The locked-out generation: Europe’s housing market is failing its young people

The crisis is not merely a matter of rising digits on a balance sheet; it is a fundamental shift in the relationship between income and housing. In metropolitan areas, where employment opportunities for the young are most concentrated, the link between wages and housing costs has effectively broken. Official statistics often mask the severity of this shift. The housing cost overburden rate – a headline indicator of the social scoreboard of the EU’s European Pillar of Social Rights – tracks those spending more than 40% of their disposable income on housing. While aggregate data might suggest a downward trend in overburdening among the general population as some incomes rise, this masks a deepening spatial and demographic divide. For many young Europeans, the reality is a housing-cost-to-income ratio far exceeding the 30% threshold typically considered affordable. In some regions, the portion of a young person’s income that is required to rent a starter home can be 60–70%, or even higher.

This is not a peripheral issue of comfort; it is a structural barrier to adulthood. Young people are increasingly trapped in a state of housing exclusion, unable to transition to independent living. This delay in achieving independence ripples through the life cycle, forcing young people to postpone career changes, mobility and family formation. When just 40% of young people living with their parents state they would choose that arrangement if given an alternative, the mismatch between preference and reality becomes a matter of social cohesion.

The scarcity of affordable housing is the result of a pincer movement between shifting demand and stagnant supply. On the demand side, demographic changes have outpaced the market’s ability to adapt. As life expectancy increases, older generations are remaining in their homes longer. While the greater policy emphasis on enabling people to stay at home or in their community as they age is welcome, it does necessitate the provision of more housing units of an appropriate size. Furthermore, the rise of single-person households and the ‘financialisation’ of housing – where properties are treated as speculative assets rather than infrastructure – have further increased the pressures on the demand side.

Short-term rental platforms have exacerbated this; in areas of high demand, they have often priced out local workers in favour of more lucrative, transient visitors. By late 2025, the supply of new housing units in the EU met only 50% of actual demand (EIB, 2025). This shortfall is compounded by supply-side constraints: soaring costs for labour and materials, limited land availability, and a construction sector that has historically struggled with low innovation and productivity.

The result for the young is that they may be forced to live in whatever housing they can afford. As a result, young Europeans are disproportionately represented in poor-quality housing characterised by damp, rot, energy inefficiency or overcrowding. This carries a high social price. Poor housing conditions lead to worse physical and mental health outcomes and deepen energy poverty, undermining the EU’s broader climate and welfare goals. The gender dimension is equally stark; single parents, the majority of whom are women, face significantly higher rates of housing insecurity and financial strain.

Addressing a crisis of this magnitude requires moving beyond the EU-level versus Member State binary. While housing remains a national competence, the European Union is increasingly deploying its financial and regulatory levers. The European Affordable Housing Plan, unveiled in December 2025, signals a shift in priorities. This includes a planned scaling up of the €43 billion already invested through such packages as the Recovery and Resilience Facility and Cohesion Policy, alongside the creation of a Pan-European Investment Platform in partnership with the European Investment Bank.

Crucially, the EU has revised its State aid rules regarding Services of General Economic Interest. Previously, Member States were largely restricted from intervening directly in housing markets to avoid distorting competition, with exceptions reserved only for the most vulnerable. The revision recognises that housing unaffordability has moved up the income distribution, impacting middle-income households, and provides governments with greater flexibility to intervene.

However, three priorities must guide future policy if the locked-out generation is to be brought back into the fold. First, the focus must shift from demand-side subsidies – such as first-time buyer grants, which can perversely inflate prices – to supply-side solutions. These include unlocking the potential of vacant dwellings and renovating existing stock, which is both more efficient and more sustainable than new construction.

Second, the regulation of the rental sector must be viewed through the lens of the outsider. While tenant protections are vital for stability, overly rigid markets can stifle mobility and bar newcomers – primarily the young – from entering. Finally, there is the urgent need to address youth homelessness. With an increasing number of young people, particularly in urban areas, finding themselves without a stable home, the scaling up of Housing First policies is vital. If policymakers fail to integrate housing with transport, income and social protection, the traditional pathways to social mobility for Europe's youth may become increasingly difficult to navigate.