Beyond VV reform: the real problems facing the Canary Islands

By Maximilian Brandtner

See below for the Spanish version!

I am writing this piece to set out the perspective of an overseas owner of a holiday home in the Canary Islands. This is because there are plans to reduce, amend or even withdraw Vivienda Vacacional (VV) licences altogether. Furthermore, it is proposed that people not resident in the Canary Islands should no longer be allowed to buy property there. The reason for this is the shortage of housing for local residents. This applies to both affordability and availability.

From my perspective as a holiday let owner, the following questions arise, which I present here as food for thought. The criticism contained therein – some of it implicit, some explicit – is not directed at anyone personally. It is my firm belief that criticism is a necessary tool for the democratic exchange of views, which is enshrined and guaranteed in the constitutions of both Spain and the EU.

What it’s all about: We own two properties in the Canary Islands, comprising a total of four flats. The plan is also to leave our stressful but lucrative jobs up north in a few years‘ time and to use the letting of these flats to create a smooth, active and entrepreneurial transition into retirement.

We are currently letting two flats through a company based on the Canary Islands, for which we pay tax and employ tradespeople. We do, of course, hold the VV licence. The other flats are currently being renovated by a company based on the Canary Islands.

We searched for a long time before we found a building contractor who was willing to work without employing undeclared labour and who accepts electronic payments instead of cash. And one who works with specialist contractors, so that we can, for example, obtain an official certificate for the electrical work.

For us, this goes without saying, even though it is considerably more expensive and time-consuming due to the shortage of (legal) skilled workers. However, this significantly reduces the number of companies that are suitable candidates. And that brings me to the first issue:

1. Punishing those who operate legally, rewarding those who operate illegally: In our town, the majority of privately let holiday lettings are let without the VV symbol displayed on the property. So the change to the VV’s terms and conditions means that those who do everything by the book are being penalised. Those who let out properties illegally will simply carry on doing so.

My neighbour has four flats, all of which he successfully lets out online. The building has no residents‘ association or other licence, no doorbell and no letterbox. Tourists often ring our doorbell when they’re looking for their somewhat hidden flats. Incidentally, the neighbour is – excuse me – not a foreigner.

2. Illegal properties: Many of the houses that are being let out illegally were not even built legally in the first place. We have spent thousands of euros on solicitors and architects from the Canary Islands, simply to have properties checked before buying them. Over half of the properties we viewed had legal issues or discrepancies between the Land Registry and the Cadastral Register (this peculiarity of Spanish regulations is unfamiliar to many foreigners, for whom a Cadastral Register entry automatically implies the property’s legality). Here, too, it is honest people who are penalised. The illegal houses, mostly right by the water’s edge, are, however, being let out illegally with even greater success.

3. Motorhomes: Right on the beach by the sea here in our village, there are at least ten motorhomes per night in winter – and significantly more in summer. One kilometre to the south is a bay where there are also at least ten motorhomes every night. Four kilometres to the north, there are well over 20 motorhomes in the bays every night.

So there are at least 40 motorhomes per night along our five kilometres of coastline. The nearby rock is often used as their toilet. Rubbish is frequently left lying around. And the taxes that we and the residents of the Canary Islands in the municipality pay are used to fund a small hut on the beach with a shower and toilet.

Suggestion: Why aren’t there any proper, legal campsites with water, electricity and a shop with a bar or restaurant, to provide this adventurous form of holiday with a professional setting that generates turnover, profits, tax revenue and order?

4. Long-term campers: We know a number of long-term campers who have been travelling in a campervan for over five years and receive social security benefits from their country of origin. The number plate is not Spanish, so no taxes or fees are paid.

Why is this behaviour – which is detrimental to the environment, the tax authorities and public cleanliness – not only tolerated, but even subsidised with taxpayers‘ money (showers, toilets)? There is potential revenue here for camping operators and local authorities from licensed, regulated and high-quality camping holidays. And anyone who finds that too expensive can go camping in Norway. There, free camping is enshrined in law under the ‚everyman’s right‘.

Now on to a very serious issue that gives me pause for thought. So much so that I find myself wondering whether the large amount of money we have invested in the Canary Islands was actually a good decision, given that fundamental property rights could be infringed upon if the laws are implemented.

5. Long-term letting: We’d really like to let the property on a long-term basis – not to tourists, but to local residents. That would be much easier given our situation, as we currently live in Northern Europe and work full-time. However, both other property owners and the consultants we’ve paid are advising us against it. And as you can see, the number of vacant flats is significantly higher than the number of holiday lettings. Hey, the Canary Islands are missing out on three flats in long-term lets just because of us (with one holiday let for ourselves). And we have several friends who also own more than one property and who aren’t letting them out either, partly because of the legal uncertainty. The reasons are as follows:

6. Tenancy law: If a tenant stops paying the rent, he or she can simply continue to live there, whilst we are still obliged to pay for water and electricity – plus the legal fees and court costs involved in resolving the case. In such cases, there is no legal distinction between possession and ownership.

7. Occupas: We pay well over 100 euros a month just for alarm systems for flats that are mostly vacant (partly because the illegal flats are offered at lower rents whilst generating higher income). This is another reason why we’d like to let them on a long-term basis. However, the legislation is so irrational that a squatter can move into the flat within a ridiculously short time – just a few hours – using a pizza receipt with a date and time stamp, and he or she cannot be removed through legal action without judicial intervention after this short period of no more than two days.

The whole process can take years and cost thousands of euros. It is not uncommon for the flat to be left in a state of disrepair afterwards. What is a European democracy like Spain hoping to achieve with this legislation? What does Brussels actually make of it?

If the law protected property rights, we and others would also put our flats on the market. We wouldn’t charge exorbitant rents. We are not a limited company, but a family that values peace and security. We want to cover our costs, and we want the house and its facilities to be used.

On the subject of housing construction:

8. Rising demand: If you like, there’s the local population, expats working for companies, tourists and pensioners, as well as other motivated immigrants, both documented and undocumented. How this is regulated is an internal matter for Spain, and one in which I choose not to get involved. Many countries, such as Canada, have skills-based points systems. If you bring money or expertise with you, you’re actively courted. If not, then you aren’t. I think that makes sense for both the economy and society as a whole.

9. Politics: When social housing is discussed in the run-up to the elections, is action actually taken after the elections? Perhaps one could say: inversely proportional to that – very little.

10. Security: What about an attractive scheme for digital nomads and the self-employed? We have many friends up north who would love to come to the Canary Islands officially for a few weeks or months, but are looking for legal certainty regarding tax and health insurance. Asian countries, in particular, have very good legislation in this area. We could learn from them.

11. Companies: Finally, there is the responsibility of companies – in this case, the major tourism firms. If staff cannot find somewhere to live, why don’t the companies build staff accommodation? It is, after all, in their own interests. And they can make money from it, too.

Did you know that there is a district in Berlin called Siemensstadt? Did you know that there are so-called railway workers‘ estates in many European countries? Companies are taking responsibility themselves. You’ll find this is particularly true in the hotel industry. There are market-based solutions. Simply calling on politicians and the state all the time is not enough for a company.

Which brings me to my final point: Qui bono? Who stands to gain from the decline of legal holiday let tourism and the lack of appeal of long-term rentals? It’s obvious: the multinational corporations. And who owns these companies? Either large foreign conglomerates, or – depending on the Canary Islands in question – one or two local families who monopolise entire beaches and stretches of land.

Profits therefore either go abroad or remain in the hands of the feudal lords at the top of the pyramid. There is little middle class. In percentage terms, within the Canary Islands‘ hotel industry, this means business owners whose families and staff benefit locally. Therefore:

12. VVs: They are all small family-run businesses, some operating on a part-time basis, others on a full-time basis. Some are run by Canarian owners locally, whilst others are run by friends of the Canary Islands living abroad. VV tourists visit local supermarkets and restaurants, spending their money locally at regional businesses.

In these massive hotels, behind locked iron gates and wearing identification wristbands, people eat, drink, dance and lounge by the pool. All of this forms part of the horizontal and vertical value chain under the umbrella of the corporate groups, and is delivered by staff who are not paid enough and are often unskilled – and I fully understand their frustration.

VVs offer the opportunity for independence through a wide range of flexible options. Canarians, mainland Spaniards, EU nationals and nationals from other countries – people with a sense of responsibility who take an active approach to life.

Consequently, a system that disadvantages law-abiding property owners, whilst illegal letting or the unlawful appropriation of flats is legally protected or at least tolerated, creates incentives, both economic and moral, that do not promote prosperity or tax revenue.

Spanish version (automatically translated by the author of the article):

Holiday Home Reform? The elephant in the room: illegal holiday rentals, the tenancy law and squatters

I am writing this to present the perspective of an owner of a holiday home abroad. This is how the housing situation should be: Holiday licences (VV) may be reduced, amended or even withdrawn entirely. People who are not resident in the Canary Islands should not be allowed to purchase property either. The reason for this is the shortage of housing for local residents – both in terms of affordability and availability.

From my personal perspective as the owner of a holiday flat, the following questions arise, which I present as points for consideration. The criticisms contained herein – some implicit, some explicit – are not directed at anyone in particular. I believe that criticism is a necessary tool for the democratic exchange of views, and this is enshrined and guaranteed by the constitution in both Spain and the EU.

What it’s all about: We own two houses in the Canary Islands, comprising a total of four flats. The plan is also to leave our stressful but lucrative jobs up north in a few years‘ time and make a smooth, active and entrepreneurial transition into retirement by letting out the flats. We currently let two flats with the help of a Canarian company, for which we pay tax and employ tradespeople. Of course, we hold the VV licence. The other flats are currently being renovated by a Canarian company. We searched for a long time until we found a construction firm that was willing to work without holding multiple jobs simultaneously. One that accepts electronic payment instead of cash. And one that works with specialist firms, so that we can, for example, obtain an official certificate for the electrical system. For us, this is a given, even though it is much more expensive and takes longer due to the shortage of qualified (legal) workers. However, this significantly reduces the number of eligible companies. And that brings me to the first problematic point:

1. Punishing those who follow the law, rewarding those who break it: in our city, most privately let holiday flats are let without the VV symbol on the building. So, changing the terms of the VV means that those who do everything by the book will be penalised. Those who let illegally will simply continue to do so. My neighbour has four flats and successfully lets them all out online. There is no VV or any other licence displayed on the property, nor is there a doorbell or a letterbox. Tourists who arrive often ring our doorbell when they’re looking for their somewhat hidden flats. By the way, the neighbour – I’m sorry to say – isn’t a foreigner.

2. Illegal: Many of the houses that are let out illegally aren’t even legally registered. We have spent thousands of euros on Canarian solicitors and architects just to have the properties thoroughly inspected before buying them. More than half of the properties we analysed had legal issues or discrepancies between the land registry and the cadastral register (this peculiarity of Spanish regulations is unusual for many foreigners, for whom a cadastral entry automatically implies that the property is legal). Here, too, it is the honest who suffer. The illegal properties, most of which are right by the water’s edge, are rented out illegally with even greater success.

3. Recreational vehicles. At least 10 mobile homes are parked overnight every night in winter in the seaside area of our town. Far more in summer. One kilometre to the south there is a bay where there are at least 10 mobile homes every night, and four kilometres to the north there are more than 20 mobile homes every night in the bays and other spots. That is, there are at least 40 mobile homes per night within less than 5 km of the coast. The nearby rocks are often used as a toilet. Rubbish is usually left lying around. And with the taxes paid by us and the Canarian population of the community, a facility with a shower and toilet is being funded on the beach. Suggestion: Why aren’t there proper, legal campsites with water, electricity and a shop with a bar/restaurant to give this form of adventure holiday a professional atmosphere that generates sales, profits, tax revenue and order?

4. Long-term campervan traveller. We know some long-term campervan travellers who have been travelling in a campervan for more than five years and receive social security benefits from their country of origin. The number plate is not Spanish. Consequently, they do not pay any taxes or road tax.

Why is this behaviour – which is bad for the environment, the economy and hygiene – not only tolerated but even supported with taxpayers‘ money (showers, toilets)? This is where camping businesses and communities stand to gain revenue from authorised, regulated and high-quality camping holidays. And for whom is it too expensive? I reckon they can go camping in Norway. Because there, wild camping is legally enshrined as a right enjoyed by everyone.

Now, on to a very serious issue that gives me pause for thought. So much so that I find myself wondering whether all the money we have invested in the Canary Islands was a good decision, given that when laws are enforced, fundamental property rights can be infringed.

5. We would very much like to let it on a long-term basis. Not to tourists, but to local residents. This would be much easier given our current situation, as we live in northern Europe and work full-time. However, both other property owners and our paid advisers are advising us against it. And as you can see, the number of empty flats is significantly higher than the number of holiday flats. In fact, with us alone, there is a shortfall of three flats for long-term letting in the Canary Islands (and one holiday flat). We also have several friends who own more than one property but do not let them out due to legal uncertainty. The reasons are as follows:

6. Tenancy law. If a tenant stops paying the rent, they can continue to live there, and we even have to pay for water and electricity, as well as legal fees and court costs to resolve the case. The legal distinction between possession and ownership does not apply in these cases.

7. Squatters: We pay over 100 euros a month just for alarm systems for flats that are mostly empty (also because illegal flats are offered at lower prices to people on higher incomes). That is another reason why we would like to let it out on a permanent basis. However, the legislation is so irrational that a squatter with a dated and timed pizza delivery receipt has a ridiculously short timeframe of just a few hours to move into the flat, and cannot be legally evicted without judicial intervention after this short period. They cannot be removed after a maximum of two days. All this can take years and cost thousands of euros. It is not uncommon for the flat to fall into disrepair afterwards. What is a European democracy such as Spain aiming to achieve with this legislation? What does Brussels really think about this?

If the law protected property rights, we and others would also put our homes on the market. We wouldn’t charge exorbitant rents. We are not a public company, but a family that values peace and security. We want to cover our costs and we want the house and the plumbing to be used.

With regard to housing construction:

8. Growing demand: to put it simply, there is the local population, corporate expatriates, tourists and retirees, as well as other motivated immigrants, both documented and undocumented. How this is regulated is an internal matter for Spain, and I shall remain on the sidelines. However, many countries, such as Canada, have points-based systems. If you bring money and/or skills, you’ll be actively courted. If not, you will not be. I think that makes sense for the economy and society as a whole.

9. If social housing is discussed before the elections, will action be taken after the elections? Perhaps one could say so. Inversely proportional to that: very little.

10. How about an attractive regulatory framework for digital nomads and the self-employed? We have lots of friends up north who’d like to come to the Canary Islands officially for a few weeks or months, but are looking for legal certainty regarding tax and health insurance. Asian countries, in particular, have very good laws in this regard. You could learn from that.

11. Finally, the responsibility of companies – in this case, the major tourism firms. If employees cannot find housing, why don’t companies build housing for their staff? It is in their own interests, and they can even make money from it. Did you know there is a district in Berlin called Siemens-Stadt? Did you know that in many European countries there are so-called railway workers‘ estates? Companies take responsibility themselves. This is also the case, particularly in the hotel industry. There are market-based solutions. It is not enough for a company to always call on politicians and the state.

This brings me to my final point: Qui Bono? Who benefits from the massacre of legal short-term lettings and the lack of appeal of long-term rentals? It’s obvious, of course. Multinational companies. Who do these companies belong to? Or rather, the big foreign corporations. Or, depending on the Canary Islands: 1-2 local families who monopolise entire beaches and plots of land. So the profits either go abroad or remain in the hands of the feudal lords at the top of the pyramid. In the Canarian hotel sector, there are few medium-sized companies in percentage terms – that is, business owners whose families and employees benefit in a decentralised manner. For this reason:

12. VVs are small family-run businesses, some part-time and others full-time. Some are owned by local Canarians, whilst others are run by friends of the Canary Islands living abroad. VV tourists visit local supermarkets and restaurants and spend their money locally in regional businesses. In the giant hotels, people eat, drink, dance and relax by the pool, behind locked iron gates and wearing an identification wristband.

Everything to do with the creation of horizontal and vertical value within the corporate framework, carried out by staff who are not optimally remunerated and are often unskilled – whose frustration I fully understand. The VVs enable self-employment for many people across a wide range of different and flexible models. Canarians, mainlanders from Spain, EU nationals and people from other countries. People with a sense of responsibility and an active lifestyle.

Therefore, a system that puts law-abiding homeowners at a disadvantage, whilst the illegal letting or occupation of flats is legally protected or at least tolerated, creates both economic and moral incentives that do not promote prosperity or tax revenue.