Many low- and middle income households across Europe continue to be burdened by an affordable housing crisis, warns the United Nations Economic Commission for Europe (UNECE) in a new report.
Housing stress is experienced by over one third of households in Europe belonging to the lower 40% of income distribution, the report reveals.
"Housing policies have been neglected for too long. Given the huge numbers of people affected and the implications of decent housing for health, poverty reduction and social inclusion, affordable housing must be brought to the top of the political agenda," urged UNECE Executive Secretary Tatiana Molcean, who called for a Ministerial Meeting on Housing in 2025.
While the severity of housing affordability issues varies significantly between countries, many households across the region face housing costs that exceed 45% of their income, far above the so-called "30 per cent rule" of spending no more than 30% of gross income on housing expenses.
While housing affordability issues affect large swathes of the population in Europe, the poorest households are the hardest hit. In some countries, such as Estonia, France, Iceland and Italy, housing costs reach around 60-70% of income for households under the poverty line. This figure reaches above 80% in Romania and Serbia.
The right to adequate housing is a human right recognized in international human rights law as part of the right to an adequate standard of living.
The report, which informs discussions between Mayors and policy makers at UNECE's intergovernmental Committee on Urban Development, Housing and Land Management, warns that low-income households experience greater volatility in their ability to afford housing expenses relative to their income, which makes housing accessibility more challenging and increases vulnerability. Newcomers to the housing market, immigrants, young families and young people in general, older persons, and single-parent families are among the most affected by affordability challenges.
Housing affordability was also among priority issues raised by many city leaders at the UN Forum of Mayors, who called for stronger measures at national level to support local efforts.
The Housing Stress ratio - the percentage of housing costs relative to income for households that fall within the bottom 40% of income distribution - was on average 34% for the 32 countries included in the study (see table below) in 2020.
Estonia, Greece, Iceland, Italy, Luxembourg and the United Kingdom were found to have housing stress above 40%. Only 12 countries exhibit housing stress levels under 30% (Cyprus, Czechia, Germany, Croatia, Ireland, Lithuania, Latvia, Malta, Portugal, Romania, Slovenia and Slovakia), suggesting a relatively better situation for lower-income households in covering housing costs.
Recalling that affordable housing is critical for the wellbeing of society, the report warns that failure to address the situation can prevent households from meeting other essential needs such as energy and food and pose barriers to accessing education, transportation and more. The lack of affordable housing pushes many into substandard homes which are typically overcrowded and concentrated in disadvantaged neighbourhoods, perpetuating a cycle of poverty. Ultimately, the lack of affordable housing is among the factors leading to homelessness.
The impact of housing costs on poverty has intensified since the global financial crisis, which resulted in lower financing volumes and significant disruption in the construction of affordable housing.
The high demand for housing, coupled with reduced mortgage financing, has pushed more people towards renting, creating a shortage in the rental market and driving up rental prices. However, housing affordability affects both renters and homeowners. Homeownership is the most common form of tenancy for the 32 European countries included in the study - at 65.3%, compared with 29.4% for rental, of which 22.1% of households rent at market prices and 7.3% rent at reduced prices or through public housing. A further 5.2% of households benefit from housing provided at no cost, which may include support from public services or family members.
The tenancy structure varies significantly by country (see chart below). Most countries have a homeownership rate above 70%, with only Switzerland and Germany having a higher rental rate than ownership rate.
Key issues and solutions
Key housing affordability challenges identified in a survey by the Committee's Real Estate Management Advisory Group - which covered European countries in addition to the US and Canada - include limited rental markets in some countries, supply-demand imbalances and high costs, with major cities and urban areas being most affected by housing unaffordability. Primary drivers of unaffordability are high demand, increasing prices, income growth that lags behind inflation, and housing stock shortages, leading to market distortions such as illegal occupation and high commuting costs. To improve housing affordability and ensure sustainable and inclusive housing for all in the region, the report recommends that policymakers enhance monitoring and data collection, reform policies and regulations, increase financial support for those most in need, foster collaboration between relevant agencies, prioritize equity and inclusion and integrate sustainability into housing solutions. Additionally, they should ensure sufficient construction in the affordable housing segment and simultaneously develop supporting infrastructure such as schools and transportation.
Best practices
To help guide these efforts, the report highlights a range of best practices, including:
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The city of Vienna (Austria) amended its Building Code in 2018 to include a "Subsidized Housing" zoning category. In these zones, two-thirds of the usable floor space for housing must be allocated to subsidized dwellings.
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The Housing Guarantee Programme in Latvia provides guarantees ranging from 5-30% of the loan amount, depending on the number of children, with additional increases for energy-efficient homes. The programme has supported around 25,000 families and involves a total investment of EUR 1.9 billion.
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In Podgorica (Montenegro), a project implemented in cooperation with the Development Bank of the Council of Europe has helped 1,500 families resolve housing issues with subsidies on mortgage interest rates.
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In Spain, housing policy is the responsibility of its 17 autonomous communities. The Basque Country has maintained a consistent and socially-focused policy over time, without frequent legislative changes. At the local level, notable examples include initiatives in Zaragoza.
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In the USA, federal tax credits are provided to developers of affordable rental housing ensuring affordability for at least 15 years, and are limited to families earning less than 60% of the median income.
