In the late 2010s, when Europe had shown signs of recovery from the 2008 Crisis, another problem emerged: housing prices began to accelerate. Then COVID-19 struck, and housing costs have since outpaced income growth. What have European Institutions done in response?
Introduction
The rising cost of living driven by the housing crisis is often cited as Europeans’ top concern when casting their votes in national or European elections. Reports show that the housing prices, both for sale and for rent, have increased steadily every year over a 15-year-period.
The EU’s medium and smaller economies are among the most affected. In Hungary, houses have seen a price hike reaching nearly 250% since 2010, with a 125% increase in rental prices. In Portugal, Lisbon has been called the most unaffordable city in Europe as income growth has remained minimal. Czechia’s Prague has similarly become more unaffordable as lower- and middle-income households are gradually priced out of the city.
The problem is not limited to Europe’s middle and small powers, however. Housing access and affordability is worsening across the EU as whole, a trend the Commission has recognised as requiring a holistic, multipronged response. The European Affordable Housing Plan represents the clearest acknowledgement to date that housing affordability is no longer a peripheral issue, but one demanding coordinated European-level action.
Contextualising the Crisis
The leading cause of the crisis is a shortage of supply, although the factors behind this shortage are complex and vary by national context. Both the post-2008 recession and the COVID-19 pandemic significantly slowed construction and investment in real estate. In both instances, the market responded with rising costs.
As homeownership became increasingly expensive, demand for rental housing grew. Combined with urbanisation trends and incentives for short-term rentals, among other factors, rental prices rose sharply in the mid-2010s.
Many EU countries with the highest rates of homeownership are also among those most affected by housing shortages. This may be partly explained by the prevalence of single-family home purchases as a prevalent market practice in these member states.
From Limited Competence to Coordinated Action
Historically, the EU has done little to directly address the housing crisis, as housing policy approaches vary widely not only between countries but also across regions. Affordable housing has not been institutionally recognised as a core EU competence and has largely been left to national governments.
Still, in recent years, the EU has increasingly tested the limits of institutional action. As part of the Green Transition, the Commission has promoted energy-efficient construction, arguing that poorly insulated, fossil fuel-dependent homes entail higher long-term costs and risk exposure.
In 2024, under the “renovation wave,” the Commission launched the Affordable Housing Initiative, which set out goals to develop “Lighthouse Districts” in 100 European cities as models of sustainable, energy-efficient, and affordable housing. The European Investment Bank has likewise unveiled an action plan to promote investment and innovation in housing construction and renovation. In parallel, ”Eurocities,” a mayoral alliance of cities heavily affected by the crisis, published a report outlining recommendations and proposed actions addressed to the Commissioner for Energy and Housing, Dan Jørgensen.
Taken together, these initiatives signalled a shift away from passivity. The European Affordable Housing Plan may be understood as the institutional attempt to consolidate these fragmented efforts into a more coherent policy framework.
The European Affordable Housing Plan
In mid-2025, the European Commission unveiled a roadmap outlining the steps toward an active initiative to address the housing crisis, including consultations with the general public, public institutions, and experts. As part of this process, a team of experts was appointed to advise on and develop the Plan.
After months of anticipation, the Plan was formally presented in a Communiqué.
In it, the Commission establishes housing as a priority for social cohesion, growth, and competitiveness, while reiterating that housing policy remains a member-state competence and that EU action will be pursued through joint efforts. Funding is to be secured through instruments such as InvestEU, cohesion funds, and the Social Climate Fund.
The 22-page Plan (whose summarised version is also available) details four pillars:
- Boosting supply: In close coordination with industry, this pillar aims to promote innovation and productivity in construction through the creation of a “Construction Services Act,” the simplification of bureaucratic processes and red tape via a housing simplification package planned for 2027 and reductions in living costs through sustainable renovation practices that improve long-term cost efficiency (particularly regarding energy expenditure).
- Mobilising investment: This includes the creation of a “Pan-European Investment Platform for Affordable and Sustainable Housing,” comprising national hubs and an expert platform, as well as the potential allocation of €11.5 billion through InvestEU and the reprogramming of social cohesion funds at the national level. It also envisages increased public investment in social housing through simplified state aid rules, including exemptions from prior authorisation under certain conditions.
- Enabling immediate support: Measures include addressing short-term rentals in housing-stressed areas by enabling public authorities to adopt proportionate and justified regulatory responses; tackling speculation through enhanced transparency and investment in social economy institutions for housing; and promoting structural reforms in member states through targeted recommendations and support in the design of fiscal, housing and social policies..
- Supporting the most affected: Recognising that the housing crisis disproportionately impacts specific groups, such as younger generations, this pillar focuses on targeted support through investment in student housing and new accommodation models. It also aims to address homelessness and housing exclusion through a forthcoming Anti-Poverty Strategy and to identify and replicate proven best practices.
Policy Framing and Analysis: What this means for national and local governments
The European Affordable Housing Plan is a long-awaited response to the housing crisis. It is ground-breaking in that housing has traditionally been treated as an exclusively national competence.
The Plan is, broadly speaking, good news for Europeans seeking to buy or rent a home in the future. However, one recurring theme is social housing. While social housing appears to be a common denominator in successful housing models, the concept remains contentious and may raise concerns among centre-right and libertarian policymakers.
In fact, social housing has increasingly become a target of anti-welfare rhetoric, often portrayed as a relic of an outdated welfare-state model and associated with crime and poverty. As a result, many European governments have historically underinvested in social housing programmes.
In the UK, for example, the share of social housing relative to total housing stock declined in the years following the Thatcher administration, as homeownership was promoted and social rentals became concentrated among the most disadvantaged groups. By contrast, countries that have maintained a substantial social housing sector have been more successful in stabilising housing costs. Evidence from Austria, the Netherlands and even Singapore shows that social housing, whether state-managed or operated by non-profit entities, can moderate price growth in both rental and ownership markets.
Crucially, social housing is most effective when embedded within a holistic policy framework rather than used as a stopgap measure. Such an approach must address construction costs, skilled labour shortages and urban planning strategies that prioritise social inclusion, such as the French concept of mixité sociale. The Plan frequently references best practices from countries with strong, integrated social housing systems, which appear to have informed many of its proposals.
Finally, the initiative is likely to generate a series of legislative packages and proposals in the coming years. As the Commission notes, primary competence will remain at the national level, meaning that member-state governments are expected to act jointly in implementing the Plan. In short, the Plan itself will not deliver solutions directly; rather, it seeks to mobilise mechanisms that facilitate coordinated action from national governments.
Final remarks
Europe’s housing crisis may have taken a decade to command centre stage, but the political spotlight has finally arrived. With the European Affordable Housing Plan, the Commission has moved beyond isolated initiatives toward a more explicit, strategic engagement with housing affordability.
Notwithstanding, social housing remains a divisive issue for many on the political Right, who favour limited state intervention and spending. The Commission’s direction is therefore likely to encounter resistance unless the broader rhetoric around its proposals evolves. The fact of the matter is that pragmatism must be prioritised: housing affordability cannot be reduced to ideological contestation.
Social housing, whether made available by the state or by non-profit actors, is strongest in countries least affected by the housing crisis. Furthermore, without adequate regulatory support, traditional private real estate investment tends to favour a higher-income market. Member states must therefore prioritise policy frameworks that either prop up private social-economy agents, or deliver housing through public investment.
While the Plan’s effectiveness will ultimately depend on its design and implementation, its very existence marks a turning point: housing has entered the EU’s core policy conversation, at last. Whether this translates into stability and tangible relief for Europeans priced out of cities remains to be seen. For now, the Plan sets in motion an initiative that has long been needed, and the benchmark against which future European housing action will be judged.
Sources
Eurobarometer
Eurostat
The Guardian
OECD
European Commission (1, 2, 3, 4)
European Parliament
Statista
POLITICO
Bruegel
Eurocities
Eur-Lex
Housing Studies (Taylor & Francis)
Federal Reserve Bank of Cleveland
Durham University Business School
Austrian Federal Government
Marja Elsinga, Delft University of Technology
UN Habitat
High Committee for the Housing of Disadvantaged People of France (in French)
