Blackstone, which has turned swathes of foreclosed American homes into the largest single-family rental home business in the US, is expanding that model in Spain.
Bloomberg reported today that the firm is bidding against Goldman Sachs to buy 1,458 housing units from the city of Madrid. In July, Blackstone bought 18 apartment blocks from the city for €12.5 million ($173 million).
The deals mark not only the first private equity purchases of publicly-owned housing in the country, but what is perhaps a fundamental shift in how Spain thinks about housing. For years, home ownership in the country has been among the highest in Europe because of policies dating from the late 1950s that made owning a home (pdf. p. 1-3) cheaper and easier. Today, even after the financial crisis and years of austerity, about 83% of Spanish people live in homes they own. It is the most common form of occupancy for all social classes in the country.
Now, with unemployment at 26% amid a weakly recovering economy, more people are unwilling or unable to buy new apartments. Moreover, the Spanish government has started to encourage renting over owning a home to cut down on banks’ exposure to bad loans. (Some economists have also linked high home ownership to high unemployment.) Last year, officials got rid of tax breaks for home buyers and passed new laws that allow landlords to evict tenants faster. Property owners are also now allowed to raise rents above the rate of inflation.
For Blackstone, which has spent more than $250 million creating rental units in Atlanta, Phoenix and southern California, the rental opportunity in Spain is just getting started. At least 350,000 Spanish families have been evicted from their homes, and the housing market won’t look attractive again for a while. As we’ve reported, home prices have fallen 37% since 2007 and there are an estimated 1.5 million unsold homes that could take the market an estimated five years to absorb.