Donald Trump may rage about Europe being a multicultural hell facing “civilisational” collapse. As a proud real estate guy, however, he must be impressed by one feature of European life: the house prices, and the extent to which even progressive governments have abandoned housing to the markets.
Since 2010, average sale prices in the EU have surged by close to 60%. In some countries, such as the Netherlands, house prices have doubled in a decade. Rents, meanwhile, have increased by almost 30% on average in the last 15 years. The rent average masks dramatic spikes experienced in some countries: 208% in Estonia, 177% in Lithuania, 108% in Ireland and 107% in Hungary. If property has been a lucrative bet for wealthy investors, the cost of a home is a financial ordeal for millions of people whose incomes have been outpaced.
Younger Europeans are bearing the brunt, with many barely able to rent independently or with any security, let alone afford a mortgage, even when they are in work. New research by the EU agency Eurofound (European Foundation for the Improvement of Living and Working Conditions) reported extraordinary levels of housing precarity:
• 30% of 25- to 34-year-olds in the EU live with their parents. (In Spain, Portugal, Ireland and Poland, the rate is almost 50%).
• Young Europeans spend almost one-third of their income on housing.
• Rents have inflated so much in Ireland, Poland, Portugal, Spain and Bulgaria that a worker between 18 and 34 has to spend more than 80% of their wage on a two-room flat.
No wonder Jaume Collboni, the mayor of Barcelona, says housing poses a threat to the EU as big as Russia. The price of a home in his city has risen by almost 70% in the past decade.
A range of factors is driving the affordability crisis, including a post-pandemic surge in construction costs. But the biggest structural issue, say experts, is “financialisation” – where homes are treated as a market asset whose value is expected to keep rising to generate profits for investors, rather than a basic human right. In a shift dating back to the 1980s, many European governments have disengaged from direct social housing provision. Home ownership has slumped, even in countries where it used to be an ingrained part of the culture.
The resulting crisis is not just a downer for young people still sharing a kitchen with their “full nester” parents – it is an economic drag. Employers can’t attract workers to the fastest-growing cities because this is where housing prices have escalated most.
Essential workers are being priced out, undermining public services. Ireland has had to recruit thousands of healthcare workers whose jobs often require them to be close to hospitals. “We are now completely dependent on non-EU workers in our [healthcare] professions,” Phil Ní Sheaghdha, president of the Irish Congress of Trade Unions, told a Eurofound conference in Dublin last month. “What we don’t tell them is that when they get here, they will have no place to live, or if they do, that 70% of their wages, if they are working as a nurse, is going to be spent on rent.”
Housing inequality is, in some countries, feeding the success of far-right parties that peddle a narrative of zero-sum competition between migrants and locals for scarce resources. In that sense, housing has become Europe’s political timebomb, say experts.
However, that risk of even more voters being drawn to the extremes is finally stirring action from the EU. On Tuesday, the European Commission unveiled its first-ever affordable housing strategy, which gives governments more leeway to subsidise affordable housing. Current rules, for example, have blocked authorities in the Netherlands from helping low-income households with housing. These are “the missing middle”, who are not poor enough to qualify for social housing yet can’t afford to buy or rent.
The new EU strategy takes aim too at short-term rentals, with new EU legislation expected to be framed by the end of 2026. This could allow local authorities in areas of “housing stress” to limit rentals.
The demand from Collboni and other mayors for €300bn a year in extraordinary Covid-style joint EU funds to construct affordable housing has not been taken up. Nor is there any radical move against speculation.
European governments have the real power at national level. They are under mounting pressure to disrupt the “asset” model and reinvest directly in social housing on a scale not seen since after the second world war, and extend eligibility beyond just the poorest groups. The fact that the EU is stepping in shows at least an awareness of what is at stake.
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