The Official Credit Institute (ICO) will open the application period on September 1 for new loans aimed at building affordable rental housing. The main novelty of the program is that part of this financing can be converted into a non-repayable grant when the project is not profitable for investors under the price limits required for this type of housing. This write-off can reach up to 30% of the loan, although its amount will be calculated on a case-by-case basis depending on the economic viability of each development. With this initiative, the Government aims to encourage investment in moderately priced housing to try to address the huge access crisis that exists in Spain.
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The line is part of the España Crece fund, the investment instrument that the Government calls the “sovereign fund” and with which the ICO plans to deploy new financing instruments for projects considered strategic. The organization has received a capital increase up to a total of 10.891 billion euros (originally estimated at 10.5 billion) from unused European funds from the recovery plan, with which it expects to mobilize up to 60 billion in financing and guarantees and attract joint public and private investment of 120 billion, according to sources from the organization who requested anonymity this Friday.
Housing will be the first area in which these instruments will be launched due to its priority nature. In this case, the total loans and investments planned over the coming years will have a financial capacity of 13.787 billion euros. According to ICO estimates, this allocation will mobilize nearly 23 billion euros of investment with private sector participation.
In this first phase of the project for affordable rental apartments, financing of 12.15 billion euros is planned. The program is structured in three modalities: loans for the promotion of new housing, long-term financing for the purchase and management of buildings intended for affordable rental, and a third option that combines both phases into a single instrument.
The first modality is aimed at developers who build the housing. These loans will have a term of up to seven years and will allow deferral of principal and interest payments during the construction period. Once the development is completed, the loan will enter the exploitation phase of the property. The second modality is designed for investors who acquire already completed buildings and keep them for affordable rental. In this case, interest will be paid periodically and the principal will be repaid at the end of the term, a scheme designed for long-term investments.
The third modality will integrate both phases into a single financing for operators who promote and manage the properties for decades. ICO expects these loans to extend up to 35 years, so that the same project moves from construction to rental without the need to contract new financing.
ICO admits that financing alone will not solve the accessibility problem in the real estate market. For developments to move forward, it considers it necessary for municipalities and autonomous communities to provide public land, as the cost of land is one of the main obstacles for projects to be profitable. The goal is to combine both aids — land and financing — so that tenders are not left deserted due to lack of developer interest.
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The main differentiating element of the program is the non-repayable portion. ICO will forgive up to 30% of the amount granted when the expected income from affordable rent does not allow obtaining the necessary profitability to carry out the investment. With this mechanism, the organization aims to compensate part of this gap and encourage the private sector to develop housing with limited prices that, under current market conditions, usually offer lower margins than other developments. Sources from the organization have insisted that by lowering promotion costs, it will be possible to align prices with the payment capacity of future tenants. The rest of the financing will be granted under market conditions.
For that 30% to be forgiven, the housing must permanently maintain its protection regime and be destined for affordable rental. As a reference, ICO sets the maximum price established by the Ministry of Housing at nine net euros per square meter per month (900 euros for a 100 square meter apartment). The amount will be updated each year with the Housing Lease Reference Index.
The loan write-off, in any case, will not be automatic. ICO will first verify that the conditions of permanent housing protection and energy efficiency standards (label A and B), as well as the green certificate, have been met.
Other projects
In addition to funds for housing development, España Crece includes instruments to finance projects linked to strategic technologies, ecological transition, and the growth of small and medium-sized enterprises. Among them are programs aimed at sectors such as cybersecurity, quantum computing, autonomous systems, or biotechnology, as well as guarantee platforms to facilitate SME access to credit.
The green transition will be one of the common criteria in all sovereign fund financing instruments. At least 36.5% of the resources will be allocated to projects that meet the European Union’s green labeling criteria. In housing, new construction developments must achieve a green label of at least 40%, while rehabilitation actions must comply with all the standards foreseen for this type of project. All must respect the European principle of not causing significant harm to the environment (known in sector jargon by the English acronym DNSH).
ICO expects the full set of España Crece instruments to be fully operational during the first quarter of 2027. The line dedicated to housing will be the first to be launched and applications can be submitted starting September 1.
