No respite seen in Spanish housing crisis

CIUDAD VALDELUZ, Spain — Empty avenues and rows of vacant, red-brick apartment blocks make this brand-new suburban community feel like the set of a science fiction movie in which a disaster wipes out most of a city’s inhabitants but leaves its buildings intact.

Forty miles east of Madrid, where protesters clashed with police Thursday over new austerity measures, Valdeluz has come to symbolize the real estate investment madness that swept Spain last decade before plunging it into a dire economic crisis that shows no sign of abating.

"It seemed to make perfect sense at the time," says a local realtor named Beatriz Blazquez.

"We're close to the capital, there's a high-speed train connection, and there was a demand for homes," she explained in her office on the deserted main street. "Then the banks started giving credit to just about anybody and construction got out of control.” Now building has stopped and houses’ values continue to drop.

Planned for 30,000 residents to live within easy commuting distance of Madrid and the nearby provincial capital Guadalajara, Valdeluz is now home to a mere 3,000 people in a very eerie setting.

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Beyond a central core of inhabited houses clustered around a cafe, medical center and a few grocery stores, "for sale" signs hang on forlorn stretches of empty apartment blocks.

Some buildings’ ground-floor doors are bricked up. Others were abandoned half-finished. In the outer reaches of this would-be city, lamp posts, trash cans and road signs line paved streets, but wildflowers and waist-high grass grow where houses should stand.

Unfortunately for Spain, Valdeluz is far from an isolated case. In Guadalajara province, it's only the most striking part of an archipelago of similar follies.

Wholly or half-abandoned "urbanizaciones" of neat little villas or low-rise apartment blocks surround many villages. Built to realize Spanish dreams of spacious suburban homes, swimming pools and lavender-scented gardens, they have instead helped plunge the country into an economic nightmare.

National statistics tell the story. In 1990, construction work began on 81,000 new homes. The number soared to 533,000 in 2000 until reaching a peak of 762,000 new housing starts in 2006 — more than in Germany, France and Britain combined.

The figure dropped to 86,000 last year as real estate values fell 23 percent in real terms since 2008.

Construction accounted for 16 percent of Spain's economic output in 2007 until the global financial crisis burst the property bubble the following year. Almost 2 million construction workers lost their jobs, helping push Spain's unemployment up to 25 percent, the euro zone's highest.

The crisis forced Spain to seek an EU bailout of up to 100 billion euros to help save regional savings banks that gave loans to construction companies. To meet its terms, the government this week introduced tough measures including a rise in the sales tax and cuts to unemployment benefits meant to save $80 billion over the next two and a half years.

They will make economic recovery more difficult. Back in Valdeluz, real estate broker Blazquez says its population has recently begun growing again only because banks have slashed prices by up to 40 percent in a bid to sell off homes.

A short drive away stands another symbol of the real estate frenzy that helped put Spain into the epicenter of Europe's debt crisis. Pioz, Spain's most indebted village, owes 16 million euros, eight times its annual budget. It would take more than 7,000 years to pay off the debt according to a government repayment plan.

A local council member named Dionisio Torres describes a pre-crisis “infinity of spending.”

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"Keeping it hidden in the closet is infamous in Spain,” he says. “Here they had a big closet."

A member of the conservative People's Party — which recently won control of Pioz as well as the national government — Torres naturally blames his village's woes on the previous Socialist-led council.

He says it invested huge amounts in drainage, sports facilities and other infrastructure because it expected the village to expand to 25,000 inhabitants from its current 3,800 over four years.

"They thought the village was going to grow in an unbelievable way,” he says, “but it was clear that model of development was unviable."

Spain’s plight has created a paradoxical situation in which an estimated 700,000 new homes sit empty as the country’s homeless grow.

An anti-eviction activist in Madrid named Alvaro, who declined to give his last name, says the authorities evict 50 people in the capital each day. "People who have lost their jobs can't afford to pay their mortgages,” he says. “So the banks and even the government housing agency are kicking them out."

A member of the "indignados" protest movement that rose in response to the crisis, Alvaro works in the city’s working-class Tetuan district. It lies in the shadow of gleaming towers banks built for their headquarters during the boom years.

Alvaro helps organize teams of protesters that rush around the capital to confront officials evicting people. The group also offers support for evictees and negotiates with banks to grant reprieves for those who have defaulted on their mortgages.

"Middle-class people who are quite well off are getting evicted,” he says, “but the poor are most affected, especially immigrants who have no family support networks here.”

He says Spain's record level of youth unemployment — more than 50 percent — is helping fuel the protests. "There is a generation of well educated young people who have nothing to do,” he explains. “We have journalists, legal experts and other specialists working with us."