MADRID / LISBON (Realist English). Portugal and Spain have found themselves at the epicentre of the most acute housing crisis in the European Union.
The combined housing deficit in the two countries over 2021–2025 exceeded 1 million units, while the rate of increase in house prices and rents is several times faster than income growth. As the Financial Times notes, this has turned the Iberian Peninsula into a “black spot” on the European property market.
Crisis by numbers: a deficit of 1 million homes
According to a study by the Bank of Spain, between 2021 and 2025 Portugal built approximately 300,000 fewer homes than needed to meet population demand. This is equivalent to 6.6% of all households in the country. In Spain, the deficit over the same period stood at 750,000 units — 3.7% of total households.
For comparison, the average housing deficit in the eurozone was just 0.5% of total supply. At the same time, both countries are among the EU states with the lowest levels of social housing.
Lisbon — Europe’s most unaffordable city
The crisis is felt particularly acutely in the largest cities — Lisbon, Porto, Madrid and Barcelona — where house prices and rents are rising much faster than incomes.
Residents of Lisbon on an average income would have to spend more than 110% of their earnings on renting a typical one‑bedroom apartment in the city centre — the highest figure in Europe. According to a Tradingpedia study, the average rent for a one‑bedroom apartment in central Lisbon is €1,331 per month, while the average net salary is estimated at €1,343. After paying rent, a resident is left with less than €10.
In Madrid and Barcelona, this figure stands at 75%. In Madrid, on 24 May 2026, thousands of people took to the streets to protest the soaring cost of housing.
Causes: immigration, tourism and bureaucracy
Bank of Portugal Governor Álvaro Santos Pereira identified the high immigration inflow as the main cause of the crisis, which has led to an increase in the number of households while housing supply fails to keep pace with demand.
In recent years, Portugal has received both low‑skilled workers from South Asia and wealthy foreigners through the “golden visa” programme. Until the rules were tightened in 2023, foreigners could obtain residence permits through property purchases.
An additional blow to the market comes from tourist rentals. In both Spain and Portugal, the use of apartments for short‑term tourist rentals reduces the amount of housing available to local residents. In Barcelona, the share of housing owned by foreigners from northern countries exceeds 44% in some districts.
Construction sector has yet to recover from the crisis
The Portuguese Association of Developers and Real Estate Investors (APPII) has stated that the construction sector has yet to recover from the devastating effects of the eurozone crisis. “We lost companies, we lost workers and we lost production capacity,” the organisation noted.
Developers are ready to start building, but rising costs and excessive bureaucracy make building homes for the middle class unprofitable. As a result, they are forced to move into more expensive segments where these costs can still be offset.
As the Financial Times notes, the housing shortage is forcing people to sleep on friends’ sofas, rent individual rooms in apartments shared by several families, and spend increasing amounts of time commuting.
Government response
In April 2026, the Spanish government approved a €7 billion housing plan for 2026–2030, which includes funding for public housing and the renovation of vacant buildings.
Lisbon has followed the example of Barcelona, Valencia and Milan by scrapping tax breaks for digital nomads and restricting short‑term rentals to tackle the oversaturated housing market. Spain has also introduced the toughest measures against Airbnb in the region.
The crisis has already become one of the main political vulnerabilities for Spanish Prime Minister Pedro Sánchez ahead of the 2027 elections.
Portugal and Spain have found themselves trapped in a structural imbalance between supply and demand that is excluding more and more workers and middle‑class families from access to housing. As the publication Eatsauca notes, although both countries share the label of “black spots” of the housing crisis in the EU, their market resilience differs significantly.
In 2025, the supply situation in Portugal showed signs of improvement — construction activity almost kept pace with the rate of new household formation, partly due to a decline in immigration. However, the deficit accumulated over previous years remains unresolved.
