Housing affordability in Europe: a critical survey of issues

This paper reviews housing affordability issues in the EU with a view to framing the ongoing discussion in historical, empirical and policy analysis literatures. Housing affordability has traditionally focussed on the vulnerable and low-income population. Recently it has turned to questions of housing access for middle-income households, and efficiency losses from the lack of affordable housing in urban centres of innovation and productivity growth. The current state of housing affordability varies considerably across the EU. At the aggregate level, some indicators suggest that affordability has improved, others – notably on social housing – that it has worsened. At a more disaggregated level, there is evidence that affordability has deteriorated, especially in private rental markets and some urban centres. Population groups facing affordability problems include the socially vulnerable, many lowincome households, and internationally mobile workers, young adults living with their parents, and international students. The paper finds that demand fundamentals and socio-cultural factors can explain fairly well the longterm rise in house prices. The aggregate housing stock is high but is not optimally distributed for affordability purposes. Importantly, new housing supply is coming on stream too slowly from a historical perspective. Housing affordability policies in the EU are numerous, eclectic, and often inefficient. Despite the economic significance of housing, there is still a tendency to view it primarily as a shelter. The rationales for housing affordability articulated in urban economics and economic geography are just beginning to appear in the EU policy discourse.