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

Overview – European Housing Crisis Report

The Staff Working Document titled “Understanding the housing crisis: Staff Working Document accompanying the European Affordable Housing Plan” is produced by the European Commission’s Directorate‑General for Economic and Financial Affairs. It consolidates extensive research and data on housing affordability across the EU, drawing on EU‑wide statistics, Eurostat datasets, and contributions from institutions such as ESPON, the European Environment Agency, and the European Investment Bank. The document serves as an evidence base for the European Affordable Housing Plan (COM(2025) 1025).

Key Findings – Affordability Worsens

Across the Union, the gap between housing costs and household income has expanded markedly. Price‑to‑income ratios have risen in most regions, especially in urban and tourist hotspots where a median household would need more than 30 % of its income to purchase a 25 m² apartment. Rental markets show a similar strain: new‑contract rents in capital cities have increased by about 36 % since 2013, outpacing both wage growth (≈44 %) and inflation. In 2024, 8.2 % of the EU population faced a housing cost overburden (spending over 40 % of disposable income on housing), rising to 31.1 % among those at risk of poverty.

Drivers – Supply Shortfalls and Demand Pressures

The report identifies insufficient new supply as the primary driver. The Commission estimates that Europe must add roughly 650 000 dwellings per year on top of the 1.6 million already built, at an annual cost of €150 billion, to meet projected demand. Building permits have fallen 22.2 % since 2021, reflecting constraints in labour, materials, and permitting processes. Demographically, urbanisation continues (EU urban share projected at 84 % by 2050), migration, and changing household structures (single‑person households grew 16.9 % between 2015‑2024) all boost demand. Institutional investors, short‑term rentals, and “golden‑visa” schemes further tighten supply in high‑value areas.

Economic Impact – Wealth Gaps and Productivity

Housing price growth (≈61 % nominal increase 2013‑2025) has outpaced income growth (≈60 % over the same period), amplifying wealth inequality. Homeowners gain equity, while low‑ and middle‑income renters allocate a larger share of disposable income to housing, reducing private consumption. The report notes that housing costs represent over 35 % of disposable income in Greece and about 25 % in Germany and Denmark. High costs also suppress labour mobility, hindering the allocation of skilled workers to growth poles and dampening overall EU productivity.

Social Consequences – Poverty, Homelessness, and Health

Around 1 million people in the EU are homeless, including 400 000 children. Young adults increasingly delay leaving parents’ homes (now 61 % of 18‑34‑year‑olds), and fertility rates fall where housing is least affordable. Vulnerable groups—people with disabilities, Roma, migrants, and victims of domestic violence—experience disproportionate housing insecurity, with over 30 % of Roma households living in inadequate conditions. Energy poverty affects 42 million Europeans who cannot properly heat their homes, linking housing quality directly to health outcomes.

Environmental Dimension – Construction Footprint

Construction and renovation account for roughly half of all extracted materials in the EU and about 6 % of EU greenhouse‑gas emissions. The sector’s material intensity and waste generation pose significant sustainability challenges. The report emphasizes retrofitting existing stock, densification, and adaptive reuse of vacant buildings as lower‑impact strategies compared with new land‑intensive development. Energy‑efficiency upgrades can deliver a 12‑to‑1 return on investment in terms of energy‑cost savings over a building’s lifetime.

Policy Recommendations – Integrated Sustainable Solutions

To close the supply gap, the document calls for streamlined permitting, increased public and private investment, and stronger incentives for brownfield redevelopment. It advocates for a balanced housing mix that combines ownership, social rental, and affordable private rental, supported by targeted subsidies that avoid inflating market prices. Tax reforms—such as higher recurrent property taxes on vacant or under‑occupied units and reduced tax bias toward owner‑occupied housing—are proposed to curb speculation. Finally, the plan stresses that any expansion of housing stock must be coupled with rigorous environmental standards, circular‑economy principles, and energy‑performance targets to align affordability with the EU’s climate objectives.