Housing affordability: Approaches to measurement and key data insights

Resource overview: “Housing affordability: Approaches to measurement and key data insights” is a background paper published by the European Foundation for the Improvement of Living and Working Conditions (Eurofound), a tripartite EU agency established in 1975. It was prepared for the Danish Presidency of the Council of the European Union for a high-level conference on affordable and sustainable housing. The paper is authored by Marie Hyland (Research Officer, Social Policies Unit) and Massimiliano Mascherini (Head of the Social Policies Unit).

Why affordability is on the agenda: The paper frames Europe’s housing affordability challenge around a chronic undersupply of affordable housing, with pressures linked to rapid urbanisation, demographic change, and the “financialisation” of housing (treating housing as a commodity for investment and wealth accumulation). It notes a decline in social housing stock in some countries due to reduced public investment and sales of social housing units, alongside rising difficulties for low-income households accessing homeownership or the private rental market. The impacts described include reduced capacity to pay for essentials (food, healthcare, childcare), weaker ability to save, and effects on wellbeing and security.

How to measure housing affordability: Eurofound highlights that there is no international consensus on a single definition or metric, and summarises five prominent measurement approaches discussed by the OECD (2021). These include (1) house-price-to-income (or rent-to-income) ratios at country level, useful for broad tracking but too aggregate for household realities; (2) housing-expenditure-to-income ratios at household level, which can identify vulnerable groups but can be weaker for cross-country comparisons and depends on market structure and housing quality; and (3) residual income approaches, which assess income left after housing to meet a minimum standard of living but require complex data. The paper also discusses housing quality indicators (e.g., overcrowding; housing deprivation such as leaks, dampness, rot) and subjective measures (perceived financial burden), noting that perceptions and “objective” ratios may not align across age groups or countries.

Key EU-level data insights: A central paradox is that official EU statistics show improvement on an aggregate indicator while affordability concerns remain prominent. The EU average housing cost overburden rate (share of people spending more than 40% of disposable income, net of housing allowances, on housing costs) declined from 10.1% in 2017 to 8.2% in 2024. Over 2010–2024, average EU house prices rose by 55.4% and rents by 26.7%, with the largest increases reported in capital cities, employment hubs and popular tourist destinations. The paper also cites underinvestment in construction and references an estimate that in 2025 the EU housing supply will meet only about 50% of annual demand for additional units.

Who is most affected and what questions follow: The paper stresses that averages can mask sharp differences by tenure, geography, and household type. Across Member States, renters spend a larger share of income on housing than owner-occupiers, and urban residents can face much higher overburden rates than those in towns, suburbs or rural areas (with examples where city rates are more than double elsewhere). Using EU-SILC microdata, households at risk of poverty or social exclusion (AROPE) spend 35% of income on housing on average (vs 17% for non-AROPE). The 30/40 indicator (spending >30% of income on housing while in the bottom 40% of the income distribution) suggests 14% of EU households experience affordability stress, with higher stress among market-rate renters (31%), reduced-rate renters (25%), single-person and single-parent households, city residents (17% vs ~13% elsewhere), and young adults living independently (28% for ages 18–29 vs 14% for ages 30+). The paper concludes by posing practical policy questions on which EU-level metrics best capture current challenges, what “unaffordable” thresholds should be used across the income distribution, and whether affordability measurement should incorporate dwelling quality.