In 1912 Don Benigno Vega Inclán y Flaquer, Royal Commissioner for Tourism from 1911 to 1928, who was himself from Valladolid, reported to King Alfonso XIII the ruinous state the house was in. The King took up his suggestion and ordered the creation of an Institución Cervantina to “prevent the ruin and disappearance of this sacred memorial ... so that it could also be for the honour and glory of the capital of Castille.”. The Marquis proposed that the Hispanic Society of New York could be brought in to help in the project. Its president, Archer Milton Huntington, immediately joined in the project and thanks to the enthusiasm and resoluteness of the King and the American, the initative went ahead.
In 1912 the King acquired the house at nº 14, identified as the house where Cervantes had actually lived and Mr Huntington acquired the adjoining ones, nº 12 and nº 16 so as to be able to count on ‘space for development’ if some day the new cultural institution required it.
In late 1912 and early 1913 repairs were carried out on the house, paid for by the new owners and the Marquis continued with the work until 1916, when the State took over responsibility for the house.
The Town Council, on its part, ceded in 1912 the use of the space in front of the house, so that there would be an uninterrupted view of the house from the calle de Miguel Íscar. It was decided that the houses were to be a monument in memory of Cervantes, by converting them into a cultural centre with two libraries: one would be a popular library and the other was to specialize in the collection of rare and fine editions of the works of Cervantes.
When all the repair work had been completed, on 31 December 1915 , King Alfonso XIII generously donated house nº 14 to the State , a donation which was accepted by what was then the Ministerio de Instrucción Pública, on the only condition that the State promised that the Institution would figure officially in the Budget with specific provision for staff costs, essential maintenance expenses and the possible publication of special editions of Cervantes’ work.
On 23 April 1916 Popular and Cervantes´ Library, was opened to the public with a deposit of books from the National Library and the Marquis gave some of his own books to fill the recently installed shelves, making a total of over 4000 volumes.
As far as the house Cervantes had actually lived in was concerned – only four rooms on the first floor of nº14 – the Marquis addressed himself to the complicated problem of restoring it "with dignity, decorum and respect". He built up a collection of antique furniture in different styles and of varied provenence so as to be able to recreate the atmosphere he had set out to achieve, but the house was still not opened as a museum.
The Marquis also managed to obtain, in deposit, the upper part of the façade of the demolished Hospital of the Resurrection, dated 1579, and had it installed in the garden in front of the house. That Valladolid hospital, although it no longer existed , had been the home of Cipión and Berganza, the dogs who are the protagonists of one of the Exemplary Stories.
Following the King’s example, on 21 May 1918 Mr Huntington handed over to the Spanish government the ownership of nº12 and nº 16 , the two houses on either side of what was now called Cervantes’ house. The Marquis himself rented nº 10, to prevent it being sold and demolished.
The house was visited by members of the Royal Family on various occasions and the Library led an animated existence until 1936, but the institution gradually weakened and the Popular Library was damaged by flood water in the same year. Salto de línea In 1942 the Marquis de la Vega died and left nº 10 to the State.