Construction in Spain

Building blocks

Sep 14th 2006 | SESEñA
From The Economist print edition

The bad side-effects of a housing boom

LONG before you reach Seseña, on the new toll road south of Madrid, you see the cranes. They clutter the skyline above 100 huge apartment blocks at this half-built new town emerging from a dusty, empty plain. This huge housing project, being built in a small country town, is a symbol of today's Spain. It represents a booming economy, a dangerously overheated housing market and—according to the new mayor—a worrying dose of municipal greed and corruption.

More than 13,000 apartments are being built in Seseña, the biggest single housing development in a country obsessed with building. Young first-time buyers from Madrid will start moving in later this year. They have been forced 40km (25 miles) out of the capital by prices that have more than doubled since 1997. Seseña, a town of fewer than 10,000 people, is now preparing to welcome 40,000 new arrivals.

The building boom creates lots of wealth. It pays the wages of hard-hatted workers and, so long as Spain's housing bubble does not burst, should make its promoter rich. It also helps to fill the local town hall's coffers with fees from building licences and other taxes. Some councillors benefit directly. Two are on the promoter's payroll, as is the daughter of a third.

The new mayor, Manuel Fuentes, notes that permission to build was rushed through just before he was elected. "It was all very quick and not at all transparent." State prosecutors have been asked to investigate. The promoter denies corrupting councillors. They also deny any wrongdoing. No criminal charges have been laid. Yet Seseña's name has now joined the growing list of Spanish towns hit by construction-related scandals.

Spaniards have long suspected that there is graft in their town halls, whichever party runs them. But it was only when a dozen councillors from the southern resort of Marbella were arrested in March that hard evidence came out. Marbella is now being run by administrators appointed by a regional authority. Illegally built holiday homes may be bulldozed. Local democracy is, in effect, dead.

Fresh scandals involving town halls and construction projects now emerge almost weekly. Marbella's councillors are alleged to have taken bribes, but the corruption elsewhere is often more subtle. As Spain builds, town halls increasingly come to depend on income from licences, land sales and property taxes. A mayor who sells municipal land, or pushes through a new housing development, bending the law if necessary, gets more to spend on vote-winning projects.

Because of the opaqueness of municipal accounting, it is hard to say just how dependent town halls now are on building. Estimates for the resorts around Marbella run as high as 70% of total income. Government and prosecutors have usually turned a blind eye, as nobody wants to kill the golden goose of construction.

"The worst thing is that it has just become normal," says Alejandra Gómez-Céspedes, a criminologist at Malaga University. "When you apply the law, it is as if you are acting against people's civil liberties." Every year the number of houses being built rises. Last year around 715,000 were started (compared with some 225,000 in Britain, which has a population one-third bigger than Spain's). The Marbella case shows that the law is at last being applied in some places. Spain's Civil Guard chief plans to set up special units to tackle municipal corruption.

Another danger lurks for town halls, however. Spain's housing market may crash, bringing a sudden halt to all building. How will they pay the bills then?


Disclaimer: The information provided on is not intended to be legal advice,
but merely conveys general information related to issues commonly encountered.