The President of the Government, Pedro Sánchez, detailed this Monday that the new sovereign fund plans to mobilize 23,000 million euros for the construction of up to 15,000 affordable homes per year. The investment vehicle, called Spain grows, was announced on January 15, and euros in unused loans from the European Recovery Plan, as well as an additional 2.8 billion euros in the form of transfers that will not have to be returned. It will be managed by the Official Credit Institute (ICO).
The intention, however, is for this capital to yield much more. The Executive’s expectation is that it can be multiplied thanks to debt instruments up to 60,000 million euros, and that this amount will in turn double to 120,000 million euros thanks to the participation of the private sector. Of that total amount, 23,000 million will go to housing: 14,000 million from public sources (through the injection into the ICO and the debt it requests), and the remaining 9,000 million from private investors.
📺LIVE TV | “We have to build more public and affordable housing. The Spain grows fund will mobilize up to 23,000 million, to build 15,000 homes a year. It will roll out a red carpet for private investors but not for speculation”
— EL PAÍS (@el_pais)
“We have to build more homes, more public and affordable housing, and the lack of financing cannot be another of the bottlenecks that the sector suffers,” said Sánchez during his speech at the College of Architects of Madrid. The president has assured that it will be the largest volume of investment ever mobilized by Spain for housing, and has invited investment funds, venture capital funds and other sovereign funds to join the initiative. Of course, he has made it clear that profit cannot be the fundamental factor for those who participate. “We are going to extend a red carpet to the private investor, but not to speculate with a constitutional right, but to build a home for citizens with difficulties accessing housing.”
Housing will thus be one of the pillars of the fund’s investments, along with the competitiveness of Spanish companies, the energy transition and digitalization. The tool thus meets several objectives. It seeks to save community funds that had to be recycled in another format so that they do not expire in 2026. And it allows the Government to redouble its available resources at a time of budget paralysis.
The presentation of this instrument was scheduled for January 19, but the Adamuz train accident the day before forced Moncloa to postpone the event. The Spanish sovereign fund was born as a rare review among his peers. Not only because it is usually an instrument used by countries that sell raw materials to dispose of their surpluses, in the case of Norway or the Gulf countries, but because of the use of debt to enhance its effect. A part of that money will be used by the ICO to provide the capital necessary to build rental housing at affordable prices.
The idea that it is more of a reinforced ICO than a sovereign fund itself is, in fact, one of the criticisms of the opposition. The PP accuses the Executive of having created the instrument to cover up its poor execution of the European recovery plan and save part of the recovery plan loans that it has renounced. “It is not a sovereign fund. A sovereign fund is what countries that sell raw materials have,” the economic deputy secretary of the formation, Alberto Nadal. The Government, however, defends that it will continue the investment drive when the European recovery mechanism ends this year.
