Housing may not be an EU competence but the growing affordability crisis across the union demands attention.
The affordability of housing has become a major problem for many households across Europe. The affordability crisis may however look very different by country, region or demographic group. So while for some gentrification has raised rents in their neighbourhood, for others increased housing costs stem from more recently elevated interest rates.
The most severely affected are those renting from a private landlord, city dwellers and lower-income households. According to Eurostat, about one in ten European households in cities are overburdened by housing and energy costs. In addition to unaffordability, many experience housing insecurity: especially those renting privately are often stuck in temporary contracts with no long-term security of tenure.
At the same time, there are persistent concerns about housing quality, ranging from badly insulated homes, too expensive to heat or cool, to overcrowded conditions. Such precarious housing has many negative consequences for individuals’ working lives, for families and for children.
Wake-up call
While housing is not a direct competence of the European Union, the affordability crisis is a topic European policy-makers can no longer ignore—it should really be a wake-up call. In an event in February, organised by Housing Europe, the European commissioner for jobs and social rights, Nicolas Schmit, made clear that ‘the housing problem divides our societies, and it may be a risk for our democracies’. Framed positively, affordable, good-quality housing in an inclusive neighbourhood is the answer to some of today’s main social challenges.
Non-profit or municipal housing associations provide secure and affordable housing to many Europeans and they have played an important role in mitigating some of the consequences of recent economic crises. But the proportion of affordable rental housing in national and regional housing markets varies greatly, ranging from more than 20 per cent in the Netherlands, Denmark and Austria to less than 5 per cent in Italy, Germany and Spain.
Indeed, despite the urgent need for affordable housing, its share in most countries has actually been in decline. The speculative building boom in the wake of the global financial crisis has driven up land prices, which has made it increasingly difficult to secure affordable land.
Since the pandemic, construction costs have gone up sharply. Eurostat records an increase in construction prices of 26 per cent in the three and a half years to the third quarter of 2023—in some countries it was greater, including in Austria 35 per cent. Moreover, the cost of borrowing from capital markets has become a lot more expensive. The European Central Bank interest rate for main refinancing operations has gone up from about 1 per cent in mid-2022 to 4.5 per cent in September 2023 and has remained there since. While the ECB is planning a reduction in the near future, interest rates are expected to remain high compared with previous years.
At the same time, public (capital) investment in the construction of affordable housing has seen a sharp decline in most European countries. Already in 2018, a study by the European Commission estimated the investment need for affordable housing across Europe at €57 billion—this figure is likely only to have increased in the intervening years.
Renewed momentum
The EU alone will not solve the affordability crisis but there is a renewed momentum among many stakeholders to put housing on the agenda for the next five-year term. Take the Liège Declaration, endorsed in March by all housing ministers from the member states—the first time in the history of the union that such a declaration, urging a European ‘new deal’ for affordable and social housing, had been launched. Its objective is to enhance investment in new affordable housing and ‘green’ renovation of the existing stock. The commission and the European Investment Bank will provide the necessary funding.
The main challenges, and a list of demands for policy-makers, have also been laid out by Housing Europe (the European Federation of Public, Cooperative and Social Housing) in its recently launched manifesto. While implementation of most housing policies is up to national or regional policy-makers, the EU can set the right framework and facilitate access to finance.
The benefits of affordable housing reach far beyond the immediate social context in promoting cohesive societies. Investing in affordable housing has moreover many positive economic consequences. The policy-makers emerging after the European Parliament elections will hopefully build on this momentum.
This is part of our series on a progressive ‘manifesto’ for the European elections
Gerald Koessl (GKoessl@gbv.at) is a researcher at the Austrian Federation of Limited-Profit Housing Associations, a member of Housing Europe. He worked at the National Housing Federation in London and has a PhD from Goldsmiths College there.