Spain’s snap election is unlikely to address its housing crisis

Prime Minister Pedro Sanchez of Spain has called an early election for Nov. 29. He wants to boost his parliamentary support after the Spanish Parliament last week rejected his proposals to address a housing crisis that has drawn nationwide protests.The snap vote is a high-stakes wager for Sznchez, whose Socialist Party trails in nearly every opinion poll. So, the big question is: Why is he calling a snap election 8 months earlier than expected when Spain’s economy is often described as the envy of Europe?The proximate catalyst is the acute shortage of affordable housing in major cities, particularly Madrid and Barcelona, where home prices are up 26% since 2024. At the same time, these cities and Spain’s other major urban centers have experienced strong population growth. A growing housing shortage combined with rising demand has run into the brick wall of the Spanish regulatory regime. Building more housing is extremely difficult in Spain. On Sept. 23, far-left populists in Spain took to the streets when an 87-year-old woman living in Madrid was evicted from her rent-controlled apartment, where she had been living for decades. Sanchez tried to short-circuit the protests with a typically far-left response: expanded rent controls and other protections for renters. Such measures are popular among tenants and socialists, but they only make the housing affordability crisis worse — they increase demand, and over time, they decrease supply. Why invest in new apartments when the chance of government intervention on prices is high?The appropriate response would be to pass policies that would increase supply. Planning approvals should be accelerated. Zoning and density restrictions should be modified. Local governments should reduce the bureaucratic obstacles that delay construction. Private capital should be encouraged. But there are bigger problems confronting Spain than the current housing crisis.Like France, politics are extremely polarized in Spain. Sanchez, who has been in power since 2018, has historically governed through a delicate, fragmented alliance of regional and leftist parties. This lack of a reliable absolute majority has left his administration vulnerable to constant legislative standoffs. Today, Spain features two major competing political forces. One, led by Sanchez, champions social welfare, progressive civil rights, labor rights, and secularism.The alternative is the center-right People’s Party, which focuses on fiscal conservatism, economic liberalism, traditional social values, and the defense of Spain’s constitution. The left favors government intervention, minimum wage hikes, and strengthening labor unions, while the right pushes for lower taxes, deregulation, and business-friendly policies to stimulate job growth.Because neither the left nor the right can easily secure an outright majority in the Spanish parliament, governance relies heavily on complex, fragile coalitions. This dynamic has resulted in high levels of political polarization and intense parliamentary gridlock.2026 MIDTERM ELECTIONS LIVE UPDATES: LATEST NEWS, RESULTS, AND ANALYSISThe other major problem confronting Spain is the paradox of above-average GDP growth alongside stagnant productivity growth and high, persistent structural unemployment, especially among younger workers. Strong GDP growth in Spain is dependent on low-value-added tourism, the continued influx of cheap, unskilled labor, as well as economic assistance from the European Union, which transfers resources from wealthier EU countries to poorer nations such as Spain.Unfortunately, European political history suggests that Spain will continue to choose to muddle through and favor government over free markets.James Rogan is a former U.S. diplomat who later worked in law and finance for over 30 years. He writes a subscription-based daily note on markets, economics, politics, and social issues. His email is [email protected].