One roof, many realities: Europe's complex housing crisis

This research paper, published by the Analysis and Research Team of the Council of the European Union, addresses the multifaceted housing crisis in Europe. It emphasizes that the crisis is primarily structural, with varying local characteristics across Member States. The document presents an overview of the current housing landscape and its implications for policy discussions, especially in light of increasing housing costs and the need for sustainable solutions.

The paper highlights that housing prices in Europe have surged by 60.5% from 2015 to 2025, significantly outpacing disposable income growth. By 2024, EU households spent an average of 19.2% of their disposable income on housing, with stark differences between urban and rural areas. In urban regions, 9.8% of residents lived in households spending over 40% of their income on housing, leading to increased financial vulnerability. The crisis has been exacerbated by external factors such as the global pandemic and geopolitical instability, which have affected social stability and economic resilience.

New housing construction is lagging behind demand, with the European Investment Bank estimating that nearly 1 million new dwellings are needed to close the supply gap. Construction costs have risen dramatically, by 56% from 2010 to 2024, making it increasingly challenging to build affordable housing. The paper notes that the existing housing stock is largely outdated, with 85% built before 2000, contributing to poor energy efficiency. This inefficiency is exacerbating energy poverty, affecting 8% to 16% of the EU population.

Urbanization is projected to increase significantly, with cities expected to house 83% of the EU population by 2050. This rapid urban growth is leading to a mismatch between housing supply and demand, particularly for younger and lower-income households. The document notes that the EU faces a shortage of 4 million affordable units, while many existing homes are under-occupied. As the population ages, smaller households are becoming more common, necessitating a 10-15% increase in urban housing units by 2040.

The financialization of housing has introduced new challenges, as institutional investors increasingly treat housing as a financial asset. This trend has led to higher housing prices and rents, exacerbating affordability issues for lower-income tenants. Although institutional investors can help address certain housing gaps, their presence often fails to create genuinely affordable housing and can lead to gentrification.

The paper emphasizes the need for comprehensive and harmonized data on social housing, as well as tailored responses to the unique challenges faced by different Member States. It calls for a strategic discussion on housing at the EU level, recognizing that effective policies must consider the diverse housing systems and underlying causes of the crisis. Measures to improve affordability should aim to enhance housing as a public good rather than a financial asset, ensuring long-term accessibility and sustainability.

In conclusion, the document asserts that addressing the housing crisis is crucial not only for social well-being but also for the economic competitiveness of the EU. Sustainable housing solutions must be prioritized to meet the evolving needs of European societies.