Courage of their evictions

Spain picks smart route out of housing mess

Spain looks to be avoiding Greece's housing mistakes. Given Madrid and Barcelona's new Podemos-backed mayors campaigned on "paralysing" the eviction process, the upshot could have been Athens-style stasis, with a broad-based moratorium on auctions of primary residences. Instead, Barcelona's Ada Colau and Madrid's Manuela Carmena are going about things in a smarter way.

In Spain, some 55,000 mortgage holders were evicted in 2013 and 2014 alone. In the UK families might have wound up in rent-subsidised social housing, which constitutes 18 per cent of housing stock, according to Amnesty International. But such properties number only one-two per cent in Spain, meaning there aren't enough places for evictees to go.
 
Although Carmena and former housing activist Colau don't have the power to stop court-ordered evictions, the latter was a founding member of the anti-eviction platform that regularly physically stops foreclosures. This sort of direct action is understandable, but it has unintended consequences. It could make it harder for lenders to sell parcels of non-performing loans to the private sector, thus freeing their balance sheets to lend to the economy. Oddly enough, private solutions can benefit mortgage holders too. Blackstone bought Euro 3.6 billion of mortgages from Catalunya Banc last year. Foreclosures will inevitably continue. But because Blackstone bought homes at around a 40 per cent discount, it can offer mortgage holders debt relief, something the banks are more loath to do.

Carmena and Colau's alternative to blocking evictions is to improve on a 2012 code that provides relief for needy families and asks banks to contribute empty homes to help those foreclosed. Carmena is setting up an office to mediate between citizens and banks, and find solutions.

That makes sense. Although it was improved last year, the code seems too restrictive: half of the homes in the fund stand empty. Banks should also theoretically want to earn some income on their scores of empty homes and repair battered reputations.

Spanish non-performing loan investors are taking advantage: Bankia, the bailed-out lender, is reportedly close to selling a package of dud mortgage loans to Oaktree and Chenavari. Spain's improving economy may have helped the mayors to be more moderate. But if they manage to ease the eviction problem, they will deserve plaudits.