The country’s warm climate and beaches have made it a popular travel destination and real estate investment hub among Brits and others—factors that have pitted locals against the government in recent years.  

Now, Spain wants to make it significantly more expensive to buy homes for people outside the bloc, hoping this will free up more housing for Spaniards. 

Prime Minister Pedro Sánchez proposed a raft of other measures on Monday, including a tax exemption on affordable housing for landlords and higher taxes on flats offered to tourists.     

“The West faces a decisive challenge: to not become a society divided into two classes, the rich landlords and the poor tenants,” Sánchez said when he unveiled the plan. 

According to the prime minister, in 2023, non-EU residents purchased some 27,000 homes—but these investments weren’t made to live in.

“They did it to speculate, to make money from them, which we cannot allow in the context we live,” he added.

Sánchez didn’t elaborate on when the taxes would kick in if approved by the parliament or how they would be applied. 

Spain is facing an acute housing shortage. The country’s central bank predicts it needs 550,000 new homes to meet demand in the next two years. Meanwhile, house prices have soared 48% in the last 10 years, led by significant growth in new developments, urban centers, and tourist areas.

“The shortage of buildable land is one of the causes of the housing shortage in Spain. Although cities have land to develop housing, the proportion of land ready to build is limited and the processes are excessively long and complex,” BBVA Research’s Rafael Doménech said in a July note.

Tourism is another factor—the industry is a key driver for the country’s economy, but it’s also become contentious as landlords cash in on lucrative visitors over local tenants.

The friction in the housing market has resulted in protests across the country and increased anti-tourism sentiment.

Late last year, Spanish cities Valencia and Barcelona cracked down on short-term rentals, which they believe has created “social problems” and limited housing supply. The country is also investigating Airbnb and Booking.com over outdated listings that inflate prices on their platforms.

For nearly two decades, each Spanish government has inherited a housing crisis at varying degrees, prompted by the 2008 property market crash coupled with the global financial crisis. The price per square foot has skyrocketed 82% in 10 years, while wages have only increased 17%.  

“We are facing a serious problem, with enormous social and economic implications, which requires a decisive response from society as a whole, with public institutions at the forefront,” Sánchez said Monday.