioned zone necessarily refers to family housing contracts, and the tension we see in Segovia is primarily motivated by student apartments relegated to concrete areas of the city. The mostly short-term one year student contracts do not meet the five-year minimum rental contract requirement which would allow it to be considered for the tensioned zone status. Miguel Tovar, the president of this organization, offers an alternative solution: the Public Administration in Segovia could “facilitate or promote the creation of family housing” under their own specific requirements and regulations, incentivized by “reduction of fees of taxes on license” and provision of “land that offers buildability.” He calculates that the construction of 100 to 150 housing units could ameliorate Segovia’s housing situation.
Whatever the correct legal path forward may be, without government intervention in the near future the same trajectory of excessive multiplication in rent is expected, with increasing numbers of Segovians having to leave their city as many already have had to do. In the words of Councilor San Juan, “Segovia cannot allow itself to continue under the law of the jungle any longer; it is necessary for the administrations to put order in a market that is leaving out more and more neighbors.”
Featured image courtesy of Inés Chueca/Minube
