The European Investment Bank (EIB), led by author Peter Koh, addresses the pressing issue of financing affordable and sustainable housing in Europe. The report highlights the economic challenges that prevent private developers from building affordable housing, primarily due to the lack of profitability in creating homes at lower price points. The rising construction costs—up to 48% from 2010 to 2023—alongside skyrocketing land prices and regulatory burdens, have created a significant market gap in accessible housing.
The report explains that public support is crucial for developing non-market housing that caters to citizens unable to afford market prices. Without such assistance, many housing projects would either result in losses or barely break even. The EIB acknowledges that the ongoing housing crisis is particularly severe in urban areas and coastal towns, necessitating coordinated efforts across all EU member states.
In response to these challenges, the EIB has launched the Action Plan for Affordable and Sustainable Housing, aiming to increase annual financing by 40% in 2025, which would support the construction or renovation of over 1.3 million housing units. The plan intends to broaden financing beyond countries with established affordable housing frameworks to all 27 EU member states, ensuring that funds are allocated to meet local needs effectively.
The EIB’s financing strategy includes significant loans for affordable housing projects, such as a recent €60 million loan to Česká spořitelna in Czechia for the construction of energy-efficient apartments in Prague. Notably, the EIB can now finance up to 75% of project costs for investments that merge affordability with energy efficiency, a substantial increase from their usual cap of 50%. In special circumstances, they may even combine EU and EIB funding to cover the entire project cost.
To tackle localized housing issues, the EIB is collaborating with the European Commission to develop a financial toolbox tailored to regional needs. This new model allows national and regional authorities to channel public funds into the housing sector by creating flexible combinations of loans and grants. Such an approach helps mitigate risks for investors and facilitate private and public investment in affordable housing.
Beyond financial support, the EIB emphasizes the importance of strong policy frameworks and regulations to foster investment in affordable housing. Their advisory services assist countries lacking such frameworks in developing effective policies by drawing on successful practices from nations with established affordable housing systems, like France and Austria.
The EIB has also initiated partnerships with various cities, such as five Croatian cities, to create local guidelines for financing social and affordable homes. These efforts align with the European Commission’s wider strategy, which includes appointing a commissioner for housing to develop a European Affordable Housing Plan and modernizing cohesion policy to prioritize affordable housing.
To streamline access to housing solutions, the EIB has established a "one-stop-shop" for public authorities and housing providers. This central point of contact facilitates communication and project support, making it easier for stakeholders to obtain financing and advice for their housing initiatives.
Overall, the EIB's comprehensive approach, combining financing, advisory support, and innovative solutions, aims to address the urgent housing crisis across Europe, ensuring that more citizens can access affordable and sustainable housing solutions.