The Electoral Cycle and the Housing Crisis

Introduction

Governments often adjust economic policy and public spending in response to electoral incentives, particularly through increases in spending before elections followed by subsequent adjustments once they are over. The objective is clear: to maximize votes.

The theory of the political business cycle, one of whose leading exponents can be found in the work of Anthony Downs and his An Economic Theory of Democracy, has warned for decades that governments tend to prioritize policies offering the greatest immediate electoral returns, even when their structural effects are limited or counterproductive in the long term. Under this logic, policymakers frequently act according to short-term political incentives. And few areas illustrate this contradiction better than housing.

Housing policies require a long-term horizon

While modern democracies operate on four-year electoral cycles, cities and housing policies require horizons spanning several decades. This divergence in time horizons partly explains why many governments fail to address the structural problem of housing shortages during their terms in office. Nor are they usually willing to risk pursuing major cross-party agreements which, although they could provide long-term stability and continuity, would reduce some of their immediate political returns.

Effective housing policy requires continuity, regulatory stability, administrative coordination, infrastructure planning, legal certainty and sustained long-term investment. Yet few of these priorities have genuinely been present under successive Spanish governments. Political incentives tend to reward measures with an immediate impact, announcements with high propaganda value and symbolic regulations that facilitate ideological confrontation with the opposition.

Measures such as direct subsidies, moratoria and price controls fit within this logic. Although they generate short-term political gains, they do not create new supply, shorten urban-planning procedures, turn land into buildable housing sites or increase productivity in the sector.

The consequence is the constant postponement of reforms whose results would only become visible after several legislative terms: far-reaching revisions of urban planning, major residential developments, new metropolitan infrastructure or genuine simplification of administrative procedures, which remain excessively slow and complex.

Housing policy as a narrative tool

Ultimately, housing ceases to be conceived as a genuine matter of state policy and instead becomes a narrative tool. With each new term of government, priorities change, regulations are amended—creating legal uncertainty—and the incentives facing market participants are altered. The result tends to be the same: less supply, less investment and a higher regulatory risk premium.

In the long term, the economic consequences of a housing crisis such as the current one extend far beyond the real estate sector itself: they affect birth rates, labour mobility, productivity, real wages, household savings and the economy's potential growth. This is precisely what we mean when referring to the structural effects of policies designed to secure immediate electoral returns.

The housing crisis cannot be resolved within four-year electoral timetables, because cities are not built at the pace of the ballot box. And as long as politics continues to focus on the next election rather than the next generation, the crisis will persist.