Housing affordability: Approaches to measurement and key data insights

This background paper, titled "Housing affordability: Approaches to measurement and key data insights," was prepared for the Danish Presidency of the Council of the European Union for the High-Level Conference on Affordable and Sustainable Housing, held in Copenhagen on September 29-30, 2025. Published by the European Foundation for the Improvement of Living and Working Conditions (Eurofound), the document aims to address the pressing issue of housing affordability across Europe. The authors, Marie Hyland and Massimiliano Mascherini, are associated with Eurofound's Social Policies Unit, which focuses on providing research and insights into social policies within the EU.

The paper highlights that many Europeans face severe challenges in finding and affording homes, primarily due to a chronic undersupply of affordable housing. Factors contributing to this crisis include rapid urbanization, demographic changes, and the financialization of housing, which has led to soaring property prices and rents. There has also been a significant decline in the availability of social housing, exacerbated by reduced public investment and the sale of social housing units. For low-income individuals, achieving homeownership or affording the private rental market can be nearly impossible, with the social rental sector often being inadequate due to limited supply and long waiting lists.

The paper discusses various approaches to measuring housing affordability, noting that there is no international consensus on a single definition or measurement. Key metrics include the ratio of housing prices or rental costs to income, which provides a broad overview but may not accurately reflect household-level experiences. The housing cost overburden rate, which identifies the percentage of households spending more than 40% of their disposable income on housing, is used within the EU Social Scoreboard. However, this threshold can be arbitrary and does not capture the nuances of different household situations.

Between 2010 and 2024, house prices in Europe rose by an average of 55.4%, while rents increased by 26.7%. The paper notes that the most significant price increases occurred in capital cities and urban areas, driven by factors such as demographic shifts, net migration, and investor demand. The supply of housing is constrained by geographical factors and regulatory environments, leading to a persistent underinvestment in construction, with projections indicating that only 50% of the annual demand for new housing units will be met in 2025.

The report emphasizes that housing affordability challenges disproportionately affect certain groups. The analysis reveals that renters, single-parent households, and those at risk of poverty spend a significantly larger share of their income on housing. For instance, households classified as at risk of poverty or social exclusion spend an average of 35% of their income on housing. The 30/40 indicator of housing affordability stress reveals that 14% of households across the EU experience affordability stress, with young people and tenants facing the greatest challenges.

The paper concludes by highlighting the need for better metrics to capture housing affordability challenges across Member States, particularly in light of the complex relationship between housing costs and income. It raises essential questions about how to define unaffordability and how to incorporate housing quality into future assessments. The contradiction between declining aggregate housing cost overburden rates and widespread perceptions of unaffordability calls for further discussion and research into sustainable housing solutions across Europe.