Housing reforms "to help 250,000 families" but at cost of EUR 75 million

14th January 2008, Comments 0 comments

Taxpayer to foot bill of changes aimed at low- and middle-income households.

14 January 2008

MADRID - The government approved a sweeping reform of its housing plan on Friday, expanding the range and scope of the subsidies available to low- and middle-income families and offering new incentives to developers in a bid to revitalise Spain's flagging construction sector.

The modifications, which are expected to cost taxpayers EUR 75 million, are being introduced three years after the ambitious housing plan went into effect, and reflect in part the changes the Spanish housing market underwent last year as a slowdown in property prices and tightening credit conditions stymied growth in the sector. Housing Minister Carme Chacón said she expects the amendments to the plan to help a further 250,000 Spanish families obtain affordable housing, in addition to the 620,000 who have benefited since 2005.

"This plan harms no one. Instead it offers more help to families and lends a hand to the private sector," Chacón said.

One of the principal measures is the nationwide introduction of a system of letting subsidised renters purchase their homes once they have lived in them for a period of five years. The scheme, which had previously only existed in certain regions of the country, allows renters to discount a substantial proportion of what they have paid in rent from the purchase price, so long as the property is at least 10 years old.

Buyers of subsidised homes will nonetheless be expected to pay more for the property. From now on, the base price for subsidised housing will be EUR 758 per square metre, a 4.12 percent increase from EUR 728 previously, although still well below the average market value of EUR 2,500. The aim, according to Chacón, is to encourage developers to build more subsidised housing units - an option that is likely to grow increasingly attractive as Spain's housing boom cools and demand for property at current market prices dries up.

In addition, home subsidies will be opened up to a larger segment of the population, including households earning 6.5 times the minimum wage, or approximately EUR 3,300 per month. The rate of interest families pay on subsidised housing loans will increase from 4.35 percent to 5.09 percent, reflecting higher euro-zone interest rates, although from now on it will be possible to extend the repayment period to more than 25 years.

"These are opportune and appropriate measures," Deputy Prime Minister María Teresa Fernández de la Vega told reporters in a joint press conference with Chacón.

The plan also includes incentives to refurbish old city-centre buildings and will allow developers to convert unsold new properties into subsidised homes within one year of completion, as opposed to two at present.

[Copyright EL PAÍS 2008]

Subject: Spanish news

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