Spaniards blame the government and banks for their housing situation

Since the beginning of the global financial crisis in 2008, Spain suffered from a severe rise in unemployment. With over 5 million people left unemployed, homeowners were primarily affected. With a lot of blame directed toward the banks and the government, they too are suffering because of the situation and are trying to improve it.

By Maram Shalaby and Riana Ghosn

Homeless man taking a nap in the streets of Madrid. Photo credit Riana Ghosn

Homeless man taking a nap in the streets of Madrid. Photo credit Riana Ghosn

With millions of homeowners owing mortgage debt to the banks, and millions unable to pay rent, house evictions suddenly became a dominant problem in Spain. This, not only, negatively affected the citizens’ living situation, but also left its mark on the Spanish economy and banking system.

While it is easy to point fingers and only weighing the situation in a humanitarian versus political way, citizens, mainly represented by organizations, the government, and the banks are all working to find a middle ground.

Many Organizations fight for the Spaniards’ housing rights

Once this problem appeared, Spaniards quickly took caution. Starting with neighbors and families protecting each other, and ending with numerous organizations spreading their support across Spain, movements against house evictions began to spread.

With organizations such as RAIS Foundation, the Red Anti-Poverty Network and Diocesan Caritas, social support began to appear in cities all over Spain.

In just one year, Cruz Roja Española or the Spanish Red Cross, has doubled its attention to homelessness through creating the Unidades de Emergencia Social (UES) or Social Emergency Units. This movement, which started in 2012, has spread its services to attend to people living on the street and the increasing population groups that, until recently, led a standard living situation.

“In 2012, in addition to caring for people with substance abuse problems and psychiatric disorders, we began to meet construction workers, many of them from Eastern Europe who, as a result of the socio-economic crisis, had lost their jobs.” stated Gonzalo Herrera, head of the UES of the Henares Corridor in a press release published by the Red Cross.

Platforma de Afectados por la Hipoteca, otherwise known as PAH, is one of biggest and main organizations specifically dealing with house evictions in Spain.

The PAH started working since 2009 to raise awareness about the housing crisis and the “abusive” mortgage law.

This law dictates that if one receives a mortgage loan to buy an apartment and fails to repay his loan back to the bank, he/she will lose their apartment and if its value is not enough, he/she would still be in debt, with an exception of vulnerable families.

According to The Wall Street Journal, the European Union’s top court ruled against this law in 2013.

However, Spain did not take actions responding to the court’s rule and the situation kept deteriorating.

The Bank of Spain reported that the repossessions of apartments by the bank increased by 11% in 2014 compared to 2013.

According to PAH’s website, “Since the start of the [2008 economic] crisis, there have been 500,000 foreclosures and 184 evictions per day, and the situation of hundreds of thousands of families is critical. Many lives are at stake.”

This urged many people to join these organizations and become activists, initiating numerous protests and campaigns across Spain. These movements attempted to shed light on the issues they are fighting for and force government officials to find solutions.

The Government’s attempts to improve the situation

The right to adequate housing, under international law, imposes on governments a duty to ensure that policies and legislation guarantee all segments of society the right to decent housing.

Judith Sunderland, senior Western Europe researcher in a report to the humans’ right watch, said “It’s about government responsibilities to guarantee basic human rights, including the right to adequate housing.”

Specifically in the Spanish Constitution of 1978, according to Art.47: ‘All Spanish individuals have the right to decent and appropriate housing. The public authorities will promote the necessary conditions and will establish the relevant rules to make this right a reality.’

In an attempt to ensure this right, in November 2012, the government decided to put in place a scheme to protect mortgage debtors with vulnerable conditions, according to Inés García-Pintos Balbás, head of the social investment and innovation department at Confederación Española de Cajas de Ahorros (CECA), an association representing the Spanish savings banks to the public authorities and internationally.

“Vulnerable groups are defined in the decree as single families with 2 or more kids, families with the main parent as unemployed, or someone with a disability,” Balbás explained.

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A homeless person’s belongings left on a public bench in Madrid. Photo credit Riana Ghosn

To the public, this was not enough. The evictions and the protests both continued.

In May 2013, the law slightly broadened the criteria of who can be protected against evictions. It now includes people with disabilities or serious illnesses, and created the option for people already benefiting from the moratorium to extend the duration for a further six months, according to a report by Human Rights Watch.

Many analysts, including Spain’s national human rights institution, Defensor del Pueblo, have criticized these criteria in their reports and deemed them as arbitrary and too narrow to provide Spaniards effective protection against eviction.

Another instrument that the government put in place is the Social Housing Fund. As defined by Balbás, this is a fund provided by banks which caused them to offer around six thousands apartments with a low cost rent of maximum 400 euros per month.

This fund was provided for the benefit of families who have been evicted of their apartments for the non-payment of mortgages, and therefore have fallen under the framework of the vulnerable requirement.

Both law changes continued to receive a lot of criticism from experts and various associations trying to help people facing problems with house evictions

“Measures taken so far by the government to alleviate the mortgage debt overhang are insufficient”, Human Rights Watch stated in a report.

María José Aldanas of Spanish housing and homelessness association Provivienda told The Guardian, “Spain is suffering from high numbers of repossessions and evictions, so we have reached a point where we have too many people without a home and many homes without people.”

According to the National Institute of Statistics of Spain, the country holds 3.4 million empty houses, which correspond to 13.7% of the total housing available. This caused massive pressure on banks.

To solve this predicament, the government has set up what is called Banco Malo, otherwise known as SAREB in Spanish.

“It is an initiative that has been set up in several countries of Europe. It is a bank where you transfer all these kind of assets that are difficult to liquidize” Balbás explained, adding, “Under certain requirements banks transfer these bad assets to this bank, so that they can have their balances in a good shape.”

Another initiative is to set up real estate companies to be able to manage these sectors and the apartments. In this case, the apartments are put up for sale or for rent.

“We are trying to get some income from them, and some others are externalized to create real estate investment funds,” said Balbás.

The bank’s attempts to improve the situation

On the other hand, banks are also suffering because of this situation. They faced a large volume of unpaid debts as well as owning many empty apartments or buildings.

To avoid having to deal with these buildings/apartments, banks tried to leave house evictions as a last resort.

“They [the banks] tried to negotiate rates giving [house eviction victims] a motivation period. They tried to enlarge the period of repayment so people could pay in smaller quantities per month and also gave them a período de gracia, which are six months where the victims don’t have to pay their mortgages. The banks consider that during six months, one can find a new job or can recover from a problem and resume paying,” said Balbás.

Unlike Anglo Saxon or Latin American countries, where mortgage debts are forgiven by only repossessing houses, Spain also requires the debtors to pay the rest of their debts if the value of their house wasn’t enough to cancel the debt, which put families in very difficult situations, added Balbás.

However, with the increase of the house evictions and the social crisis that the victims found themselves in, the banks started accepting the houses as a payment of debts and started to forgive the remaining amount.

“Before the banks [started accepting this], it was impossible to have such an exchange. Our movement now tries to achieve these exchanges.” said Iván Ramírez, the spokesperson of PAH Madrid.

In addition, the Spanish government urged the banks to keep the families in their houses and make them pay a social rent which means that the family only has to pay 30% of their income as mortgage.

“Evictions have not been very high [thanks to these measures] unlike what you see in the news, they have been around a thousand to two thousand forced evictions of what we call first resident of house [meaning the houses where people actually live in],” said Balbás, adding, “it is not the same as being evicted from your second residence, or from your holiday apartment, or your professional apartment where you run your business.”

According to the Bank of Spain, repossessions of occupied apartments fell by 36 %, however there is an increase in judicial repossessions of 18.5 % in 2013, with respect to the previous year.

“We feel that the situation is getting stabilized because the economic conditions are stabilized now. The measures that we have put in place have proven to be quite effective,” stated Balbás.

She then added that the reason why certain figures show that the situation is getting worse and that house evictions are increasing, is that all of the measures that the banks have been putting in place, for the past two or three years, are coming to an end.

This crisis started because of the period where mortgage lending was cheap in Spain. In general the Spanish market had higher interest rates and when they joined the European Union and adopted the Euro, they entered in a phase of very low interest rate so for the first time in generations, buying an apartment was something that is affordable to the large majority of families, explained Balbás.

Today, even in the cases where Spaniards are provided with such aid from the bank, the current standard of living is still not satisfactory.

“The bank took my flat, and forgave my mortgages. I now pay the monthly rent to the bank. That is 30% of my salary. This leaves me with about 15 euros to spend a day,” said  Diego Vargas, house eviction victim and activist in PAH.

With Spain approaching a new future, specifically after the Parliamentary elections, there is no doubt that this will not be the end of the efforts to solve the housing crisis. Click here to learn more.

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