The European Affordable Housing Plan is expected to be presented within December. As announced by the EU Commissioner for Housing, Dan Jørgensen, the plan will include the relaxation of “overly strict” state aid rules and the provision of funding to member states to boost investment in affordable housing.
According to information already published, the main strategies include increasing investments in affordable housing, promoting social and non-profit housing models, improving regulation of the private rental market, and utilizing vacant buildings for residential purposes. The goal is to strengthen national initiatives through easier access to financial instruments and greater flexibility in state aid rules.
Measures are also being considered for underused and vacant buildings, with proposals such as subdividing existing properties, adding floors, or converting them into housing units, aiming to create new homes and revitalise neighbourhoods.
The European Commission is already conducting extensive consultations for the development of the plan, including input from a special parliamentary committee and a public consultation phase.
Housing prices are surging
The housing crisis is worsening across Europe. From 2010 to the second quarter of 2025, rents increased by nearly 29% and home prices by over 60%, while many cities have seen protests over the rising cost of living.
At the same time, construction costs have risen by up to 48% between 2010 and 2023, further burdening the market. “People with normal jobs and incomes can no longer live in many cities — living has simply become too expensive,” Jørgensen admitted.
A “holistic” European package
The Danish Commissioner stressed that the crisis is multifaceted and requires a unified strategy covering investment, energy policy, social policy, the internal market and state aid regulations. The elevation of housing to a critical political issue in many European countries has also led to the creation of the new Commissioner for Housing portfolio — the first in EU history.
Intervention in short-term rentals and housing “financialisation”
In 2026, the Commission will also propose new measures for short-term rental platforms such as Airbnb and Booking.com, which are considered to significantly contribute to rising housing prices in major urban centres.
“Tourism is good, but not when it makes residents feel that their city no longer belongs to them,” the Commissioner noted.
The Commission also plans to tackle the so-called “financialisation” of housing, as the massive entry of investment funds — according to Jørgensen — drives speculative practices that do not ensure social benefit.
Where have prices risen the most?
According to Oxford Economics, the sharpest increases are found in cities in Central and Eastern Europe, Portugal and the Netherlands, where housing prices have more than doubled between 2015 and 2024. Even after 2022 — when much of Europe experienced a correction due to inflation, higher interest rates and weak growth — these markets continued to climb.
Conversely, some of Europe’s wealthiest metropolitan areas, such as London, Paris, Geneva, Zurich and Stockholm, recorded relatively modest increases. This is attributed both to already high housing costs — leaving limited room for further growth — and to a gradual price convergence among major cities, as investors seek returns in more “affordable” but fast-growing markets.
Incomes fall behind — pressure intensifies
In almost every city, prices have risen far faster than incomes. The result? A sharp deterioration in affordability, especially where wages are lower. The consequences are manifold: reduced labour mobility, squeezed disposable incomes and weaker entrepreneurial activity. At the same time, inequality, poverty and young adults remaining for years with parents or in rentals with no prospect of buying are fuelling social pressures.
The picture in rentals
The situation in rental markets is equally alarming. According to the European Investment Bank, rents have doubled over the past decade in cities such as Lisbon, Dublin, Budapest, Berlin and Luxembourg. Even where rent caps exist, the market becomes distorted: long-term tenants are protected, but newcomers face much higher costs as some landlords leave the market or “lock in” high prices for new leases.
What is driving the crisis?
There is no single cause, but a combination of factors:
Demand
Years of cheap money facilitated property purchases by both investors and households.
Explosive population growth in cities like Madrid, Málaga and the Balearic Islands — often driven by international migration from Latin America.
Changing household structures: more people living alone or in smaller families, increasing demand for housing.
The rise of short-term rentals in tourist hubs, reducing the available housing stock.
Supply
A decline in construction activity after 2008, with further setbacks during the pandemic.
Labour shortages and the bankruptcy of many construction firms.
Urban planning, environmental and bureaucratic barriers that increase building costs and permitting times.
A sharp rise in the cost of materials.
What now?
Projections by Oxford Economics show that housing prices will continue to rise in the coming years. Governments now face a narrow margin of action: failing to intervene poses serious economic and social risks. It remains to be seen whether the European Affordable Housing Plan will ultimately be the key to restoring stability in one of Europe’s most pressing policy challenges.
