Who's most affected by Europe's housing crisis?

Europe's housing crisis has escalated dramatically over the past decade, with average house sale prices in the EU increasing by 55.4% and rents by 26.7%, significantly outpacing income growth for many demographics. The situation is particularly critical in Portugal, where the European Commission estimates that housing prices are overvalued by around 25% above their fair value, surpassing other markets in the European Union.

Young people, especially those aged 18 to 29, are among the hardest hit by this crisis. A recent report by Eurofound highlights that this group is more likely to struggle with housing costs and utility payments. Many young individuals seek accommodation in urban areas where job opportunities are concentrated, but these locations also experience the most severe disparities between housing demand and supply. As a result, many young people are forced into living arrangements they would typically avoid, such as living with parents or relatives, which can lead to overcrowding.

Statistical data from 2024 reveals that the highest rates of overcrowded homes were observed in Romania (41%), Latvia (39%), and Bulgaria (34%). In stark contrast, countries like Cyprus (2%), Malta (4%), and the Netherlands (5%) reported much lower overcrowding rates. The challenges persist even for those young people who manage to live independently, as they often allocate a larger portion of their income to housing compared to other age groups, leading to increased financial strain.

Certain EU countries have recognized the severity of the housing crisis and are actively investing to alleviate the situation. In nations like Bulgaria, Ireland, Poland, Portugal, and Spain, as well as parts of Austria and Italy, the rental market is so unaffordable that tenants may need to spend over 80% of the median wage to rent a standard two-room apartment.

According to Eurostat data from 2024, the EU invested 5.3% of its GDP in housing. Cyprus led this investment at 8% of its GDP, followed by Italy at 6.8% and Germany at 6.2%. Conversely, Poland invested only 2.2%, with Latvia and Greece close behind at 2.5% and 2.6%, respectively.

The European Commission has initiated its first-ever Affordable Housing Plan to combat the housing crisis across the EU. This comprehensive plan includes measures aimed at identifying speculative behaviors and advocating for fairness in the residential housing market. The EU plans to mobilize at least €11.5 billion from its multiannual budget, in addition to the €43 billion already committed to social, affordable, and sustainable housing. National and regional banks are expected to contribute an additional €375 billion by 2029.

Unmet housing preferences have been associated with various negative outcomes, including difficulties in achieving independent living, constraints on career choices, adverse effects on mental health, and postponement of family planning. The ongoing housing crisis presents significant challenges that demand urgent attention and action from policymakers and stakeholders across Europe.