Understanding the housing crisis: Staff Working Document accompanying the European Affordable Housing Plan

The document titled "Understanding the housing crisis: Staff Working Document accompanying the European Affordable Housing Plan" was published by the European Commission. It serves as a comprehensive analysis of the housing affordability crisis affecting the EU, highlighting the key drivers and consequences of this issue. The document aims to provide a robust evidence base for the European Affordable Housing Plan, consolidating extensive data and research on the subject.

Housing affordability is defined as the relationship between housing costs and household income. Over the past decade, affordability has worsened, particularly in urban areas where the price-to-income ratios have increased. In some regions, even a medium income is insufficient to purchase a small apartment. For instance, approximately 40% of the urban population would require more than 20 years of mortgage payments to buy a 25 m² apartment.

The lack of affordable housing has significant social implications, including an increased risk of poverty, homelessness, and instability for vulnerable groups. In 2023, around 4% of the EU population faced severe housing deprivation, living in overcrowded and unfit dwellings. High housing costs disproportionately affect low-income households, leading to challenges in accessing education and employment opportunities.

Rising housing costs consume a large portion of disposable income, limiting spending on other goods and services. As of 2024, low-income households spent an average of 37% of their income on housing, compared to 16% for higher-income earners. The construction sector, while a key economic contributor, faces productivity declines due to rising material costs and labor shortages.

A primary cause of the housing crisis is the mismatch between supply and demand. The European Commission estimates that Europe needs an additional 650,000 dwellings annually to meet rising demand. However, building permits for new residential constructions have declined significantly, making it difficult to keep up with the growing need for housing.

The document emphasizes the need for affordable, sustainable, and quality housing. It highlights the importance of energy-efficient designs and the utilization of existing building stock to address the housing crisis without compromising environmental sustainability. Investment in energy efficiency can lead to significant long-term savings for households and help mitigate climate change.

Economic factors, such as income and mortgage rates, heavily influence housing demand. Urbanization and demographic shifts, including an increase in single-person households, further exacerbate the need for affordable housing in cities. The financialization of the housing market has also contributed to rising prices, making it challenging for many to enter the market.

The housing affordability crisis in Europe is multifaceted, impacting various social and economic aspects. It requires urgent policy interventions to enhance the availability of affordable housing while considering sustainability and quality. The European Affordable Housing Plan aims to address these challenges by providing a framework for action, ensuring that housing remains accessible and equitable for all citizens.