An expat's role in driving up prices

My adventures in apartment hunting and gentrification in Barcelona

Greetings! Just a quick note for everyone who has reached out the last few weeks: the next three months might be my last in Barcelona, but they will NOT be my last in Spain. The Catalunyan countryside, Priorat, and Cornudella de Montsant are all calling. More on that in future posts—because now, I still have some things to say about Barcelona.

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My street in Sant Antoni, Barcelona

The first apartment I tried to rent in Barcelona was much bigger—and cheaper—than the one I eventually settled for.

This first one was in Eixample, in a fancy part of the city. It was walking distance to my son’s school, and near a nice park and the Barcelona-Sants train station. Like many apartment hunters here, I found it through Idealista by drawing a map around the neighborhood I wanted to live in and filtering via price and listing date.

The Eixample place had a large balcony overlooking a quiet street. I would have been able to eat breakfast or drink a coffee there every morning. It had two large bedrooms separated by an open-plan kitchen and living space. It even had a separate, small room that had been requisitioned as a home office.

I told the listing agent I wanted it on the spot, and that I would be at their office within an hour with the deposit. I rushed to an ATM, took out a bunch of euros, went for a coffee, and then took another walk around the neighborhood.

The problem, as I found out upon arrival at the leasing office, was with the rental contract. The owner wanted a 5-year lease, and wouldn’t budge on the term. I could break it, but the contract specified I would pay a one-month penalty for each year I didn’t stay. That meant a penalty of more than €5,000 euros if I left after “only” 12 months.

I left disappointed. But, as I later understood, this first experience in apartment hunting as an expat was somewhat predetermined. Barcelona has certain policies intended to protect renters—and I had run afoul of them.

Standard rental contracts in Barcelona

There is much confusion on this topic, in part because the law keeps changing. Pandemic-era protections were extended, then replaced, and personally, I remain confused about which parts of the law are Barcelona city policies vs. Spanish law in general.

But the bottom line is this: standard rental contracts here are 5 years if the landlord is an individual, or 7 years if the landlord is an entity or company. These are obligatory periods for “long-term” rental contracts, during which landlords may not raise rents.

According to a new law that took effect last year, I may have been able to cancel that lease agreement after 12 months without penalty, but I was in no position to argue that to the leasing agents back in April 2023, with my limited Spanish and even less knowledge of when and how that law took effect.

With so many rule changes, most online resources in English on this subject are necessarily out-of-date, leading to more confusion. And if you look at the Facebook groups for expats in Barcelona, there are hundreds who share my confusion and more each month. Stories of expats arguing the legalities of rental agreements with intransigent landlords are legion.

In any case, I couldn’t commit to a five-year lease. But what then?

In Barcelona, there are essentially three kinds of rental agreements, and many Barcelona rental agency websites are organized according to those three categories: long-term leases of 5- or 7- years; short-term rentals of up to a month (the kind you’ll find on Airbnb); and temporary rentals of 1-11 months.

The last of these appears to be in a legal gray area. There are fewer tenant protections and landlords can increase rents when the contract expires. Most notably, agencies can charge steep leasing fees for these rentals.

I’ve met expats and locals alike who detest these fees. They consider them to be extortionary, inflationary, and possibly illegal.

Still, you might have noticed from the options above that there is a massive gap in the market for anything between 11 months and 5 years. This is one area where one longs for the somewhat more free-market approach of the U.S., where 12 months is standard but lease terms are absolutely negotiable, and where a tenant and landlord are absolutely free to negotiate for 18 months, 2 years, or whatever their heart desires.

Moving with money

After my experience at the leasing office, however, I was stuck. What I wanted was a 12-month lease at normal market prices. But due to the byzantine Spanish rental laws and attendant incentives, the most practical option was to get an 11-month lease, pay a higher monthly rental rate, and swallow the associated agency fees.

In effect, policies designed to protect renters have birthed an inflationary market of temporary rental spaces for people like me capable of paying higher prices. It’s not as bad as an Airbnb (more on how soured I am on Airbnb later), but it is worth acknowledging that my U.S. dollars are certainly doing their small part to drive up rental prices in Barcelona.

Of course, this is Economics 101. It has happened in every place, for all time, whenever people with more wealth and income move to a place with less wealth and income.

In the U.S., we know it as gentrification.

I’ve always thought that word is a bit underserving of its associated negative connotations. After all, gentrification usually means more services, cleaner, nicer neighborhoods, possibly with less crime, and better schools. For existing residents, the value of their properties goes up.

Still, all this might be cold comfort to people who liked their neighborhood just fine the way it was before, never intended to sell their homes, and are now faced with higher property tax bills to fund all these new services (To be fair, I don’t think new cafes with fancy avocado toast and flat whites are worth higher taxes either.)

By bringing my U.S. dollars and higher income to Barcelona, I effectively found myself in an urban fantasy playground for grownups with plenty of money to spend. For the last eight months of living here, it’s felt like I’m in a land of milk and honey, and every time I buy a cafe con leche and chocolate croissant for €2.10 I wonder how I got so lucky.

At the same time, it’s not lost on me that Barcelona, like many cities, has a serious problem with the price of housing, and with the cost of living in general.

Yet neither Barcelona nor Spain are powerless here. Housing policies like the ones above effectively drove me to choose a shorter term and pay a higher premium. But for the huge penalty on breaking a 5-year lease, I would have preferred the Eixample apartment.

On a city-wide scale, this policy puts more money into the hands of rental agencies, with some renters protected from rent increases, but a distorted market with huge gaps in lease terms and higher prices for others.

Barcelona’s choices

Barcelona could change those policies to eliminate the gap and reduce the incentives that lead expats like me to pay more. They could ban Airbnb like New York City has done, freeing up those apartments for additional housing. And they could implement other policies to discourage short-term rentals. This would lower rental prices at the margins, but it would also take money away from tourist-economy businesses like bars and restaurants.

But then, policy is usually about these kinds of tradeoffs.

My preferred solution to the housing crisis, not just here but everywhere, is to build more housing units.

Reforms to make it easier to build would do more than just help at the margins—they might just solve the overall problem.

I have a personal interest in this (beyond the fact that I own two pieces of land in the U.S. that I would like to build homes on): now that I live in Spain, I want housing to stay cheap for me.

Even with the premium I’m paying, I feel lucky to live in this great city, in this amazing neighborhood, at this price. It’s not the cheapest place in the world, but it’s a lot cheaper than the equivalent apartment would be where I used to live in Washington D.C., or even Paris or Berlin, let alone New York City or London.

The price to value is still amazing, and I hope it stays that way.