Housing under pressure: How politics, policy, and investment are shaping Europe’s housing future

At the last 98th EUROCONSTRUCT Conference in Winter 2024, the spotlight was firmly on Europe’s deepening housing crisis. Despite growing populations and high migration, new housing supply is falling sharply in many countries – fuelling rising rents, affordability challenges, and political urgency, says EUROCONSTRUCT.

A renewed policy focus, including the EU’s first commissioner for housing and major national initiatives, signals housing’s elevated place on the European agenda. But with demand far outpacing supply, real solutions will require coordinated investment, reform, and innovation across the continent, says the company.

Housing is now a major issue, with a significant shortage in many countries, despite a renewed focus following political elections across many countries in the EUROCONSTRUCT area.

“My presentation on the prospects for the European Housing market at the 98th EUROCONSTRUCT Conference in December 2024 highlighted a number of specific challenges for housing, notably real concerns about shortages of new housing supply in some countries despite strong population growth and significant inward migration,” says Annette Hughes, EY economic advisory for EY Ireland.

She adds: “The overall level of housing completions was expected to decline by 13.1% across the 19 member countries of EUROCONSTRUCT over the period 2021-2024, with declines expected in 15 countries, including Sweden (54.5%), Finland (45.5%), Denmark (28.8%), Norway (23.5%) and Austria (22.2%). Many factors were responsible at the time, including the escalation in interest rates since mid-2022, albeit now moderating, the rising cost of construction, affordability and viability issues, and excessive regulations. Over the next two years, the prospects for new supply were reported to be equally poor in countries like Germany (-30%), Austria (-24.5%), France (-16.8%) and Italy (-7.9%), where further declines were forecast. The consequences are such that the shortage has adversely impacted rents and house prices, with the result that housing is now a major economic, social and political issue in many countries.”

Given the difficult situation in many countries, the growing concerns about the lack of supply of affordable housing and the affordability issues across many cities in Europe has led to a renewed focus on housing policy to address the increasing housing challenges which have emerged over recent years, says Annette. This is evident in many of those countries that have had elections over recent months. Yet, the increasing gap between actual supply and the housing requirement remains an ongoing challenge in many countries across the EUROCONSTRUCT area.

It’s noted the European Commission appointed the first European commissioner for housing in December 2024, Mr Dan Jorgensen, who will now have responsibility for energy and housing. His key task is the delivery of a “European affordable housing plan”, which is expected to address the root causes of the housing shortage, offer construction solutions, and increase investment in the sector, says EUROCONSTRUCT.

It adds: “The Plan will include a Pan-European investment platform, which is intended to attract public and private investment in affordable and sustainable housing projects, utilising a blend of funding sources to accelerate home construction and alleviate the shortage, with the support of the European Investment Bank. This indicates the elevated importance of housing on the EU agenda.”

There were seven parliamentary elections across the EUROCONSTRUCT region over the past 15 months, in Germany, Ireland, Austria, France, the UK, Belgium and Portugal. With many putting housing at the centre of their election campaigns, it has transpired that elections have significantly influenced housing policies and have led many governments to enhance their efforts to address their housing situation, says the organisation.

The return of a majority Labour Government in the UK in July 2024 saw the Prime Minister, Sir Keir Starmer, reiterate his commitment to build 1.5 million new homes by 2030, which in annual average terms is almost 1.5 times the level of supply in 2024.

In Ireland, where housing has been at the top of the political agenda for almost a decade, the new Programme for Government contains substantial housing commitments to build on the progress achieved under the previous government’s Housing for All Plan by introducing a new, fully funded, ambitious yet practical housing plan to increase the construction of homes. The Government is said to prioritise supporting home ownership, and states that it will deliver more homes, starter homes and social housing, as well as introduce practical housing options for positive ageing, and rural housing. Nonetheless, the shortfall is significant with the updated requirement set at an average of 50,500 new homes to 2030, despite many challenges, to do with planning, viability and the availability of funding.

In conclusion, the housing situation in many countries across the EUROCONSTRUCT area is very challenging and affordability remains a critical issue across many European cities, says the company. More significant supply is needed which will require increased construction capacity, a more streamlined planning system, more construction workers, access to funding and more sustainable construction practices. It adds: “Governments are endeavouring to implement policies to encourage the construction of affordable housing and rental units to address the severe housing shortage and affordability issues. The elevated importance of housing at an EU level is welcomed and it’s hoped that member states will be supported over the medium-term in their efforts to tackle the housing supply shortage effectively to achieve the desired result.”
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