Resource context
This resource is an essay from the European Investment Bank (EIB) that examines Europe’s housing crisis and outlines policy, financing and construction responses. It is authored by Janel Siemplenski Lefort and published by the EIB, drawing on EIB research and data sources such as the EIB Investment Report and EU statistics.
Scale of affordability pressures
The essay describes a long period of price growth that has outpaced incomes. Over the past 15 years, average rents in the European Union increased by about 25% and house prices by about 50%. Around 1 in 10 Europeans now spend 40% or more of their disposable income on housing, signalling widespread cost overburden. The text links these trends to shortages of affordable supply in many cities and to declining availability of social housing since 2010, even as the number of vulnerable people (including people experiencing homelessness and newly arrived migrants) has risen.
Who is affected and why it matters economically
The housing shortage is presented as a constraint on opportunity and competitiveness. The essay notes that young people delay starting families, students may turn down places at top universities, and essential workers such as teachers and nurses may avoid jobs in large cities because housing is unaffordable. It also highlights reduced labour mobility: high costs discourage people from moving to economically dynamic regions, which can make recruitment harder for employers, push up wages, and dampen productivity growth. The EU Commissioner for Energy and Housing, Dan Jørgensen, is quoted warning that the crisis undermines social justice and cohesion and weakens the economy.
Supply gap and construction bottlenecks
A central finding is that demand has outstripped supply for more than a decade. To close the supply gap, the essay cites an estimate that the European Union needs to build almost 1 million new dwellings. It argues that increasing supply requires faster and less costly building methods, regulatory reforms to speed permitting, and financing solutions for new construction and renovation. The construction sector is described as fragmented, with many small firms facing labour shortages and limited capacity to invest in digital tools or training; only about 25% of EU firms invest in innovation. The pandemic and subsequent inflation and interest-rate increases are also described as slowing residential construction through disrupted permitting, delayed material deliveries and labour constraints.
Drivers of price growth and distributional impacts
The essay links rising prices to urbanisation and the concentration of jobs and innovation in major cities. Between 2013 and 2023, rents rose by 50% to 100% in several capitals and large cities (including Lisbon, Dublin, Budapest, Berlin and Luxembourg). It also points to factors such as low interest rates and the growth of short-term rentals in tourist destinations, while noting that restrictions on short-term rentals are unlikely to solve shortages on their own without broader supply measures. On distribution, it reports that from 2010 to end-2024 rents rose 26.7% and home prices 55.4% (with very large increases in some countries). Ownership rates declined for 24–35-year-olds (down 5.9 percentage points from 2005 to 2023) and for low-income households (down 9 percentage points), and recent cross-border movers are much less likely to own a home than people born in the destination country.
Renovation, energy performance and the EIB action plan
Beyond new building, the essay emphasises upgrading existing stock: about half of Europe’s housing was built before 1980, and much of it is energy-inefficient (rated D or worse), making renovation essential but costly. It presents the EIB Group’s action plan for affordable and sustainable housing, including an aim to increase housing lending to €4.3 billion in 2025, targeting innovation in construction, building renovation and new supply, alongside advisory support and approaches that blend EU grants with loans. It also notes the EIB has financed nearly half a million social housing units across 16 countries since 2018.