3. Housing sector adjustment takes time. Many new homes will still come onto the market, pressuring home prices. However, building permits and housing starts are falling quickly-presaging far less construction activity in the medium run.
4. By limiting the inventory of vacant homes, housing policies can facilitate adjustment:
* Policies to activate the rental market are welcome. Rentals absorb vacant homes, assist labor mobility, and allow vulnerable families to find shelter at moderate cost. Planned improvements in regulations and speeding up rent disputes are essential. Initial rental periods, currently five years, should be liberalized.
* Mortgage assistance to newly unemployed workers (to defer half their monthly payment for up to two years) is helpful in limiting foreclosures.
* However, the mission discourages building more subsidized homes. These add to inventory, and their markets are often distorted and untransparent with benefits not always reaching those intended. Means-tested income assistance for rentals is preferable to construction and home-ownership subsidies.
-Spain: 2008 Article IV Consultation - Concluding Statement of the Mission