Beware banks bearing gifts

Toxic assets belonging to nine banks were acquired. Just over three-quarters of these assets were credits and loans; the rest were real estate. The value of all these was 107,000 million euros (107 billion). In rescuing banks, Sareb paid just over 50,000 million - around 50% of the value, therefore. Although it’s true that Sareb isn’t a bank, it’s known as the bad bank because of its purpose - managing those toxic assets. But there is a banking element, for this wasn’t a venture solely funded by the Spanish government’s Fund for Orderly Bank Restructuring; 54% of the capital is private, that of banks and insurance companies. The Fund is the largest shareholder, but a private-sector combination forms the majority. Of the banks with an interest, Santander has the greatest - a 22% stake.

This public-private mix is, I believe, important for understanding what has been happening with the Sareb offer of properties (and potentially also land) to regional governments for them to use for social renting purposes. When Prime Minister Sánchez made the announcement of some 50,000 properties being made available, there was - in some quarters - an initial reaction of euphoria. Gifts of housing; this was an impression given. But the euphoria soon became scepticism, and with good reason.
The main opposition party in Congress and in the Balearics, the Partido Popular, reckoned it was all an electoral ploy. Maybe it was, but even the Balearic government quickly downplayed any sense of euphoria. President Armengol said there would have to be “rigour” in purchasing properties with public money. Purchasing? Where had this come from? Weren’t these properties being given away? This was a false impression, as they most certainly were not.

In responding to the Sánchez announcement, one voice in the Balearics who recognised potential complications was the president of the developers association, Luis Martín. He said - not in so many words - fine, but what about the payment? In case this had yet to dawn on everyone, the Spanish government clarified that there would indeed be payment; hence Armengol’s requirement for rigour. The regional government would assess each property one by one, an initial figure of 447 properties having come down to 120 - those that Sareb considered to be habitable and which could be used more or less immediately. One hesitates to say could be occupied, as so many of these Sareb properties have been occupied. They have squatters. A majority of properties need major rehabilitation.

Two of the three coalition parties in the Balearics, Més and Podemos, were indignant. Antonia Jover of Podemos said that transfer of properties in the Balearics should be “free and in perpetuity”. In her view, as citizens were already paying for the debts managed by Sareb and as public debt “belongs to everyone”, then so also should the properties. In Palma, the Més councillor for housing, Neus Truyol, believed that Sareb should cede land to build VPO protected housing for free, VPOs being homes for which the public authority sets an affordable price for purchase or for rent and which cannot be sold on the open market. To this end, the town hall has identified a number of plots, while Truyol explains that there was a meeting with Sareb a couple of years ago at which the bad bank offered empty apartments and ones with squatters “at a very high price, which was irresponsible, as they had been acquired with public money”.

Which is true, but only up to a point, and that’s because of the private stake in Sareb, an entity which - as was reported a month ago - had seen its losses drop by 7.4% to 1.5 billion euros. By 2022, Sareb had cut its total asset portfolio to around half of what it was - 26.5 billion euros - but it is paying out interest on the rest and so a senior debt of some four billion euros higher.

The bad bank’s mandate is to sell all the assets within fifteen years. This would mean 2028 at the latest. The report a month ago added that Sareb, because of higher interest rates at present, is focused on accelerating sales and reducing debt. And a couple of weeks later, well well, came the Sánchez announcement - 50,000 properties, but not for free and in reality under half this number (initially at any rate) because of habitability.

If this all proves one thing, or rather two, then it is that nothing is as it may seem to be on first impression and that there is no such thing as a free home. Yes, on the face of it Sareb does possess a means (many means) for helping to address the housing problem. But when all said and done, given requirements in the Balearics, 120 properties are like spitting in the wind - a lot of publicity for, quite frankly, not very much.