NIAS Europe Studies

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CWA # 1474, 20 September 2024
NIAS Europe Studies
The European Housing Crisis: A Background

  Advik S Mohan

A key issue across Europe in the past few years has been the growing scarcity of cheap and available housing. Approximately 70 per cent of residents in the EU own their homes, while the remainder of the population rents their homes. A report by Eurostat in 2023 showed property prices across the EU had increased by 47 per cent and rents had risen by an average of 18 per cent between 2010 and 2022. This led to the decline of house ownership across the EU. Eurostat also found that 10.4 per cent of the EU urban population living in a household was affected by housing cost overburden and 6.2 per cent in the case of rural areas. As of 2022, 90 per cent of the population lived in their own houses in eight out of 36 countries.

Where is it happening? 
The severity of the crisis differs across the EU. Estonia witnessed a 192 per cent increase in housing prices between 2010 and 2022, while Italy saw a decline in prices. Another example is, Germany and Switzerland; the percentage of individuals living as tenants in their house was 53.5 per cent and 57.5 per cent. While in countries like Austria, Turkiye, France, Denmark, Sweden, and the UK, the rate of residents living in their own houses was below 70 per cent. 

In the Balkans, there is a higher rate of ownership. Over 95 per cent of residents own their homes in Albania, Romania, and North Macedonia. However, the percentage of housing is not enough, since the housing quality matters as well. The average number of rooms in the EU was 1.6 in 2022.  Malta fared the best by this indicator; with 2.3 rooms per person. Countries like Luxembourg, Norway, Ireland, Belgium, and the UK also fared well; with rates of 2.0 rooms or more per person. On the other hand, the Balkan states had lower rates. The high homeownership rates in the Balkans do not correspond with the availability of rooms. 
Montenegro and Albania had a rate of only 0.9 rooms per person. According to Eurostat, 61.6 per cent and 58 per cent of the population in Montenegro and Albania lived in overcrowded homes. Romania, Latvia, North Macedonia and Serbia also had rates of over 40 per cent of their population living in overcrowded houses. Cyprus, Malta and the Netherlands had the lowest overcrowding rates with 2.2, 2.8, and 2.9 per cent respectively. According to Eurostat, over 20 per cent of households in Greece and Denmark spend more than 40 per cent of their disposable income on housing.

In 2023, data from ratings agency Fitch showed housing prices had fallen or remained constant. Prices fell by two per cent in both the UK and France; five per cent in Germany, and rose slightly by two to three per cent in Italy and Spain. The housing crisis is also observed to have a dire social impact across Europe; primarily impacting the youth. For instance, 55 per cent of residents born between 1977 and 1986 in Portugal owned a home by 25 (Age). However, those born after 1997, were 25 per cent only. House prices have increased by 8.7 per cent over the past decade. Similarly, rents in Turkiye increased by 121 per cent between 2022 and 2023. Even Luxembourg with a high per capita income witnessed young residents failing to buy homes (Average house costs EUR 1.5 million). The Federal Statistics Office of Germany estimated one in five German households were spending at least two-fifths of their income on rent. It is also estimated that it is short of over 800,000 apartments. In the Netherlands, the average home costs EUR 452,000. Similarly, the average rent of a flat in London stands at nearly EUR 2,500 per month, while renting a studio apartment in Paris now takes six months.

Why is the crisis happening?
First, the current crisis is the result of decades of flawed policies. Over the past few decades, Europe has witnessed rapid urbanisation. 72 per cent of the EU population now lives in urban areas, with the percentage in countries like Italy and the UK exceeding 80 per cent. The rapid pace has made it difficult for national governments to build enough homes. At the same time, construction costs have also rapidly increased. This made it difficult for the middle class to access housing. 

Second, government policies are designed to benefit the prosperous sections of society. An example of this is how in 2010, the Government of the Netherlands abolished the Ministry of Housing and Planning and allowed housing corporation stock to be bought by investors. As a result, a quarter of homes in the big cities of the Netherlands are owned by foreign investors. Similarly, countries like Greece and the UK have rental schemes wherein landlords and private investors benefit more from the housing system. An example of this is the benefits provided by the UK Government for Russian businessmen, who bought up property in London as second homes. 

Third, attempts to reform have been challenged by local institutions. An example of this is the refusal of local governments to implement housing price controls in Spain, despite the Government of Spain passing a law decreeing that. This state of affairs means houses are inaccessible for most of the youth and middle classes, while the rich benefit more.
Some have blamed large-scale immigration to Europe; such as from the Middle East and Ukraine for the crisis. However, there is no evidence that immigrants are responsible for the shortage of housing in Europe. 

Fourth, immigrants and asylum seekers face more difficulty in finding adequate housing. Surveys in France, Spain, Germany, and the Netherlands have found discrimination by landlords against house-seekers of an ethnic background, or with a foreign-sounding name. Despite this, right-wing populist parties like the PVV in the Netherlands, the AfD in Germany, and Reform in the UK have blamed immigrants for the crisis. However, the real problem lies with the existing housing systems across nations which benefit the elite sections more. 

Fifth, the Austrian housing model as a prospective solution.  To tackle the crisis social housing can be made more accessible and affordable for the majority of the population. The Austrian capital of Vienna offers a potential model to follow. Vienna provides both public housing owned by the local government, as well as rent-controlled housing run by housing associations. Moreover, the middle class is not excluded from housing, since 75 per cent of the population qualifies for governmental guidelines for owning a house. Additionally, the city has restricted private investment and rentals into housing, keeping rent prices low. The example of Vienna could help European nations in solving their housing crisis.

References
Servet Yanatma, “Housing in Europe: Where do people rent more than they buy?,” Euro News, 13 May 2024
Eric Albert, Sandrine Morel, Marina Rafenberg, Cecile Boutelet, Anne-Francoise Hivert, Jean-Pierre Stroobants and Allan Kaval,  “Why Europe’s housing crisis is taking hold,” Le Monde, 14 March 2024
Jon Henley, “Higher costs and cramped conditions: the impact of Europe’s housing crisis,” The Guardian, 06 May 2024
Joanna Adhem, “Europe’s housing crisis: Portugal, Turkey and Luxembourg struggle to find solutions,” Euro News, 10 October 2023
Annabelle Quince and Nick Baker,  “Vienna has created an equitable and affordable housing market. Here’s how,” ABC News, 04 August 2023
Jon Henley,  “Everything’s just… on hold’: the Netherlands’ next-level housing crisis,” The Guardian, 06 May 2024
Paulo Pena,  “Europe’s governments inflate housing prices with huge tax privileges for real estate,” Investigate Europe, 08 December 2022
Ashifa Kassam, “ ‘Double punishment’: the racial discrimination in Europe’s rental housing market,” The Guardian, 08 May 2024

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