Local councils and regional governments are turning to private investment to accelerate the construction of affordable rental housing

Faced with the growing housing affordability crisis, public administrations in Spain have increasingly turned to public-private partnerships to promote affordable rental housing. Regional governments, city councils and public entities have announced plans that could total up to 100,000 homes. However, results so far have been uneven, highlighting that the challenge is not only political will, but execution, design and economic viability.

Spain’s public rental housing stock remains very limited — around 260,000 units — far below European averages. To reach EU standards, this figure would need to quadruple. At the same time, there is land available to develop up to 1.8 million homes, yet much of this potential remains blocked by slow administrative processes and complex urban planning regulations.

The prevailing model is based on a simple premise: public authorities own land but lack the financial resources or operational capacity to build and manage housing. As a solution, they tender this land through long-term concessions — typically ranging from 45 to 75 years — allowing private developers to build and operate rental homes with capped rents. Investors receive a moderate return, and at the end of the concession period, the assets revert to public ownership.

In the current environment, this approach has become almost the only way to deliver new affordable rental supply. Developing housing on private land is often unfeasible due to high land and construction costs. Even so, outcomes under this model have been mixed.

Madrid and Barcelona were early adopters in 2021, but their paths have diverged significantly. The Community of Madrid, through its Plan Vive, has become the most advanced administration, with nearly 5,000 homes already rented and thousands more under development, though still short of initial targets. Barcelona opted for a mixed public-private company, Habitatge Metròpolis Barcelona, involving major developers, but four years later no homes have been delivered and progress has been slow.

At the municipal level, Madrid City Council has replicated the model more effectively, awarding several thousand homes that are already entering the market. Other administrations, including the Catalan government and the Ministry of Housing, have announced ambitious new initiatives such as the “Plan 50,000”, though many details remain undefined.

The underlying issue is that not all tenders are attractive to private investors. Some initiatives have failed outright, such as Sareb’s Plan Viena or certain regional tenders in Valencia and Andalusia, where investor interest was minimal. Common reasons include insufficient returns relative to risk, unrealistic concession terms, high fees, fragmented projects or poorly located plots.

Experience shows that public-private partnerships can be effective, but only if tender conditions are well designed and incentives are properly aligned. Standardising economic terms, setting realistic return expectations and streamlining administrative procedures are essential to turn announced plans into actual homes.

Ultimately, the solution does not lie in headline figures alone, but in creating stable and viable frameworks that transform available land into genuinely affordable housing. Without these adjustments, the risk remains that housing plans will continue to accumulate on paper while supply shortages persist and affordability continues to deteriorate.