Spain’s government has introduced a bold proposal to impose a 100% tax on residential property purchases made by non-European Union citizens, in a dramatic attempt to curb foreign demand and address worsening housing affordability across the country.

The measure, introduced by Prime Minister Pedro Sánchez’s Socialist-led government, is part of a broader housing reform package submitted to Parliament on Thursday. The legislation aims to ease access to housing in major urban centers such as Madrid and Barcelona, where prices have soared in recent years.

A draft of the bill reviewed by Bloomberg describes the new tax as a response to what officials call one of the most pressing social challenges in Spain today: housing insecurity fueled in part by rising foreign ownership of local real estate.

Sánchez first signaled the plan in January, arguing that overseas buyers—particularly from outside the EU—were contributing to real estate speculation and displacing local residents. Government data shows that more than 27,000 homes were purchased by non-EU nationals in 2023 alone.

British citizens, who have become the largest group of foreign buyers in Spain since Brexit, are expected to be the most affected by the proposed tax. Many Britons own vacation homes or have retired in coastal regions such as Andalusia, Valencia, and the Balearic Islands. Buyers from EU nations like Germany and the Netherlands would not be subject to the levy.

The proposed legislation would exempt foreign professionals and business executives residing in Spain, meaning expatriates working legally in the country would not be affected. This carveout appears designed to protect international talent and foreign direct investment while targeting speculative property purchases.

The bill also includes several complementary measures aimed at cooling housing demand and curbing speculation:

• A higher value-added tax (VAT) on short-term holiday rentals;
• Increased taxes on real estate investment trusts (REITs) listed on public exchanges;
• A new tax on vacant residential properties.

The move comes as tensions rise in Spanish cities over skyrocketing rents and dwindling housing availability, especially in areas with high tourist traffic. Municipal governments are also taking matters into their own hands—Barcelona, for example, has announced plans to phase out all short-term vacation rentals by 2029.

The national government is exploring solutions on the supply side as well. The bill outlines plans for a public-private construction initiative using industrialized building methods to accelerate affordable housing development while reducing costs compared to traditional construction techniques.

Despite the urgency, the proposal’s future in Parliament is uncertain. Sánchez leads a fragile minority coalition and must negotiate support from multiple parties to pass any legislation—an uphill battle that has repeatedly stalled previous reforms.