Gimme shelter: Cost-of-living crisis squeezes Europe’s housing

The article "Gimme shelter: Cost-of-living crisis squeezes Europe’s housing," published by POLITICO and authored by Giovanna Coi, examines the escalating housing crisis in Europe, particularly in urban areas compounded by the cost-of-living crisis. It highlights how rising real estate prices and rents have made home ownership increasingly unattainable for many Europeans, particularly for city residents and poorer households.

Since 2014, house prices and rents have steadily increased, even during the COVID-19 pandemic, which saw a surge in housing demand due to extended lockdowns and the rise of teleworking. As the economy began to recover in 2022, the invasion of Ukraine introduced new financial pressures, exacerbating the cost-of-living crisis faced by households. Many Europeans have struggled to keep up with mortgage payments and rent, leading to significant arrears and difficulties maintaining comfortable living conditions.

Young Europeans are particularly affected by this real estate crisis, often living with their parents longer and opting to rent instead of buy. The high costs of housing discourage them from pursuing job opportunities in areas where they cannot afford to live, raising concerns for cities that rely on young professionals to remain competitive.

Despite fears of a real estate bubble, early indicators suggest that Europe may not be facing an imminent crisis. Central banks have raised interest rates in response to the cost-of-living crisis, reversing a decade of declining rates. However, this has resulted in higher mortgage costs, making home ownership even more challenging for prospective buyers. The ongoing shortage of suitable housing continues to be a significant barrier to affordability.

The demand for housing is increasing, yet supply is not keeping pace, particularly in larger cities where regulatory and spatial constraints complicate new construction. Building costs have risen significantly in the past decade, and while there was a rebound in construction approvals in 2021, the numbers dropped again last year, although they remain higher than pre-pandemic levels. Some cities have attempted to convert vacant commercial properties into social housing, but this approach is not uniformly applicable across Europe.

Cities are now recognizing the need for effective housing policies to address residents' changing needs. The quality of life in major urban centers has declined, leading people to seek more tranquil living conditions in suburban or medium-sized cities, which are also experiencing housing pressures.

As the housing crisis evolves, city leaders are prioritizing housing shortages. Many municipalities that previously remained inactive are now compelled to take action, driven by the urgent need to reconcile urban ambitions with the financial constraints imposed by the cost-of-living crisis. The article underscores the importance of addressing this issue to ensure sustainable housing solutions for all Europeans.