Urban upgrades in Spanish neighborhoods can lead up housing prices and force longtime residents to leave. Joan Monràs, director of the Barcelona School of Economics and professor at Universitat Pompeu Fabra, is among the most prominent voices warning of this unintended consequence of investing in parks and public spaces, alongside improved services.
Monràs notes that low-income households in Spain spend around 40% of their budget on housing, compared with just 20% for wealthier families. Even modest rent or price increases hit the most vulnerable residents much harder. His research, developed with Bryan A. Stuart and supported by a BBVA Foundation Leonardo Grant, identifies the widening gap in housing costs as a basic driver of inequality.
Housing Burden and Social Divide
Recent data from Spain’s Family Budget Survey shows that average household spending on housing-related costs, including utilities and energy, rose by 5.8% in 2025. Meanwhile, average household income stands at €38,994, while 25.7% of the population remains at risk of poverty or social exclusion. When housing costs rise, families with fewer resources often feel the pressure first and may have to move to less desirable areas, Monràs explains.
The strain shows up in housing supply as well as household budgets. Banco de España’s 2025 annual report describes a gap between the density of established urban areas and the density planned for new development. The difference is about 1.7 times in Valencia, Zaragoza and Seville, and between two and 2.5 times in Barcelona, Madrid and Málaga. The report estimates that bringing development-area density closer to that of consolidated areas could make room for an additional 1 million to 1.2 million homes across six major urban areas.
A separate estimate of Spain’s housing balance puts the accumulated shortfall since 2021 at around 755,000 homes. Madrid, Barcelona, Alicante, València, Murcia and Málaga account for 52.5% of the deficit. Madrid province alone is estimated to have fallen short by 108,318 homes between 2021 and 2025, while Barcelona’s shortfall is estimated at 86,315. These national and provincial figures help explain why neighborhood improvements can intensify competition in already pressured markets when housing supply fails to keep pace with demand.
Monràs argues that increasing the supply of homes is the most effective way to ease this burden. If more housing is built and prices stabilize or fall, those who spend a larger share of their income on rent or mortgages stand to benefit most. His analysis suggests that a 10% boost in residential sector productivity could reduce overall welfare inequality by about 1%.
Urban Renewal and Displacement
The problem grows when city improvements make a neighborhood more attractive while housing supply remains tight. New parks, pedestrian zones and upgraded services draw in higher-income newcomers, pushing up demand and prices. As Monràs puts it, “improving quality of life in the city can end up pushing residents out of their own neighborhoods.”
Urban regeneration does not inevitably lead to gentrification, though it can contribute to displacement when rising land and housing values price out existing residents. In a discussion of changes in Barcelona, researcher Villar linked pedestrianization and improvements to streets and neighborhoods with higher prices and population displacement. The CSCAE’s Observatorio 2030 has also called for regeneration that supports social cohesion while improving public services and spaces, protecting heritage and providing accessible green areas.
Monràs does not oppose investment in urban renewal. He says these projects must be paired with policies that expand housing options. Without them, people with greater financial means can absorb the higher costs, while others are forced to move. The issue is especially acute in Spain’s rental market, where many households already struggle to find affordable options.
In Catalonia, Idescat figures for 2025 show that 16.8% of residents could not afford to keep their homes at a suitable temperature, compared with 15.9% across Spain and 8.8% in the European Union. In Catalonia, 24.8% of the population was at risk of poverty or social exclusion, and 14.2% reported delays in payments on their basic home. These indicators do not measure displacement caused by regeneration. They do show how limited many households’ capacity is to absorb higher housing and utility costs.
A study by Esade, Fundació Hàbitat3 and Fundació Habitatge Social, based on interviews with 48 women facing vulnerability in Barcelona and its metropolitan area, describes how a shortage of affordable rentals can keep families in social-inclusion housing even when they have stable income. The researchers identify the lack of a public pathway from inclusion programmes to a lasting housing solution as a structural barrier.
Connecting Cities to Ease Pressure
Monràs also proposes a broader solution: better connections between nearby cities and major hubs like Madrid and Barcelona. Improved commuter rail and telecommunications infrastructure could link towns such as Mataró, Sabadell and Terrassa to the wider metropolitan economy. That would allow more people to access jobs and services without being confined to the most expensive urban centers.
Greater connectivity can raise prices in outlying areas, but it also reduces commuting costs and may improve residents’ quality of life. Sharp differences in rental prices across Spain reflect this dynamic: some cities face intense pressure, while others remain much more affordable. The challenge is to ensure that living farther from the center does not mean losing access to chance.
Lessons from Catalonia’s Rent Caps
Monràs’s research with economist José García Montalvo on Catalonia’s 2020 rent controls found mixed results. Rents above the official index fell, while some below the cap increased. At the same time, some higher-priced rental properties disappeared from the market. In Barcelona, the relative supply of rental homes dropped by about 10% compared with similar cities without the cap. The study also recorded a nearly 20% decrease in listings above the reference price and a 7% increase among those below it. The findings show how complex rent regulation can be when underlying supply issues remain unaddressed.
Policy Dilemmas and the Path Forward
Balancing vibrant, attractive cities with affordable housing remains a central dilemma for Spanish policymakers. Monràs’s work suggests a sustainable path requires expanding the housing stock while investing in neighborhoods and improving regional connections. Without these measures, economic growth risks leaving behind those who already devote the largest share of their income to keeping a roof over their heads.
As Spain faces mounting pressure to modernize its housing and energy infrastructure, debate over who benefits from urban renewal is likely to intensify. New EU rules require Spain to cut residential energy use by 16% by 2030, with the oldest buildings facing the first upgrades. That could further affect housing costs and availability, as detailed in this recent analysis of EU energy efficiency targets.
