Unpacking Europe's Housing Crisis

#Understanding the Scope of Europe's Housing Crisis

When politicians, media commentators, and housing experts speak of Europe's housing crisis, they are referring to a complex, multidimensional emergency that has evolved significantly over the past two decades. At its core, the crisis describes a fundamental mismatch between the supply of adequate, affordable housing and the needs of Europe's population. This manifests as unaffordable purchase prices, prohibitive rents, inadequate housing quality, overcrowding, energy poverty, and—at its most severe—homelessness. ^[1]

The European Parliament has identified that approximately 9% of EU households now spend over 40% of their disposable income on housing—a threshold defined as "housing cost overburden." ^[1] This figure, however, masks substantial variation: in Greece, 28.5% of residents exceed this threshold, whilst in Cyprus, only 2.6% do. ^[2] What began as a challenge concentrated among low-income groups has progressively engulfed middle-income households, young professionals, and essential workers who find themselves priced out of cities where they work.

#Defining Affordable Housing

Affordability is typically measured against household income. The commonly accepted benchmark holds that housing costs—including rent or mortgage payments, utilities, and associated expenses—should not exceed 30-35% of a household's disposable income. ^[3] When this threshold is breached, households face difficult trade-offs between housing and other essential needs such as food, healthcare, and education.

Yet this definition has significant limitations. It fails to account for the quality of housing people can afford, the distance from employment and services, or the security of tenure. A household may technically meet the 30% threshold whilst living in substandard, overcrowded conditions far from economic opportunities. Furthermore, income-based measures do not capture the growing number of Europeans who have simply given up searching for housing they can afford, resorting instead to remaining in parental homes, sharing overcrowded accommodation, or leaving cities altogether.

#A Fragmented Landscape: How the Crisis Differs Across Europe

Europe's housing crisis is not a single phenomenon but rather a constellation of related challenges shaped by vastly different national and local contexts. Housing systems across the continent reflect distinct historical trajectories, political traditions, and policy choices made over decades or even centuries.

Tenure structures vary dramatically. With more than 90% of apartments rented, Zurich stands as Europe's capital of tenants, followed closely by Leipzig and Berlin. ^[4] In Romania, by contrast, home ownership exceeds 95%. ^[5] Copenhagen's housing market features approximately 30% cooperative ownership—a tenure model virtually absent in southern Europe. ^[6] Vienna stands out with approximately 43% of residences in public or non-profit social housing—comprising 22% municipal housing and 21% cooperative dwellings—providing a stabilising force that has a price-dampening effect on the city's housing market as a whole. [7]* Meanwhile, cities like Barcelona and Lisbon have social housing stocks well below 5%, leaving most residents exposed to volatile private markets. [8]

Price levels and growth rates differ substantially. In Zurich, median apartment prices reach approximately €21,600 per square metre, making it among Europe's most expensive markets. [9]* Between 2015 and 2024, house prices in the EU rose by an average of over 50%, but this figure conceals enormous variation: Hungary saw prices increase by over 200%, Lithuania by 135%, and Portugal by over 120%, whilst other markets remained more stable. ^[1]

Rental market conditions are equally divergent. In Amsterdam, the average rent reached approximately €2,305 per month in 2024, with demand outstripping supply by approximately 45,000 homes. [10]* In Berlin, asking rents increased by 12% in 2024 alone, reaching an average of €15.79 per square metre—the third-highest figure in Germany after Munich (€21.69) and Frankfurt (€16.24). [11]* The availability of private rentals in the Netherlands fell by nearly 38% in the third quarter of 2024, whilst responses per available property surged, signalling intense competition and pushing up rents. [12]*

#Price Developments Over the Past Fifteen Years

The trajectory of housing costs over the past fifteen years reveals an accelerating crisis that has fundamentally altered the relationship between incomes and housing affordability.

From 2010 to 2024, EU-wide house prices increased by approximately 48%, whilst rents rose by over 20%. ^[13] However, wage growth over the same period averaged only around 20%, creating a widening gap between what people earn and what housing costs. ^[14] This divergence has been particularly pronounced since 2015 and accelerated further during the COVID-19 pandemic.

The share of income spent on housing decreased for homeowners from 18% in 2010 to 16% in 2019, while it increased for tenants from 28% to 31%. ^[6] This divergence reflects not only rising rents but also the increasing concentration of renting among lower-income groups who have been priced out of home ownership.

Examining specific markets reveals the severity of these trends:

• Barcelona has seen rental prices climb dramatically over the past decade, with the city's mayor declaring skyrocketing rents and home prices the city's "biggest problem." [15]*
• Berlin's asking rents increased by 12% in 2024 alone, with average asking rents reaching €15.79 per square metre—nearly double the protected rents enjoyed by existing tenants under rent control provisions. [11]*
• Portugal's residential property prices have risen over 120% since 2015, whilst construction of new housing has consistently fallen below the levels needed to meet demand. [8]
• Vienna, despite its extensive social housing system, has experienced significant rent increases in recent years, though rents remain approximately 20-40% below equivalent private market levels due to the cost-rent principle applied by cooperatives and municipal housing. [7]*

The Home Price-to-Income Ratio has deteriorated across most European cities. According to Deloitte's Property Index, residents in cities like Amsterdam now require over 15 annual salaries to purchase a standard apartment. ^[16] In Lisbon, the rent-to-salary ratio exceeds 100%, meaning the average salary is insufficient to cover average rent. ^[17] These ratios have transformed home ownership from an achievable aspiration into an impossibility for many Europeans without substantial inherited wealth or family support.

#Who Bears the Burden?

Whilst the housing crisis affects broad swathes of European society, its impacts fall disproportionately on certain groups.

Low-income households face the most severe challenges, often trapped in poor-quality housing, overcrowded conditions, or homelessness. Across the EU, approximately 700,000 people are sleeping rough or living temporarily in accommodation for the homeless, a figure that has risen by approximately 70% over the past decade. ^{[6] [18]}

Young people are particularly affected. The age at which at least 50% of Europeans live outside their parental home has increased from 26 to 28 years between 2007 and 2019. ^[6] Between 2010 and 2019, Spain, Croatia, Italy, Cyprus, Belgium, Greece and Ireland faced the largest increases in people aged 25–34 living with their parents. This delay is overwhelmingly attributed to economic constraints rather than cultural preference. A 2025 video report by ARTE found that average room rent in Madrid consumes over 70% of a typical student's budget. ^[19] Young adults aged 15-29 experience the highest overcrowding rates, with more than one in four living in overcrowded conditions. ^[20]

Essential workers—nurses, teachers, firefighters, service industry employees—increasingly cannot afford to live in the communities they serve. This creates operational challenges for public services and businesses alike, whilst forcing these workers into lengthy commutes that reduce quality of life and increase carbon emissions. ^[21]

Migrants and ethnic minorities face compounded disadvantages, often encountering discrimination in housing markets alongside lower average incomes and less secure employment. Research demonstrates that racialised minorities across Europe have long faced barriers in accessing housing, a situation exacerbated by current shortages. ^[22]

Single-parent families and single-income households struggle particularly in markets structured around dual-income assumptions, finding themselves unable to meet income requirements set by landlords or mortgage lenders.

#The Middle-Class Squeeze

What distinguishes the current crisis from earlier housing challenges is its expansion into middle-income households. Professionals with stable employment and above-median incomes—people who would historically have achieved secure housing—now find themselves competing for limited rental properties and priced out of home ownership.

In Munich, Germany's most expensive city, median rents for new leases have reached €21.69 per square metre—38% above the average for large German cities. [11]* A report by the European Council reveals that Lisbon, Barcelona and Madrid are the EU cities where citizens spend the highest percentage of their income on rent, with tenants in Lisbon currently having to pay more than their monthly salary to remain in their homes. [23]*

This "hollowing out" of the middle class in housing markets has profound social implications. Research across eleven European countries indicates that among those under 45, housing wealth is increasingly concentrated among higher-income households. ^[24] In Austria, France, Greece, Italy, and Luxembourg, this manifests as a "hollowing out" where middle-class housing wealth is eroding, whilst in Germany, Finland, Portugal, and Slovakia, wealth concentration occurs exclusively in the top income third.

#The Generational Divide

The housing crisis represents a profound intergenerational transfer of disadvantage. Young Europeans entering housing markets today face fundamentally different conditions than their parents encountered at the same age.

Post-war generations across Europe benefited from extensive government housing programmes that constructed millions of affordable homes. ^[25] In socialist states, housing was recognised as a fundamental right, with families able to rely on affordable cooperative and public housing. This historical foundation gave those generations a stable platform for family formation, wealth accumulation, and social mobility.

Today's young adults inherit the opposite: housing treated as an investment vehicle, depleted social housing stocks, and market rents that consume half or more of entry-level salaries. The result is delayed independence, postponed family formation, and reduced lifetime wealth accumulation. Young Europeans are increasingly likely to rent throughout their lives, never building the housing equity that their parents' generation used to fund retirement or support their own children's housing access.

This generational divide creates a self-reinforcing cycle: those who inherit property or receive family financial support can access housing and begin building wealth, whilst those without such advantages fall further behind with each passing year of renting. As one housing expert noted: "Homes across Europe have become so expensive that if you don't own one already, it will be challenging to afford the down payment on one in pretty much any major European city… unless, of course, you have family money or a really high salary." [23]*

#The Multiple Parallel Drivers of the Crisis

Europe's housing crisis results not from a single cause but from multiple interconnected drivers that have reinforced one another over decades. Understanding these drivers is essential for designing effective responses.

#The Financialisation of Housing

Perhaps no single factor has transformed European housing markets more profoundly than financialisation—the process by which housing has been converted from a consumption good and basic need into a financial asset and vehicle for wealth accumulation.

Since the 2008 Global Financial Crisis, institutional investors including private equity firms, pension funds, and real estate investment trusts have dramatically increased their presence in European housing markets. Globally, approximately $1.7 trillion in real estate is now managed by entities such as private equity firms and investment funds. ^[26] In Ireland, almost half of all new housing units constructed since 2017 have been acquired by investment funds. In the Netherlands, a quarter of recently sold homes in the four largest cities were purchased by institutional investors. ^[26]

Over the last years, the by far biggest share of European investments from professional, financial market-based investors went to Germany and in particular to Berlin, where eight major investors own residential real estate across multiple countries. ^[4] This influx of institutional capital has multiple effects: it increases demand and drives up prices, particularly in attractive urban markets; it shifts the focus of housing provision from meeting needs to maximising returns; and it creates pressure for practices such as "renoviction"—where renovations serve as pretexts for raising rents or displacing existing tenants. ^[26]

The EU itself has been identified as a "commodifying force" in housing through mortgage market liberalisation and competition law. ^[18] Tax policies across Europe further incentivise real estate investment, with analysis showing that in most EU countries, property investment receives preferential treatment compared to other forms of income. ^[27]

#Short-Term Rentals and the Platform Economy

The rise of platforms like Airbnb has fundamentally altered housing markets in tourist-attractive cities. Properties that might otherwise house long-term residents are converted to lucrative short-term holiday rentals, reducing supply and driving up prices.

The scale of this phenomenon is substantial. In France, short-term rentals tripled from 300,000 in 2016 to 800,000 in 2021. ^[28] In Greece, over 170,000 properties were listed for short-term rental via platforms between June 2018 and May 2019. ^[29] In cities like Barcelona, Lisbon, and Athens, short-term rentals now make up a significant percentage of total housing stock in city centres—sometimes exceeding 20%—drastically shrinking long-term rental availability and pushing local residents out. [30]*

Barcelona has taken the dramatic step of planning to eliminate all short-term rental licences by November 2028, with Spain's Constitutional Court upholding this plan in March 2025. [31]* Paris has implemented strict registration and time limits. Yet enforcement remains challenging, and the economic incentives for property owners to favour short-term lets over long-term tenancies persist wherever tourism is strong.

The impact extends beyond simple supply reduction. Short-term rentals transform neighbourhood character, replacing permanent communities with transient populations. They increase noise and disruption for remaining residents. And they contribute to a sense that cities are being optimised for visitors rather than inhabitants.

#Rising Construction Costs and Declining Supply

Europe is building far fewer homes than it needs. Building permits for residential structures have declined significantly since 2021, whilst the continent faces an estimated shortage of nearly one million dwellings. ^{[1] [32]}

Construction costs have risen dramatically—by over 50% between 2010 and 2024—driven by labour shortages, supply chain disruptions, higher material prices, and increased regulatory requirements including those related to energy efficiency. ^[5] The COVID-19 pandemic and subsequent geopolitical instability, particularly Russia's invasion of Ukraine, exacerbated these pressures.

In many cities, the gap between construction and need is stark. In Germany, 16.5 million single-person households faced a supply of only 5.5 million one- to two-bedroom apartments in 2020. ^[6] This undersupply creates a seller's and landlord's market, empowering property owners whilst leaving those seeking housing with minimal negotiating power and few alternatives.

#Interest Rates and Financing Conditions

The European Central Bank's interest rate increases since 2022, implemented to combat inflation, have transformed housing affordability calculations. Mortgage rates at least doubled in most European countries in 2022, and tripled in Finland, Slovakia, Switzerland, and the United Kingdom. ^[33]

Higher borrowing costs reduce the prices buyers can afford, creating downward pressure on property values in some markets. However, this has not translated into improved affordability—rather, it has simply shifted housing stress from high prices to high monthly payments, whilst making it harder for first-time buyers to qualify for mortgages.

For existing mortgage holders, particularly those with variable rates, rising interest rates represent a direct threat to housing security. The IMF has warned that European housing markets are at a turning point, with the cost-of-living crisis eroding real incomes whilst higher rates increase financial distress. ^[33]

#Energy Costs and the Burden of Inefficient Housing

Europe's housing stock is overwhelmingly energy inefficient. Approximately 75% of EU buildings are classified as energy inefficient, consuming excessive energy for heating and cooling. ^[14] In 2023, 10.6% of EU residents lived in households unable to afford adequate heating—up from 9.3% in 2022—with rates exceeding 20% in Lithuania, Bulgaria, Portugal, and Spain. ^[2]

High energy costs compound housing unaffordability. For low-income households spending an average of 5% of income on energy bills, and middle-income households spending 9%, inefficient housing represents a substantial additional burden. ^[14] Rural households face particularly severe challenges, with some spending twice as much on heating as their urban counterparts.

The need to renovate buildings for energy efficiency creates both an opportunity and a challenge. Improving insulation can reduce energy bills by 15-60%, whilst heat pumps use significantly less energy than gas boilers. ^[14] However, the upfront costs of renovation are substantial, and without adequate support, they risk falling disproportionately on those least able to afford them.

#Urbanisation and Demographic Shifts

European societies are becoming increasingly urban. Currently, over two-thirds of EU residents live in cities, towns, and suburban areas, with projections indicating over 80% will reside in urban areas by 2050. ^[5] This concentration creates intense demand pressure on urban housing markets whilst leaving some rural areas with excess housing stock.

Net migration flows compound these pressures. Between 2011 and 2019, Germany alone received net migration of 3.6 million people, with most settling in major cities where jobs and established communities exist. ^[34] This migration—both international and internal—increases demand in already-constrained markets.

Demographic changes also reshape housing needs. Ageing populations require different housing typologies, including accessible and age-appropriate accommodation. Smaller average household sizes mean more homes are needed to house the same population. Yet the housing being built often fails to match these evolving needs, with developers favouring luxury apartments over the family housing and affordable units most urgently required.

#Space Sufficiency and Under-Occupation

A frequently overlooked dimension of the housing crisis is the distribution of existing space. Whilst 16.8% of EU residents live in overcrowded households, 33% simultaneously live in homes with more space than deemed adequate. ^[2] This "under-occupation" represents a significant inefficiency in how Europe's housing stock is utilised.

Under-occupation is particularly concentrated among older homeowners whose children have left, leaving one or two people in homes designed for larger families. Whilst these householders have legitimate reasons for remaining—attachment to community, accessibility challenges, financial barriers to moving—the aggregate effect is to reduce the housing available for larger, younger households.

Addressing this mismatch requires sensitive policy approaches, including support for downsizing, shared housing models, and home-sharing arrangements, alongside new construction that provides attractive alternatives for older residents.

#Mismatched Supply: The Wrong Homes in the Wrong Places

Even when construction does occur, it often fails to produce the housing most needed. Developers, responding to profit incentives, frequently favour luxury apartments and high-end properties over affordable housing and family units. New construction in cities across Europe is increasingly oriented toward investors and high-income buyers, leaving middle and lower-income households competing for an older, shrinking stock of affordable units.

Social and affordable housing construction has declined dramatically since the post-war era. Once a major component of housing supply in many European countries, social housing now constitutes just 8% of EU housing stock on average, with much lower percentages in southern and eastern Europe. ^[32] The few new social units constructed each year cannot compensate for losses as older subsidised housing exits regulated status.

#Empty Buildings and Conversion Potential

Across Europe, millions of buildings stand empty or underused whilst housing shortages intensify. An estimated 47.5 million homes are vacant across the EU. ^[35] Meanwhile, changing work patterns have left substantial commercial space unoccupied—office vacancy rates have risen significantly in major European cities since the pandemic.

These empty spaces represent potential housing supply. Converting vacant offices, warehouses, and other commercial buildings to residential use could help address shortages whilst avoiding the environmental costs of new construction. However, regulatory barriers, planning restrictions, and the economics of conversion often impede such repurposing. Germany, recognising this potential, has launched the "Gewerbe zu Wohnen" programme to incentivise conversions, with €360 million budgeted for 2026. ^[36]

#The Housing Crisis and the Climate Crisis: An Interlinked Emergency

Europe's housing crisis cannot be understood in isolation from the climate emergency. The built environment and climate change are deeply interconnected, creating challenges that must be addressed together.

#The Built Environment's Climate Impact

Buildings are the single largest energy consumers in the EU, accounting for 40% of total energy consumption and 36% of greenhouse gas emissions. ^{[1] [35]} The construction sector contributes significantly to Europe's environmental footprint—nearly one-third of the continent's total—through material extraction, manufacturing, transportation, and on-site activities.

The vast majority of this impact comes from existing buildings rather than new construction. With 85% of EU buildings constructed before 2000, Europe's housing stock was largely built to standards that are woefully inadequate for climate goals. ^[5] Heating these inefficient buildings—42% of which still rely on natural gas—generates substantial emissions whilst creating dependence on imported fossil fuels. ^[14]

#The Renovation Challenge

Europe has set ambitious targets for decarbonising buildings, but current progress falls dramatically short. The annual renovation rate stands at just 1%, far below the 3% required to achieve climate neutrality by 2050. ^[37] Deep renovations—those achieving significant energy performance improvements—occur in only 0.2% of residential buildings. ^[14]

The investment gap is substantial. An estimated €150 billion per year is needed until 2030 for building decarbonisation, yet current funding and financing mechanisms fall well short. ^[14] The European Recovery and Resilience Facility has earmarked significant funds for building decarbonisation, and the EIB has approved initiatives including the €400 million HousingTechEU programme, but much more is needed.

Crucially, renovation must be achieved without exacerbating affordability problems. If the costs of upgrading buildings fall on lower-income tenants through rent increases, the climate response will deepen social inequality. Conversely, well-designed renovation programmes can reduce energy poverty, cut household energy bills, and improve living conditions whilst reducing emissions.

#Circular Construction and Planetary Boundaries

The climate imperative demands not just energy-efficient buildings but a fundamental rethinking of how we construct and renovate. Circular industrialised housing—approaches that prioritise material reuse, design for disassembly, and reduced resource consumption—offers pathways to more sustainable housing provision. ^[38]

Research identifies that building demolition releases significant embodied carbon that could be avoided through renovation and adaptive reuse. In Germany alone, an estimated 3.3 million tonnes of CO₂ are emitted annually through demolition and new construction. ^[37] Organisations like HouseEurope! advocate shifting funding from demolition and new construction toward renovation, alongside pricing mechanisms that account for the "grey energy" embedded in existing buildings.

The implications of planetary boundaries for housing are profound. Continued construction at historical rates using conventional methods is incompatible with climate targets. Europe must learn to make better use of existing buildings, build more efficiently when construction is necessary, and accept that infinite expansion of housing footprints is unsustainable.

#Broader Macro-Social Implications: Beyond Individual Hardship

The housing crisis extends far beyond individual and household hardship. It creates systemic challenges for European economies, societies, and democratic institutions.

#Economic Competitiveness and Labour Mobility

Housing unaffordability directly undermines European economic competitiveness. When workers cannot afford to live in productive urban centres, businesses struggle to recruit talent, innovation suffers, and growth stalls.

The European free movement of workers—a foundational principle of the EU—becomes theoretical rather than practical when housing costs prevent relocation. A nurse from Portugal cannot take a position in Munich if rent would consume most of their salary. A software developer from Poland may decline opportunities in Amsterdam if finding housing is essentially impossible.

This immobility has measurable economic costs. Businesses report difficulty attracting and retaining staff in high-cost cities, with some relocating functions to more affordable regions. Essential services face staffing shortages as workers in nursing, teaching, and public safety are priced out. The aggregate effect is reduced productivity and slower economic growth across the continent.

#Democratic Implications and the Rise of Extremism

Perhaps most concerning are the political implications of the housing crisis. Housing unaffordability is fuelling support for extremist political movements across Europe.

As researchers have documented, the failure of mainstream progressive parties to prioritise housing has created space for far-right parties to exploit grievances. ^{[39] [25] [40]} In the Netherlands, Geert Wilders and his Party for Freedom gained traction in 2023 elections by addressing housing shortages, framing them as a consequence of immigration. In Portugal, the Chega party emerged as a leading opposition force by criticising the government's failure to address escalating home prices.

Far-right parties have developed what researchers term an "ultraconservative housing ideology" that targets the middle class and emphasises property ownership for "deserving" national groups. ^[40] This ideology frames housing as a matter of national identity rather than a social right, blaming migrants and minorities for scarcity rather than addressing structural causes.

When democratic institutions fail to provide basic needs like housing, public trust erodes. As one analysis noted: "If European democracies fail to deliver on the basic promise of shelter, they risk inviting political catastrophe." ^[25] A generation locked out of stable housing has less investment in the democratic order and may be more open to radical political experiments.

#Threats to the European Project

The housing crisis poses specific risks to Europe as a democratic and peace-building project. The EU was founded on the promise of shared prosperity and opportunity across borders. When a Portuguese citizen cannot afford to live in Paris, or a Spanish worker cannot access housing in Berlin, that promise rings hollow.

The crisis also undermines social cohesion within and between EU member states. Resentment grows when wealthy northern Europeans purchase holiday homes in southern cities, driving up prices for local residents. Tensions emerge when different generations within the same country face radically different housing prospects. These divisions, if unaddressed, threaten the solidarity on which the European project depends.

European Commission President Ursula von der Leyen acknowledged this threat in her 2025 State of the Union address, declaring: "This is not just a housing crisis. This is a social crisis. A crisis of dignity, of fairness, of opportunity." ^[21] The appointment of the EU's first Housing Commissioner and the commitment to a European Affordable Housing Plan represent recognition that housing has become an existential issue for European integration.

#Conclusion

Europe's housing crisis is not a natural disaster or an inevitable consequence of market forces. It is the result of policy choices made over decades—choices to treat housing as an investment vehicle rather than a basic need, to reduce social housing provision, to favour homeowners over renters, and to allow financial capital free rein in housing markets.

These choices can be reversed. The diversity of European housing systems demonstrates that alternatives exist: Vienna's social housing model, Zurich's cooperatives, Copenhagen's cooperative tenure, and Finland's Housing First approach to homelessness all show that policy can make housing more accessible and affordable.

The stakes of action—or inaction—are profound. At the individual level, housing determines quality of life, health outcomes, and opportunities for advancement. At the societal level, it shapes inequality, social cohesion, and democratic legitimacy. The housing crisis is not merely a housing problem; it is a challenge to Europe's values and its future.

The hypothesis at the heart of this research—that a Pan-European Housing Cooperative could foster more sustainable urban living—must be understood against this backdrop. Any solution to Europe's housing crisis must grapple with financialisation, address supply constraints, navigate climate imperatives, and restore faith that democratic institutions can deliver on fundamental needs. The chapters that follow will explore how cooperative and collective approaches might contribute to such solutions.