Balearic Islands Launch Innovative Housing Reforms To Combat Soaring Prices

In a decisive effort to counteract the escalating housing crisis within its borders, the Balearic Islands have unveiled a groundbreaking housing policy that enables the division of flats.

The Balearic Islands are now permitting the subdivision of large flats into smaller properties, each measuring a minimum of 60 square meters. These measures, executed as part of an urgent policy initiative, are designed to swiftly address the pressing need for affordable housing and alleviate the worsening housing situation on the islands.

In recent years, the Balearics have grappled with severe challenges in providing access to affordable housing, as both property purchase and rental prices have skyrocketed to levels that now rival those in provincial capitals and major cities such as Madrid and Barcelona.

Property prices on the islands have surged beyond €3,000 per square meter, while average rents exceed €1,000 per month, even in the most budget-friendly locales.

In response to this price surge, the regional government is poised to enact an emergency housing decree that sanctions the division of large flats or single-family residences into smaller units, provided that the resulting properties are made available for sale or rent at an affordable rate.

Under this decree, the maximum sale price will fall within a range of €102,000 to €240,000, varying by municipality, and rental rates will range from €385 to €900 per month.

Marga Prohens, the regional president, held discussions with representatives from the property sector, collaborating on the formulation of this policy. Following her meeting with sector leaders, Prohens underscored that the decree would not burden the administration with additional costs nor lead to further land consumption.

"Access to housing is a social issue. It impacts public health due to a shortage of healthcare professionals, public safety due to a shortage of law enforcement personnel, and overall economic competitiveness due to the dearth of professionals in various sectors," Prohens emphasised.

Furthermore, the policy will grant developers the authority to increase building heights on certain streets in island municipalities, particularly in Palma. This will be feasible only in areas characterised by slopes, with a maximum height increase of 50 percent after calculating the block's average height.

The policy also facilitates the conversion of commercial spaces into residential units, repurposing hotels into apartment complexes, and transforming other urban buildings into housing units. All newly created flats must adhere to the prescribed maximum pricing guidelines established for the division of larger flats.

In cases where building height adjustments affect tenants, any changes must be approved by the building's homeowners' association ('la comunidad'). Additionally, Prohens announced that public land will be allocated to developers to construct affordable rental housing, thus augmenting the community's public housing inventory.

Rental prices have surged across Spain in recent years, particularly in regions like the Balearics, known for their robust tourist populations and tourism-driven economic models.

In addition to Palma de Mallorca, other Spanish cities with high rental costs in 2023 include Barcelona (€19.8/sqm), Madrid (€16.5/sqm), San Sebastián (€16.3/sqm), Bilbao (€13.3/sqm), Málaga (€12.1/sqm), Valencia (€11.4/sqm), Girona (€11.2/sqm), Las Palmas de Gran Canaria (€11.0/sqm), and Vitoria (€11.0/sqm). The national average rental price per square meter in Spain stands at €11.70/sqm.

A Shift in Paradigm

These urgent housing policy changes come as part of a broader shift in the Balearics' approach, moving away from a short-term, tourist-centric model toward a more sustainable economic paradigm that prioritises the local community and environmental considerations.

In recent years, the regional government has pledged to limit tourist numbers and enhance the quality of tourism it attracts. In February 2022, Balearic authorities passed legislation prohibiting the establishment of new hotels and tourist accommodations on the popular holiday islands until at least 2026, aligning with their new tourism model emphasising quality over quantity.

Additionally, the regional parliament of Spain's Balearic Islands recently passed legislation granting the holiday island of Menorca the authority to limit the number of vehicles visiting to prevent congestion and pollution during the peak summer season.