Residents in Spain and Italy, two of Europe’s most popular vacation destinations, are struggling to make ends meet amid a dire shortage of affordable long-term housing.
According to research from the European Central Bank and the Bank of Spain, the Spanish housing crisis has its roots in a collapse of the real estate bubble in 2008, followed by a lag in new construction until 2023.
In an analysis of Italy’s housing problem, George Mason University economics professor Alex Tabarrok pointed to COVID-19 pandemic-era fiscal policy as a key factor underpinning the ongoing problem of inflated building material costs.
Rental costs have also spiked because of many property owners’ catering to short-term holiday renters.
Residents have shared insights into the reality of what it takes to keep a roof over their heads and why, for some, it is hard to keep the lights on.
A few metro stops from downtown Madrid’s famous Gran Vía, Andres Fernandez said he is excited and a little nervous about his decision to move to Spain’s capital city.
“There’s a lot of jobs here, so it makes sense,” Fernandez told The Epoch Times. “But the price of housing is insane.”
Fernandez and his family are from Barcelona, Spain, but spent the past 10 years living abroad in Argentina. The 26-year-old recently moved back to Spain after finishing university. He said he believes that his job prospects as a civil engineer are better in his home country than in Latin America.
“The jobs are better and pay better here [in Spain], but the rental costs kill you,” he said.
Fernandez cannot afford to live alone, so he is sharing an apartment with two roommates in the city’s Chueca neighborhood. Finding a listing on social media for shared apartments in Spain is common because of the high cost of rent.
While young professionals such as Fernandez are drawn to Madrid for its robust job market and tech scene, the cost of living in the Spanish capital is the fly in the ointment.
According to real estate listing site Idealista, Madrid has the second-highest rental costs in Spain, after Barcelona.
Supply and Demand in Spain
Spain’s renters and homeowners alike are feeling the pain as rents, home prices, and property-related costs rise and availability drops.The number of long-term rentals in Spain has dropped by 56 percent since December 2020, while rental prices have soared by 30 percent in the same time period because of increasing demand.
In Madrid alone, Idealista’s market index comparison showed that rental housing stock dropped by 71 percent between 2020 and 2024. Meanwhile, price comparisons between December 2020 and February 2025 revealed a 44 percent price increase.
Aspiring homeowners are facing similar challenges.
Real estate data from 2024 showed that home resale prices ballooned by more than 10 percent in November last year, topping out at about $2,400 per square meter. That represents the largest per-square-meter price increase since 2006.
Fernandez said he is paying $450 per month for a private room in a shared apartment. It is outside the city center, but close enough for him to commute to work using public transportation. He said his share of the rent does not include the cost of electricity, water, or internet.
Utility costs are a related, growing burden on the population in some Spanish cities, especially for property owners who run businesses.
“It’s getting so expensive now, the electricity bills,” a hotel owner in Pamplona, Spain, named Camila told The Epoch Times.
Camila—who asked to be identified only by her first name—said her family owns two properties in the historic city of Pamplona. One location is a boutique hotel, and the other is a backpacker hostel close to the popular Camino de Santiago pilgrimage trek.
Camila said she has to be strict about electricity usage in both businesses.
“Our air conditioning and heating thermostats can’t be made hotter or colder [when turned on by guests],” she said. “They are fixed. We ask that our guests please turn off any lights or air conditioning when they’re out of the room.”
Camila said she and her family do not like to be stingy with their guests, but rising electricity costs have made it necessary.
“The price of everything is more now,” she said. “You also have more expenses as an owner, so that extra is reflected in room prices. There’s no other way to own a hotel here without going broke.”
Camila said the cost of providing internet for guests has also increased in the past year.
In 2021, Spain’s government approved a law reducing the nation’s value-added tax on electricity to 10 percent as long as the market price continued to exceed $51 per megawatt-hour.
The law provided a much-needed pressure release valve on electricity prices for Spanish residents.
However, the discount program ended in March 2024 after the market price of electricity fell below the fixed price minimum. Now, the value-added tax has returned to the standard 21 percent.
The Venice Example
Italy has a similar problem with affordable housing because of shortages of long-term housing and high utility costs. Moreover, some Italians say wages are not in line with the cost of living.Venice, one of the country’s—and the world’s—top tourist destinations, is a prime example.
“If you’re Italian, it’s impossible to live in Venice,” Daniel Marino told The Epoch Times.
Originally from the suburbs of Milan, Marino currently lives and works in Venice, a small island on Italy’s northeastern coast that sees roughly 20 million tourists each year.
“You can’t even find an apartment if you’re a local, and if you do, you'll pay 900 euros [$1,012] or more just to live in a small room,” he said, noting that it would not even be a “nice room.”
Marino said he is lucky because he came to Venice as part of a university program. The program included dormitory housing and a hospitality internship that provided a living stipend of 1,000 euros (about $1,125) per month.
“If I had to pay for housing, I'd spend my monthly allowance on just that,” Marino said. “It’s a real problem for the [Italian] people here. If you work in Venice, you probably can’t afford to live here with housing costs.”
He said the exception is if you happened to be born into a Venetian family that already owns a home or commercial property on the island.
Like most cities, Venice has neighborhoods on the mainland. Marino said he would be living there if his internship did not include housing in a suburb such as Marghera, Campalto, or Mestre.
“But it’s not cheap in these places, either, and you have to be careful,” he said. “It’s safe on the island, but the [mainland] suburbs have some bad areas.”
Adding to the cost, Marino said, is the fact that Venice has the highest waste removal tax in the country, something most people, even Italians, do not realize until moving to the City of Canals.
The Trouble With Tourists
Marino said that even if someone can afford the high rental prices, most property owners on the island prefer to offer short-term apartments to tourists.“From the outside, it makes sense,” he said. “If I owned a flat here [in Venice], why would I rent it for 900 euros a month to someone like me when I could get that much in a week from tourists?”
As the number of long-term rentals in Spanish and Italian cities is declining, holiday rentals are a booming industry. In recent years, the rise of remote work and a shift away from traditional hotels toward more economical self-contained apartments has driven the skyrocketing demand for short-term rental units in both countries.
It has been a subject of much debate and has sparked heated protests in both countries. Thousands of Spanish residents protested in more than 40 cities in April over high housing costs related to the persistent demand for vacation rentals.
To help relieve pressure on the housing market, cities such as Málaga, Madrid, Seville, and Alicante have introduced restrictions or outright bans on short-term rentals to help relieve pressure on the housing market.
Unseen Factors
Tourist rentals have borne the brunt of resident, government, and media scrutiny in the housing crisis in Spain and Italy, and it is easy to see why. The sheer volume of vacationers who opt for short-stay apartments over hotels has been growing in both countries for years.In 2024, Spain saw a more than 9 percent increase in tourist accommodation over 2023. During the same time frame, Italy saw a 6.8 percent boost in nonresident overnight stays.
However, both Marino and Camila said they believe that the spike in short-term rentals is a symptom of a bigger problem that has been growing for years.
“New building has fallen behind the need for more housing,” Camila said.
It is a problem even in her relatively small hometown of Pamplona, where the demand for short-term rentals has put additional strain on the housing market.
Spain experienced a housing boom from 1995 to 2008, which was promptly followed by a bust that lasted until 2015.
At the same time, new households exceeded new residential construction until 2023, according to the Bank of Spain analysis. The resulting housing deficit could hit 600,000 in 2025.
Italy’s housing affordability problem is intertwined with its large population of existing property owners. With more than 75 percent of households owning a home, inflated repairs and renovation costs have created a severe hardship for homeowners.
Aspiring Italian homeowners can also expect to pay an estimated 16 percent more for a home today than in 2019.
That is coupled with the same challenge of inflated construction costs faced by Spanish homebuyers.
Marino said he does not believe that there is an easy answer to his country’s affordable housing problem.
“Italy isn’t just underbuilt,” he said. “The cost of maintaining older homes is too much with inflation. Nobody wants to fix up beautiful old homes, but they can’t afford to move into a new one, either.
“You can tax foreign buyers and renters all you want. It doesn’t change the fact that prices are too high because related costs are also high. This isn’t a simple problem.”
