Resource context
This European Investment Bank (EIB) essay, published by the EIB and written by Peter Koh, examines how affordable and sustainable housing in Europe can be financed, and why market forces alone often fail to deliver homes at prices many households can afford.
Why the market under-supplies affordable homes
The central economic barrier described is profitability: building “decent housing at prices people can afford” is often not profitable enough for private developers, especially when land is scarce and developers can earn higher margins at the upper end of the market. The article frames this as a “market gap,” particularly for “non-market” housing (below-market rents or prices) aimed at people who cannot afford market housing. EIB advisor Gunnar Muent is quoted as explaining that public support is typically required because otherwise projects can be loss-making or only marginally profitable, and the deeper the discount to market price, the greater the public support needed.
Cost pressures and regulatory uncertainty
The essay highlights sharp cost escalation and uncertainty as structural drivers of the housing crisis. Construction costs are reported to have increased by as much as 48% between 2010 and 2023, while land prices have surged in many regions. It also points to accumulated regulatory burdens, administrative uncertainty, and delays (including protests, legal changes, and permitting delays) that increase financing needs and risk, raising end costs. Industry representative Joël Schons (FIEC) is cited describing the compounding effect of continual new regulations and uncertainty on housing prices.
EIB Action Plan: scaling finance across the EU
In response, the EIB Group’s Action Plan for Affordable and Sustainable Housing (launched in June) is presented as a value-chain approach, aiming to support links from construction innovation to municipalities, public housing authorities, and financial intermediaries. The plan targets a 40% increase in annual EIB financing for affordable and sustainable housing in 2025 (from an average of about €3 billion per year over the previous five years). Over the five-year period starting in 2026, the EIB states this could support construction or renovation of more than 1.3 million housing units.
Deal examples and higher financing share for efficient, affordable projects
The article notes that EIB lending for affordable housing has historically been concentrated in countries with established policy frameworks, and that the action plan aims to extend financing to all 27 EU Member States. As an example, it cites a €60 million loan (signed May 2025) to Česká spořitelna in Czechia to support construction of more than 700 energy-efficient, affordable apartments in Prague for public-sector workers. It also explains that the EIB can finance up to 75% of project costs for investments combining affordability with high energy efficiency, compared with a typical ceiling of 50%, and that in specific justified cases EU and EIB funding could be combined to cover up to 100% of project costs.
“Housing problems are local”: a toolkit mixing loans and grants
The essay emphasizes that housing constraints differ by place (land availability, planning, and other local factors) and describes work with the European Commission’s Directorate-General for Regional and Urban Policy to develop a model financial instrument for affordable housing. This “toolbox” approach is designed to help national and regional authorities channel public funds (including EU cohesion funds) in ways that attract more private and public investment. A key design feature is flexible combinations of loans and grants—such as capital grants, interest-rate subsidies, or capital rebates tied to performance—to de-risk projects and tailor support to local market conditions.
Policy and advisory support alongside funding
Beyond capital, the EIB’s advisory services are described as supporting countries that lack affordable-housing policy frameworks or relevant regulations, drawing on long-running European models (including examples like France, Austria, and the Netherlands). The article cites an agreement signed in November 2024 with five Croatian cities (Zagreb, Rijeka, Split, Osijek, and Varaždin) to develop local guidelines and identify financing approaches for social and affordable housing. Advisory work is also described as exploring solutions such as office-to-housing conversions and guidance for public-private partnerships.
One-stop shop and wider EU policy momentum
To simplify access, the EIB has set up a “one-stop-shop” that acts as a central contact point for public authorities, housing providers, construction firms, and financial intermediaries seeking EIB financing or advice. The piece also situates the initiative within broader EU actions, including a dedicated housing commissioner tasked with developing a European Affordable Housing Plan, a Commission proposal to modernise cohesion policy with affordable housing as a priority, and parliamentary work on recommendations such as regulating short-term rentals, boosting construction and renovation, repurposing vacant units, increasing EU funding, and mobilising private investment.