The Spanish capital Madrid is part of one of the most dynamic city regions in Europe. The growing integration into the world market and the transition to a post-fordist production system paved the way for the economic rise of the region. It was accompanied by a booming real estate market, which was driven both by domestic demand and foreign direct investments. The Spanish real estate sector has become a driving force of urban development in a city region with a growing tendency of decentralization, polycentrism and dispersion. The lack of formal or informal guidelines for the regional development and the growth oriented development model lead to a huge increase in land use, predominately in the suburban and peripheral parts of the region and provoked high economic, social and ecological costs that make current model unsustainable. Furthermore, despite enormous investments in housing production there was neither a drop in demand nor a reduction in house prices. To date, the lack of affordable housing and its spatial distribution is one of the core problems of Madrid. The rise of the real estate market came to an abrupt end in 2007 leading the region and the whole country into a deep and ongoing recession.
However, the crisis was not accompanied by a fundamental change in terms of a new strategy for housing and spatial development. There were some measures taken by the national and -to a lesser degree- the regional government as result of it but altogether there was no fundamental change in the housing and spatial planning policies.
This paper will examine the housing sector, the urban development and the interdependence between the two. In a second step, the case studies of two municipalities in the region of Madrid, Rivas-Vaciamadrid and Arroyomolinos, will illustrate the regional trends from a local perspective.