Housing inequality in Europe - Tackling inequalities in Europe: the role of social investment

Overview of the Report

The Council of Europe Development Bank (CEB) published a comprehensive study on housing inequality across Europe, authored by economist Edo Omic under the supervision of Jérôme Halb. The research, released in December 2017, analyses how cost, quality and spatial segregation in housing contribute to broader socioeconomic disparities and evaluates public and private responses.

Scope of Housing Inequality

Housing inequality manifests through high housing costs, substandard quality, and neighbourhood segregation. Poor households often spend up to 40 % of disposable income on housing, face overcrowding, lack basic amenities, and live in areas with limited public services. Spatial segregation limits access to transport, education and health, reinforcing income gaps.

Key Findings on Cost Burden

In 2015, 31 % of the bottom‑20 % income quintile in Europe were overburdened by housing costs, compared with less than 10 % for higher quintiles. Social housing rent‑to‑income ratios average 35 % for low‑income renters versus 19 % for wealthier households. Market‑price rents generate an average over‑burden rate of 31.2 %, while subsidised rents reduce it to 11.7 %.

Quality Deficits and Overcrowding

Approximately 31 % of the poorest quintile live in overcrowded dwellings, with severe deprivation (lack of indoor toilet, heating or adequate floor space) affecting up to 10 % of the same group. In Central‑Eastern Europe, more than half of the bottom‑20 % experience severe overcrowding.

Neighbourhood Disadvantages

Low‑income neighbourhoods report higher crime, noise, and poorer satisfaction with the living environment. Access to green space and recreational facilities is markedly lower, especially in Central‑Eastern Europe, where the bottom quintile rates satisfaction below 6 on a 10‑point scale.

Public Spending Trends

Total public housing expenditure in Europe averages 0.66 % of GDP (2015), slightly below the 0.7 % average since 2000. Housing allowances account for 0.5 % of GDP, while capital investment in housing falls to 0.16 % of GDP. Sub‑national governments contribute the most, providing about 0.33 % of GDP, whereas central governments supply roughly 0.2 % of GDP.

Shift from Capital to Transfers

Since the 2008 financial crisis, European states have reduced direct capital spending on social housing and increased cash transfers. Housing allowances rose to 0.5 % of GDP, while capital spending peaked at 0.34 % of GDP in 2009 and declined thereafter. Countries such as the United Kingdom, Ireland and France maintain high transfer‑to‑capital ratios, whereas Bulgaria, Norway and Romania still rely more on capital investment.

Models of Housing Provision

Two broad models dominate: the dualist system (market‑oriented, prevalent in Anglo‑Saxon countries) and the unitary system (social‑market, common in Germanic and Nordic states). Dualist regimes tend to exhibit higher cost burdens and spatial segregation for low‑income households, while unitary models achieve lower deprivation rates.

Policy Recommendations Highlighted

The study advocates a two‑fold approach: increased investment in affordable, high‑quality homes and policy measures to promote income mixing and spatial integration. Suggested tools include land‑price controls, rent‑setting mechanisms, subsidies for energy‑efficient retrofits, and incentives for private landlords to provide social rents. Enhancing public transport, schools and health services in deprived areas is also deemed essential.

Sustainable Housing Implications

Energy‑efficient retrofitting can cut household energy bills by up to 60 %, reducing fuel poverty and contributing to climate goals. The CEB’s own projects, such as Belgium’s PIVERT programme, demonstrate that combined social and environmental benefits are achievable at scale.

Outlook for Europe

Overall, social housing spending (transfers and capital) remains modest relative to GDP, with a clear trend toward cash‑based assistance. To address persistent inequality, the report stresses the need for coordinated public‑private investment, stronger regional policies, and sustained focus on both the affordability and sustainability of housing across Europe.