With evictions already high, tensions boil over Spanish bank bailouts
Spain's banks are moving to get rid of homeowners who aren't paying their bills. But, at the same time, they're turning to taxpayers to give them a hand, with a multi-billion dollar bank bailout. That has Spanish activists taking to the streets in protest.
Spain is about to get a $130 billion bailout from the European Union for its ailing banks.
A record 10 percent of Spanish bank loans are in arrears, putting severe strain on the system. Many of those loans are mortgages for who holders can’t pay. Hence evictions are on the rise.
One neighborhood in Barcelona is reported to have the highest eviction rate in Spain.
The neighborhood’s name is Ciutat Meridiana, but people have taken to calling it Eviction City. It’s a cluster of dull apartment buildings on a hillside high above downtown.
“To give you an idea of the neighborhood,” said resident and activist Filiberto Bravo, “the city was going to use this land for a public cemetery, but it’s too humid, so they said forget it. Then someone decided, ‘it might not be good enough for the dead, but we can use it for the living.’”
The apartments are small, most are about 800 square feet, and they’re cheap, about $60,000 on average. But during Spain’s construction boom of the last decade, prices went up five times. A Nigerian man named Abbey Davids bought in 2006, when the market was high.
Davids says people have to sign a lot of papers when they go to sign a mortgage, but he said, most of the time, in the passion and happiness of getting a house, people do not read the papers properly.
“This paper, that paper, you’re reading very fast,” he said. “You didn’t know what you sign. That is stupidity.”
Davids, sitting in his dark living room with his wife and two infant children, is waiting to be evicted. The judge, the banker and the police are due any moment. If Davids and his family are forcibly removed, it will be just one of hundreds of evictions from Ciutat Meridiana this year. Several hundred more are pending.
Davids says his initial mortgage was about a $1,000 per month. But interest rates went up.
“We find out that the monthly payment is going higher and higher,” he said. “You can imagine getting €800 from work, but having to pay €1,300. It is not possible.”
Davids says he went to the bank and said he wanted to leave the house as he couldn’t afford the loan. He says the bank told him that wasn't possible.
As Davids and family waited nervously inside, a crowd of activists, who have taken to physically stopping evictions by blocking the entryways into buildings, gathered outside.
Activist Filiberto Bravo says anger is especially high in Ciutat Meridiana because the abuses during the boom were high. He says foreigners like Davids, unfamiliar with Spain’s mortgages rules, were especially taken advantage of.
“In a neighborhood of 11,000 people, we had, at one point, 11 real estate agencies. It was crazy," he said. "More and more people were piling in and the banks and agencies sold to people who didn’t have steady salaries.”
What makes evictions like these even more dramatic is that in Spain you can’t just hand over the keys and walk away. The debt follows you. If you die, it follows your children. As more and more people default, it is creating a big problem.
“This is the most egregious example of the fallout from Spain’s housing boom,” said Santi Borrull, a local politician.
Borrull, one of the people outside David’s building, acts as a sort of mediator. Though he admits there is little he can do but watch, he says these evictions make no sense. The value of the apartments has fallen dramatically, he says, making them impossible for the banks to sell.
“These apartments end up empty, for a few months, a year or more,” he said. “We would like to see them become subsidized housing, but it’s complicated. The banks own these flats, so they’re in private hands.”
Banks have come under even more criticism from citizens groups for what they describe as evicting people with one hand, and collecting billions of dollars in rescue money with the other. Why not rescue the people directly, people ask.
Finance professor Carles Vergara, with Barcelona’s IESE business school, says that might sound fair.
“But then again,” he said, “you have the problem: Why do you rescue this family and not another family?”
In other words, figuring out how much and whom to save would be a nightmare. Vergara says it's better to change lending rules by eliminating bonuses for bringing in mortgage business.
“You get your bonus right now just for signing,” he said. “So you basically only care about signing this contract with whoever, the family or individual, and then that’s it.”
In the more immediate term, he suggests banks cancel the mortgages of those who can’t pay, but rent them the same apartment, for less. That way the bank also has some income, and fewer people are on the streets. Such discussions are underway, but it will likely be years before the entire banking sector accepts that sort of compromise.
Back at Davids’ apartment, a call came in to Borrull, the local politician. The eviction was postponed, news met with applause from the crowd. Apparently the bank got word of the protest.
But the Davids have only been given an extra two weeks. Two weeks to find another place to live, or to make another stand.
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