Europe's largest illegal settlement lies on the edge of Madrid. As the Spanish capital has grown, the city's limits have moved ever closer to the shantytown known as Cañada Real, a sprawling tangle of tents and cement houses. And as the economy has tanked, a growing number of people are calling it home.

Now the city is eyeing the property for possible development.

The roads in Cañada Real are unpaved. Houses are made of corrugated metal or cement. Some lots are just piles of garbage.

And when the power went out on a recent night, local men got together to climb up the utility pole and fix it.

Forty years ago, peasants who moved to Madrid for jobs built Cañada Real, located about 12 miles from the city's center. With the economic crisis, the settlement has swelled to as many as 40,000 residents — a mix of North African immigrants, Roma people and other Spaniards down on their luck.

Cristina Pozas, who is in her 40s, has lived here for 11 years.

"We've lived here for generations. But now the suburbs are encroaching on us, and suddenly we bother them," Pozas says. "The city has arrived here, and they want to get rid of Cañada Real. They want the money this land could bring them, and they want us to disappear."

Demolitions Begin After 40 Years

After decades of turning a blind eye to this illegal settlement, cash-strapped municipal authorities now want the land back. The authorities did not respond to requests for comment on this story.

But over the past two years, they've sent bulldozers to demolish dozens of homes, which they say are illegally built. Abdul Ghailan's house was one of them.

On a recent day, he kicked at a pile of rubble, all that's left of his home. A broken ceramic tile — a memento from Morocco, his homeland — falls off the side of the pile.

"They totally left me in the street. Thanks to help from my neighbors, I rebuilt my house again," Ghailan says. "But six months later, they came at 4:30 in the morning and demolished the house again, leaving me and my family in the street."

Cañada Real is built on a traditional livestock path, on a dry riverbed that's 9 miles long and a half-mile wide and has been public land for 700 years. People are allowed to be here, just not to build permanent dwellings — though some of the houses have been here since the 1970s.

Residents pay income and sales taxes, but not property taxes. Most built their houses themselves, with water tanks but no sewers. There are no schools or health clinics, either. People have to walk to other neighborhoods for those services. And they often use friends' or relatives' addresses, says Pozas.

"When my sons apply for jobs, they give the address of their grandparents. Because if they admit that they live in Cañada Real, no one will give them work," she says. They are very accomplished students, she adds, but may face discrimination if they list their real address.

No More Need For Workers

The stereotype of Cañada Real is unfair, says Marta Mendiola of Amnesty International.

"The local authorities have tried to criminalize people living there. They always have represented this area as a drug area, as an arms-dealing area," Mendiola says.

Spanish police say 90 percent of drug deals done in the Madrid area take place in Cañada Real.

But residents and human rights groups say those problems are exaggerated for political reasons, in order to win public support for the demolitions. Residents say they rarely see police in their neighborhoods, except when they come to evict people and demolish their homes, so they question how police are able to provide such statistics without gathering data from residents.

The focus on drugs and crime draws attention away from the real problem, residents say: the lack of affordable housing in Spain.

Luis Nogues, a social worker and professor who studies Cañada Real, says the slum provided many of the construction workers during Spain's housing boom.

Now, Spain's unemployment rate stands at nearly 24 percent. The rate for Spaniards under age 25 is more than 50 percent. The country's surge in unemployment over the past two years has hit the construction sector hardest. After the housing bubble burst, it was overwhelmingly construction workers who were laid off.

As a result, "Cañada Real no longer serves a purpose for big business interests in Madrid," says Nogues. "And that's the problem. So they're poised to remove it now. The only question is how."

Casino May Displace Dwellings

Ahmad Bilqayn came from Morocco 20 years ago for a better life. He says the living conditions here were a rude awakening.

"We're here in the European Union," Bilqayn says. "You can't leave people without houses, without anything, out on the street — leaving children out in the street. You can't do that."

The irony is, many of these residents helped build high-end condos that now sit empty, while they live in squalor.

Ghailan, the resident whose house was demolished, struggles to explain this all to his two kids.

"They say, 'Papa, it's OK, we can build another house.' I tell them our house was built poorly, and that I'll build a better, more beautiful house for them," he says. "I say it to calm them — to stop them from worrying."

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