The Self-Interest of Compassion
Spain’s Housing Law has been in force barely two years, yet its consequences are already plain. Roughly 100,000 rental units have left the market. In the first cities designated as “stressed zones,” online listings for long-term rentals have fallen in the past year between 33 percent in La Coruña and 39 percent in Pamplona, even as short-term rentals—which sidestep the cap—have multiplied. The apartments have not vanished; they have switched markets.
What coalition of interests and ignorance keeps this policy in place?
Spanish renters predictably back rent control. A poll commissioned by a far-left bloc in the European Parliament puts that support at 76.6 percent. But renters are only 18 percent of households. What matters politically is that the policy commands the backing of 68 percent of the entire electorate, with that figure dropping only to 55.5 percent among PP voters and 53.2 percent among Vox voters. The poll may carry some bias—its sponsor benefits from the appearance of cross-partisan consensus—yet bias alone cannot explain a 68 percent figure. Whatever the exact margin, the difference is supplied by homeowners, who account for three out of four Spanish households.
Two kinds of mechanism hold this coalition together: material and cognitive-emotional.
The law draws a line between types of landlord: heavier burdens on “large holders”—those with more than ten units, five in stressed zones—and lighter ones on small landlords. The asymmetry is what makes the policy politically workable: it eases the cost for the vast majority of landlords and defuses their activism.
But what truly holds the coalition together is the law’s effect on the majority of homeowners: those who do not rent anything out. On one hand, the law imposes no cost on them. On the other, they benefit from the aggregate effects on the housing stock—especially when, as rental supply shrinks, sale prices climb.
The regulation thus operates as a tax on landlords—above all the largest—from which every homeowner benefits, though unequally. Least of all, large holders themselves; somewhat more, small landlords; most of all, homeowners who do not rent out, particularly those in their primary residence, who pay no annual income tax on the property and—once past sixty-five—no capital gains tax when they sell it.
The result fits Jesús Fernández-Villaverde’s sketch of Spain’s median voter, whom the country’s political consensus serves with precision: a retiree whose twin interests are a steady pension and a steady-or-rising apartment price. The picture is filled in by other quiet beneficiaries—those best placed to pass the tougher solvency checks that landlords now impose as caps make them more selective. Civil servants and workers with permanent contracts are the obvious examples.
Alongside these material calculations runs a cognitive-emotional engine, rooted in compassion, myopia, and envy.
Expressive compassion is the most visible belief: many voters think they are helping vulnerable tenants. Yet the regulation, empirically, harms those it claims to protect. Joan Monràs and José García-Montalvo, using official microdata from 2016 to 2022, studied the Catalan rent-control regime that preceded the national law. They found that it cut rental supply by 10 to 14 percent and pushed prices on inexpensive apartments up toward the legal cap, even as prices on expensive ones fell. Voting out of compassion rewards the voter at the expense of the very beneficiary.
Cognitive myopia arises because reasoning about housing policy demands different work from different voters. The renter and the landlord grasp the direct consequences effortlessly. Everyone else has to anticipate, as in chess, not only their own moves but those of others: the landlord who withdraws the unit, the marginal tenant who can no longer find a contract, the developer who never enters the market.
We know from economic experiments that most participants rarely reason beyond the first step. The first step is what surveys and elections pick up (the capped price benefits today’s tenant), but not the second (supply contracts), the third (existing homes appreciate), the fourth (whether the voter himself—or his children—will need to rent in the future), or the fifth (whether he will then be seen as a creditworthy tenant or a potentially vulnerable one). Over time, much of the cost is borne by an invisible third party: the young worker without a contract who never shows up in any poll, the family with small children turned away as a squatting or default risk, the immigrant without guarantors. The political outsider does not know, is not organized, does not vote as a bloc.
The third root, the least admissible, is horizontal envy. The voter who backs the cap does more than consume compassion for the tenant: he also votes against the neighbor across the hall—the one who saved instead of taking vacations, bought a second apartment, and now rents it out. If we talk so much about “vulture funds,” it may be to disguise that the real target is closer to home. The neighbor who competes on equal terms is the more irritating, because his success exposes our own choices. Seen this way, support for a regulation that retroactively rewrites the terms of signed contracts—transferring income from the homeowner who sacrificed to the one who chose to enjoy—becomes less puzzling. It is a recurring pattern in Spanish lawmaking of recent decades.
For Adam Smith, the impartial spectator judged from outside, without interest in the outcome. In housing we do the opposite: we judge from within while pretending to look from without. The majority of homeowners who back the regulation do not see themselves as interested parties, because their gain is indirect, deferred, and—above all—invisible. While consuming costless compassion and settling scores with the competitive, productive neighbor, they are in effect voting to revalue their own assets. They present themselves—and perhaps even believe themselves—impartial; they are not. The pose conceals vested interest on the material plane and resentment on the moral one. The fault is not the government’s. It is ours.
Translated by Claude (Anthropic) from the Spanish original.