IMF Flags Housing Affordability as Andorra's Top Challenge, Urges Rental Focus

A recent International Monetary Fund (IMF) report has pinpointed housing accessibility as Andorra's top social and economic challenge, urging a shift in public policy toward affordable rentals rather than home ownership.

The analysis describes a rental-heavy market, where 65% of households rented in 2019, with costs hitting low-income families, low-skilled and seasonal workers, young people, newcomers, and foreign residents hardest. Around 13.9% of the population spends over 40% of its income on housing—higher than the European average—while nearly half of low-income renters face excessive burdens. Data from 2018-2019 underpin these findings, though the IMF notes significant changes since, including rents up 61% from 2015 to 2022 against just 6% wage growth from 2017 to 2021. Influxes of high-income residents and a tilt toward luxury developments have worsened shortages, alongside population growth, demographic changes, and foreign investment often for non-residential purposes.

These pressures, exceeding the EU's 48% rental rise over the same period, curb labour attraction, hiring, and investment, risking structural economic drag and social tensions. Low market fluidity, driven by longer tenancies and automatic contract extensions, further blocks access for temporary workers and new arrivals.

The IMF prioritises affordable rental policies over ownership promotion, which it sees as benefiting only a small group without addressing core issues tied to Andorra's immigration-dependent growth. Short-term tenant aid, like income-based subsidies, could prevent extreme hardship despite potential rent distortions. Rent controls offer relief but may stifle supply and mobility if applied rigidly.

Longer-term fixes include mobilising vacant or underused homes—such as through a new empty-property tax, inspections to reintroduce 3,000 units, fiscal incentives for affordable rentals, penalties for misuse, and tourist flat restrictions. It endorses planned initiatives like €50 million for 300 regulated rental units, a National Housing Institute, a Housing Fund, public-private partnerships, reserved quotas in new builds for long-term residents, and better data collection to replace past gaps in real estate statistics. Tax incentive reviews would also help balance the market.