• A reminder that housing bubbles are not unique to the United States. The root cause in Spain may be the same root cause in the U.S. articulated by Robert Reich in “Aftershock”: wages of the middle class not keeping up with those of the upper class (see The Cadence of Finance for a couple examples as to why).
• Banks offer 100% financing so people can buy homes they really can’t afford (not commensurate with the income and wealth of the homeowner).
• After a little while the homeowners can’t pay the mortgage they could not afford in the first place.
• Banks evict the homeowners and repossess the homes. In Spain the evicted homeowner is still liable for the entire mortgage debt.
• Then, as the losses mount for the banks they are bailed out by the government with tax dollars contributed by those who were just evicted (among others).
• Big picture: banks never should have extended such loans (borrowers shouldn’t have taken them out either), those borrowers pay taxes that bailout those banks, those banks evict the homeowners, the now non-homeowners are still held liable for a loan on a home they no longer own, and eventually the bank will sell the home and retain the proceeds.
• Perhaps the Spaniards should follow the ‘ol “If you can’t beat them, join them” and seek employment at banks?

http://www.usatoday.com/story/news/world/2013/12/29/spain-squatters/3650665/

Spain squatters take over buildings after foreclosures

BARCELONA — In this quiet suburb, children giggle as they kick around a soccer ball in front of their building. Their mothers trade tales nearby, their loud voices filling the entrance.

A father darts around the kids as he heads out to run a few errands.

It could be any Saturday afternoon anywhere in Spain except for some important differences. Homemade signs, calling for human rights and affordable housing, hang from every floor of this building. The elevator has never been operational. The water supply fails constantly.

The apartment building, with its gleaming faucets and brand-new hardwood floors, is home to 15 families who have been squatting here illegally for months.

Known as Bloc Salt, the squatters’ home is one of many created because of the hundreds of Spanish families who are served eviction notices daily and the thousands of properties that sit abandoned across the country since the Spanish housing bubble burst.

“In this country, we have people without houses and houses without people,” says Marta Afuera Pons of the Mortgage Victims’ Platform (Plataforma de Afectados por la Hipoteca). It only makes sense, she says, to start using one problem to solve the other.

One in four Spaniards is out of work, which in a country that boasts one of the highest rates of home ownership in the world means many families fall behind on their mortgage payments and face foreclosure.

At the same time, the number of empty buildings across the country swelled after a building boom went bust.

The Spanish government estimates that there are more than 650,000 finished properties that sit empty across the country, alongside nearly half a million properties that were left idle while under construction.

Bloc Salt has become the poster child of a national campaign to fill Spain’s empty homes with evicted families. The building’s five floors are home to 37 people — 17 of them children — who call each other by their first names, share meals and raise chickens in the building’s front yard.

Pons’ group has helped more than 800 homeless Spaniards move illegally into 15 buildings across the country. In the town of Salt, northeast of Barcelona, this newly built building sat empty for three years before the Mortgage Victims’ Platform began filling it with families in March.

In her large, sparsely furnished apartment on the fourth floor, Bouchra Zannouti carefully washes an apple for her 7-year-old son. Soft-spoken and shy, she proudly points out a large chest of drawers donated to her by neighbors. After being evicted twice in the past eight years, this is one of the few possessions the family owns.

Her husband moved to Spain from Morocco 14 years ago, lured by job opportunities in Spain’s booming construction sector. When the boom faltered, her husband could not find work.

The family fell behind on its mortgage payments and was eventually evicted.

In Spain, a century-old law stipulates that homeowners are on the hook for their mortgage even after the bank has repossessed the property. Zannouti and her husband were left with nowhere to live and $68,000 in debt.

“We had no stability. Every day brought a different challenge,” says Zannouti, struggling to speak as she fights back tears.

She and her husband found out about Bloc Salt around the same time they found out she was pregnant. “If we hadn’t found this place, I don’t know what we would have done.”

Life here comes with its own challenges. There’s no hot water or heating. The building, despite being brand-new and meticulously cared for by the families, has problems with mold, clogged pipes and ever-spreading cracks in the walls.

Residents are trying to negotiate with the building’s owner, offering to pay a small amount of rent in exchange for letting them stay in the building until it is sold. Their requests have gone unanswered, and the threat of being thrown out looms every day.

Zannouti and her husband debated leaving, she says, but decided to stay.

“It’s worth it,” she says. “I’ve learned so much about how to defend my rights. And my son, he has so many friends in the building. We’re proud to live here.”

More than 150,000 families in Spain have lost their homes in the past five years, according to AFES, an association that counsels Spaniards facing eviction.

“In 2007, there was more construction in Madrid alone than in Germany, France and Britain put together,” says Carlos Baños, AFES president.

Demand for these properties was plentiful, he says, thanks to easily accessible credit.

“In Spain, practically anybody could get a mortgage,” Baños says. “Somebody who had just started working could get 100% financing from the bank to buy a house.”

Though many are optimistic about the Spanish economy’s return to growth after more than two years of recession, Baños worries it’s not enough to halt the growing number of mortgage defaulters.

“Unemployment continues to rise,” he says, predicting that even more Spaniards will face eviction in the coming years. “We’re seeing people who have spent their entire savings trying to fend off eviction. There comes a point when they simply can’t pay anymore.”

The Mortgage Victims’ Platform — the group behind the occupied building in Salt — has been pushing the government to do more.

In February, the group gathered 1.4 million signatures on a petition asking parliament to consider allowing homeowners to walk away from their debts once their home was repossessed. The government did make it easier for the poorest families to cancel their debts but refused to extend the law to include everyone.

Last month, the discussion about evictions in Spain made it all the way to the European Court of Human Rights in Strasbourg, France. SAREB, the owners of Bloc Salt, had successfully argued in a Spanish court to kick the families out of the building. The families appealed to the EU court, which suspended the order until the local government could guarantee the families an alternative place to live.

“We’ve shown that the system isn’t working and that housing is a right,” Pons says. “That’s tremendous. Whatever happens to this place, we’ve already won.”

The victory comes at a steep price for taxpayers, says Francisco González of SAREB, a quasi-government bank that buys toxic real estate holdings from Spain’s troubled banks.

González estimates the occupation of the building has cost Spanish taxpayers millions of dollars.

“We bought this building with taxpayers’ money, and we can’t pay them back until it’s sold. But until they’re kicked out, we can’t even start to sell it,” he says.

SAREB has about 50,000 housing units to sell, he says, but the easiest to sell are those that are complete and ready to live in, such as Bloc Salt.

“They’re illegally occupying the building. It’s a crime,” he says.

Grandmother Doris Pérez smiles at the thought of being called a criminal. Having lost her home, she has lived in Bloc Salt since March with her 18-year-old daughter and two grandchildren, ages 11 and 8 years old.

“I used to wake up exhausted. But things have changed.” She feels like she’s part of a community, one that’s fighting to change the system that wronged her, she says.

As she reflects on the roller-coaster ride that has been the past few years of her life, she grows quiet.

“I lost my house. I lost my husband,” she says. She pauses as she looks around the room and smiles. “But I’ve much gained more.”