Foundational challenges: The housing struggles of Europe’s youth

Europe is experiencing a crisis of unaffordable housing. Since 2010, average sale prices in the EU have risen by 55.4 % and rents by 26.7 %, outpacing income growth for many groups. These averages mask the severity of the problem experienced in some regions and by certain groups. For example, in some EU Member States, prices have more than tripled. And within Member States trends in prices and rents have been highly uneven across regions and degrees of urbanisation. Typically, increases in the cost of housing in urban centres have far outpaced average trends. Many young people in Europe are experiencing this affordability crisis particularly acutely. Their employment earnings are relatively low, and they are more likely to be in temporary or insecure employment than older people. They often struggle to rent a home where they would choose to live. If they want to purchase a home, they may struggle to save for a down payment or qualify for a mortgage. Young people continue to move to urban areas, where employment opportunities are concentrated but housing is least affordable. They are facing these obstacles in a crucial period of their lives, while transitioning to independent adult living and making decisions about education, careers, relationships and family formation. For them, Europe’s current housing affordability crisis is a foundational problem.

The problem of unaffordable housing is not new. In certain European regions and cities, housing costs are a long-standing challenge for many groups. However, in recent years, the problem has become more widespread, affecting larger parts of the population. High energy prices, labour shortages, environmental regulations, zoning laws and the scarcity of land have limited construction activity. There has also been an increase in the use of housing as an investment vehicle. This means that individuals and families are competing with investors in an increasingly tight housing market. While the EU has no direct competence in housing, it exerts a significant influence through relevant guidance, legislation and funding. As Europe’s housing crisis has intensified, the European Commission has responded by, for the first time, including housing as a distinct part of a commissioner’s portfolio. Dan Jørgensen, the new Commissioner for Energy and Housing, is tasked with supporting Member States in addressing the causes of housing shortages and unlocking both public and private financing to invest in affordable and sustainable housing. Other EU bodies, including the European Parliament and the European Investment Bank, are also stepping up to the challenge of uncovering the drivers of the housing crisis, identifying solutions and delivering funding.

• The current EU housing affordability crisis has particularly pronounced impacts on younger age groups.

• In several Member States, the average age at which a young person leaves the parental home has been increasing. Many young people, including those in employment, cannot afford to live independently.

• In tandem, homelessness has been increasing in many Member States. Young people in cities are among the groups particularly affected.

• For young people who do achieve independent living, the challenges continue. Young people, especially those in the younger cohort aged 18–29, are more likely to be in arrears on housing and utility payments. Young people are also more likely to report that they may need to leave their home because they can no longer afford it.

• Young people who live independently of their parents spend notably more of their incomes on housing and are more likely to be overburdened with housing costs, compared with other age groups.

• Despite spending more of their incomes on housing, young people tend to live in poorer-quality dwellings.

• There are significant differences among geographical regions in the affordability of properties currently on offer for sale or rent.

• Across the EU, very little of the property on offer to rent in urban areas could be considered affordable for a young person on a median wage. This is particularly true in capital cities and popular tourist destinations.

• In Bulgaria, Ireland, Poland, Portugal and Spain, and in parts of Austria and Italy, the degree of unaffordability in the rental market is such that, in many areas, more than 80 % of the median wage would be required to rent a standard two-room apartment.

• A possible response to the affordability challenge would be to downsize and try to rent a smaller property. However, this can come with adequacy challenges, and the price per square metre is higher for smaller properties.

• Across Europe, the housing crisis is putting many young adults in a situation where they are unable to achieve their desired living arrangement (for instance, to live alone or with a partner), leading to significant mismatches between young people’s actual and preferred housing situations.

• Survey data from four Member States (Czechia, the Netherlands, Spain and Sweden) reveal that far more people are living with friends, relatives or parents than would choose to do so. Far fewer are living with partners or alone than wish to do so.

• Unmet housing preferences are associated with a range of negative outcomes. These include inability to achieve independent living, inability to follow a chosen career, negative impacts on mental health and choosing to delay having children.

• To fully understand and tackle the housing affordability crisis, it is important to consider both quantitative data on young people’s housing challenges and qualitative data on their preferences and how they navigate the system of housing policies.

• Policymakers should avoid developing a fragmented policy landscape, where policies are implemented in a piecemeal fashion with conflicting objectives.

• When it comes to financing housing initiatives, revolving funds reusing capital for housing are an effective means of financing projects.

• In terms of creating new housing opportunities for young people (such as affordable ‘starter homes’), supply-side solutions have more potential than demand-side monetary and tax benefits.

• Governments should ensure tenure neutrality in fiscal policy, treating owning and renting equally.

• To address housing shortages, it is essential to increase the number of available dwellings. The existing stock of vacant and underused buildings offers considerable untapped potential in this regard, albeit often requiring significant renovations.

• Policies to regulate rents and increase tenure security need to consider both insiders (incumbent tenants) and outsiders (new or prospective tenants, often young people), as well as housing providers.

• Young people can play an active role in policymaking – not only in the formulation of new or revised housing policies but also in the development of bottom-up, innovative housing concepts, such as collaborative housing.