OP-ED

How the EU should tackle the housing crisis

Social policies / OP-ED
Elizabeth Kuiper , Javier Carbonell

Date: 14/11/2024

The EU has its first Commissioner for Housing, Dan Jørgensen, but his mission will only succeed if the EU manages to come up with a joined-up approach and collaboration between relevant parts of the Commission.

Housing is the largest household expense across the EU, and the problem has worsened in recent years. Since 2010, EU house prices increased by 47% and rents by 18%, outpacing inflation. High building costs, rising mortgage rates, and a decrease in construction activities have strained supply, while the increase in short-term rentals and investment-driven property purchases inflates prices, especially in cities. The burden falls disproportionately on low-income households, urban residents, and young people. In Finland, Spain and Sweden, for instance, low-income tenants spend over 40% of their disposable income on housing and Southern Europeans now leave their parental homes past the age of 30. Today, housing works as a regressive tax on the young and poor, who are paying older, wealthier property owners for a place to live.

In several European countries, it has become a central issue in political discourse, featuring prominently in the recent European elections. Mainstream parties are bearing the brunt of this shift. Left-wing parties are most affected, facing criticism for unmet promises on housing, but centrist and right-wing parties are also under pressure to deliver solutions. However, despite political attention, the housing problem continues to worsen, and government interventions across Europe have failed to halt this trend.

This failure is deeply concerning and has two important political consequences. First, the proposed solutions by parties show a left-right divide that prevent finding common ground. Whereas centrum-left parties have traditionally addressed the housing problem through the lens of inequality and social policies, radical right parties started exploiting the issue and use migration policies to address the housing crisis. Second, dissatisfaction is pushing people toward direct action measures such as protests and rent strikes, as exemplified by the recent Madrid’s Tenant’s Union demonstrations. This will increase social unrest and create a climate favourable to extremist parties.

How the housing crisis affects the Commission’s priorities

Housing significantly impacts many of the new Commission’s priorities. Beyond its effects on the wellbeing on millions of Europeans, the housing crisis also affects EU’s energy transition, given that buildings are responsible for 40% of Europe’s energy consumption. Although the new Energy and Housing Commissioner role acknowledges this, housing’s effects on prosperity and democracy - other priorities outlined in von der Leyen's mission letters - remain insufficiently recognized.

The EU’s housing crisis hampers competitiveness and economic growth, as high housing costs reduce disposable income, limiting spending in high-value sectors like technology and green industries. Young professionals struggle to afford urban housing, leading to talent shortages in key cities and stalling business growth and innovation. The housing crisis also exacerbates economic and regional inequality, creating economic divides that undermine the EU's prosperity goals.
The housing crisis also poses a threat to the EU’s priority on democracy, as citizens strongly link the legitimacy of political systems with the economic outcomes they deliver. The economic crises of recent decades, compounded by slow growth and inflation, are one of the main causes of the erosion of public trust in democracy across Europe. Many Europeans, particularly young people, are becoming disaffected with democracy as they feel it does not hear their economic demands. This disillusionment may affect their support for democracy and incite them to vote for extremist parties.

What can the EU do on housing?

The prospect of a European Commissioner for Housing presents an opportunity for the EU to address structural drivers of the problem at the Member States level and unlock public and private investment for affordable and sustainable housing, as stated in the mission letter. Yet, the portfolio of the new Commissioner mainly sees the housing problem through the lens of the just transition and addressing energy poverty. As much as inefficient housing conditions and high energy prices are important drivers, the broader context of the housing problem needs to be addressed too.

The profound impact of the demographic transition on infrastructure and housing should not be underestimated, nor the role the European Pillar of Social Rights (EPSR) should play as part of the framework to ensure access to affordable and quality housing. Long-term social investment is needed to provide public and private partners with the right incentives to invest in people’s wellbeing and the EU’s competitiveness.
Besides investment, there are a number of initiatives the EU can take such as prioritizing housing affordability in the European Semester by including the principle that people should not spend more than a given share of their income for housing costs. As part of the new Commission’s aim to revise State aid rules it could remove the SGEI regulations’ narrow target-group definition of social housing as limited to ‘disadvantaged citizens’ and expand it to encompass a broader understanding of social housing. The EU should also enhance its role in sharing best practices by expanding URBACT, an initiative for sustainable urban cooperation, to include housing affordability.

To make meaningful progress in an area where the EU traditionally does not have competences, the EU should act with foresight and work on a joined-up approach with relevant Commissioners involved. The current lack of coordination in the letters illustrates this approach is not in place yet. A case in point is Commissioner-elect Suica’s mission letter, which does not make the link with the Affordable Housing Plan despite having acknowledged the link between the demographic transition and housing in her current role.

The current focus on competitiveness and productivity following the publication of the Letta and Draghi reports needs to go hand in hand with long-term investment in the housing sector, ultimately increasing citizens’ trust in democracies. Only by recognizing the housing crisis as a multifaceted problem will the Commission manage to prove the EU’s added value in this area.

This op-ed was originally published in Social Europe

Elizabeth Kuiper is Associate Director and Head of the Social Europe and Well-being programme at the EPC.

Javier Carbonell is a Policy Analyst at the European Politics and Institutions Programme at the EPC.

The support the European Policy Centre receives for its ongoing operations, or specifically for its publications, does not constitute an endorsement of their contents, which reflect the views of the authors only. Supporters and partners cannot be held responsible for any use that may be made of the information contained therein.

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