Development in the South East, an opportunity to improve the housing market in Madrid

At the event ‘New developments in Madrid. The South East: an opportunity to improve the housing market?’, organised by the law firm Pérez-Llorca in collaboration with ACTIVUM, Servicios Inmobiliarios, representatives of the City Council, the Community of Madrid, professional associations and compensation committees, discussed the legal and urban planning situation of the developments in the south east of Madrid and their impact on the residential market. The event was presented Vicente Estebaranz, Partner and Head of Pérez-Llorca’s Land Planning practice, and Antonio Lodeiro, CEO of ACTIVUM.

The session consisted of two panel discussions, moderated by Alberto Ibort Franch, senior associate of the Land Planning practice at Pérez-Llorca, in which the experts highlighted the important role that developments in the South East could play in stabilising the housing market in Madrid. These developments, which have encountered several administrative complications in various procedures, would stabilise housing and rent prices in the capital, and would also help all citizens, and especially young people, become homeowners for the first time.

Participants included Juan Carlos Lasheras, Director General of Urban Planning at the Madrid City Council; David Martínez Montero, CEO of AEDAS Homes; Mauricio Fernández de Clerck, Manager of the Valdecarros Compensation Committee; Ignacio Ortiz de Andrés, Head of Market Research at ACTIVUM; José María García Gómez, Director General of Housing and Renovation of the Community of Madrid; José María Ezquiaga, Dean of the College of Architects of Madrid; José Trigueros Rodrigo, Director of the Centre for Public Works Studies and Experimentation (CEDEX), as a representative of the Governing Board of Colegio de Ingenieros de Caminos,Canales y Puertos; Javier López-Linares Aparicio, Manager of the Los Cerros Compensation Committee, and Marta Velasco Izquierdo, an associate in Pérez-Llorca’s Land Planning practice.

The need to establish urban planning policies that generate stability and legal security in the sector was highlighted at the event as being crucial for attracting investors and facilitating the financing of projects, which consequently greatly benefit those looking for housing. As noted by José María García Gómez, Director General of Housing and Renovation of the Community of Madrid, “from 2016 to 2030, 263,000 homes will be required in the city of Madrid, and in just two years there will be an insufficient number of suitable plots of land… In the face of latent demand, a sufficient, constant offering is needed for the pressure on prices to decrease,” he said.

Juan Carlos Lasheras Merino, Director General of Urban Planning at the Madrid City Council, explained the amendments that the council intends to make to the planning of the areas in the South East. The aim is to change the detailed urban plan in Los Ahijones and Los Berrocales, and amend the general plan in Los Cerros and Valdecarros, reducing the buildable area and dissolving their current compensation committees.

In this regard, José María Ezquiaga, Dean of the College of Architects of Madrid, stressed the need to assess the possible urban planning changes from a common sense perspective, and drew attention to the obsolescence of the current General Urban Plan of Madrid, which dates from 1997, and the need for a Land Act of the Community of Madrid to respond to citizens’ housing needs.

The need to encourage the construction of protected housing in Madrid, where there are a large number of plots of land, was discussed at the meeting. The 5,000 hectares in the South East make up the largest pool of undeveloped land in the capital, and developing in this area would help to stabilise the real estate sector.

In Valdecarros and Los Cerros, areas in the South East in which the City Council intends to amend the general plan, there are close to 66,000 homes (54% of which are social housing), and the City Council and the Community of Madrid own plots of land to build nearly 18,000 homes.

Mauritius Fernández de Clerck, Manager of the Valdecarros Compensation Committee, noted that with “the drastic reduction in buildable area and the delay in making finalised plots of land available in the South East, prices would continue to rise and young people and families with less purchasing power would have to take up residence outside the capital.”

Similarly, Javier López-Linares, Manager of the Los Cerros Compensation Committee, highlighted that “the current housing situation shows a level of prices that is so high that the middle classes will not be able to afford to buy or rent.”

One of the points that was discussed most at the conference was that the shortage of land to build new homes is raising the price of available finalised plots of land, which will have a direct effect on the price of housing. David Martínez Montero, CEO of AEDAS Homes, highlighted that “there is a great imbalance between supply and demand, the rental situation in Madrid is dramatic, and this confirms once again the need for more housing.”

Ignacio Ortiz de Andrés, Director of Market Research at ACTIVUM, stressed that “administrative responsibility is critical, especially in relation to social housing… The nearby Berrocales development has recently been approved, in stages, in a late attempt to compensate for the lack of land. Obtaining plots which are suitable for building is neither a simple nor instant process, it takes many years. This commodity, which is so necessary and unique, must be provided by the Government as the stress of the shortage is being paid by buyers. Madrid is growing, let us make that possible,” he said.

In addition, José Trigueros noted “the significant outstanding investment in development works, which would boost the market for civil engineering works in Madrid.”

Lastly, Marta Velasco Izquierdo, a lawyer from the Land Planning practice at Pérez-Llorca, summarised the situation in the south east of Madrid from a legal perspective, and discussed the legal bases and limits of ius variandi in configuring the urban planning model.