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

“Gimme shelter: Cost-of-living crisis squeezes Europe’s housing” is an article published by POLITICO and written by Giovanna Coi. It examines how Europe’s cost-of-living shock has intensified long-running housing affordability pressures, particularly in cities, and it draws on analysis and reporting that includes perspectives from the OECD and other sources.

The article reports that house prices and rents have risen steadily across Europe since 2014. It notes that the COVID-19 period did not bring the typical downturn in housing demand; instead, demand increased as extended lockdowns and the expansion of teleworking kept more people at home. As economies began to recover in 2022, Russia’s invasion of Ukraine added new fiscal and energy pressures, contributing to a broader cost-of-living crisis that further strained household budgets.

The piece highlights that the impact is especially acute for urban residents and lower-income households, but it also emphasizes that affordability challenges have spread beyond the poorest groups. Lamia Kamal-Chaoui, director of the OECD Centre for Entrepreneurship, SMEs, Regions and Cities, is quoted describing the increase in housing prices as “tremendous,” particularly in large cities, and noting that the situation is “no longer just impacting the poor, but also the middle class.” The article also points to “inadequate” housing as part of the problem: households may face not only higher costs, but also difficulty maintaining quality living conditions, including staying warm.

Citing Eurofound research, the article states that younger residents are being hit hard: they live with parents longer, are more likely to rent than own, and can be discouraged from moving to places with better employment opportunities when housing costs are prohibitive. The article frames this as a competitiveness concern for cities that rely on attracting and retaining younger workers and professionals.

The article discusses concerns that price increases could point to a real estate bubble, but reports that early warning indicators suggest limited immediate bubble risk in most monitored cities. It references UBS’s 2023 Global Real Estate Bubble Index, which identified only two of 25 tracked cities—Zurich and Tokyo—as at risk. At the same time, it explains that central bank interest-rate hikes (introduced to address inflation) have increased mortgage costs, making home ownership harder for prospective buyers.

A core issue described is the shortage of suitable dwellings: demand is rising while supply is not keeping pace. The article attributes limited new construction to regulatory and space constraints, particularly in larger cities, and notes that building costs have increased substantially over the past decade, especially since the pandemic. It also mentions one response some cities have attempted—converting emptied commercial and office buildings into social housing—while stressing that this option is not widely available because many cities do not own public housing stock. The article concludes that mayors across political lines are increasingly treating housing shortages as a priority as residents’ preferences and urban quality-of-life pressures evolve, including movement toward suburbs and medium-sized cities that are also experiencing rising housing pressure.