Beyond Bricks: Understanding the Layers of Europe's Housing Crisis and Volt's Blueprint for Affordable Living
Dive into the complexities of Europe's housing challenges—high costs, investor concentration, and environmental impact.
The need for housing, along with the need for food, are the two most ancient and important concerns of humans. Even though a lot has changed through the ages, Europe has witnessed a full scale housing crisis in the last decade.
Owning a house has been a dream for lower and middle-class people, but today overcrowding, poor housing conditions, and high prices make it very difficult for most of them to find a place to live.
The cost of buying a house has increased by 45% between 2010 and 2022 in the EU. This is especially challenging for young people without significant savings, who struggle to get a loan. Homeownership for young Europeans is plummeting, while older, richer people are buying more and more houses. For example, 62,5% Southern Europeans born between 1965 and 1979 owned a house at age 30, and this percentage has dropped to 37,5% for people born in 1980 or after. The situation is not better for renters. During the last decade, rent prices in the EU have risen by 19% . In 2021, 50% of the EU population spent 40% or more of their household disposable income on housing. As a result, ordinary people are being priced out of the housing market in major European cities.
The housing crisis in Europe stems from a combination of factors. One key issue is the underinvestment in social housing by the public sector, driven by austerity policies and the liberalisation of the housing market. Governments refrain from building or even selling existing public social housing. Capital gains exemptions and interest tax-reliefs attract investors, who often choose to keep their properties or turn them into short-term accommodation, making available homes scarcer. The rise in real estate funds in the Eurozone, from €350 billion in 2010 to €1 trillion in 2021, is a testament to this trend. These political decisions cause major tax revenue losses and this money could be better invested in the broader economy.
Another major problem is the high number of empty properties. Numbers and definitions vary from country to country, but in 2016 it was estimated at 1/6 of houses in Europe . Investors prefer leaving properties vacant to avoid maintenance costs and complications associated with tenant eviction when property values rise. Property development and management lobbies, wielding significant influence, have also pushed to this direction, adding to the rising rental and property prices. On top of all this, the "Airbnbisation" of housing stock, especially in tourist-heavy regions adds to the problem, leading to unaffordable rents or mortgages and forcing many working-class people out of urban centres. The situation is made worse by high rates of inflation and rising power bills, which force many into unstable housing and, in the worst circumstances, homelessness.
Higher building costs, driven in part by post-COVID-19 increases in raw material prices and borrowing costs due to rising interest rates, have caused a substantial decrease in housing construction. Germany, for instance, is expected to experience a 32% drop in construction between 2023-25. Furthermore, the environmental impact of construction activities, particularly nitrogen pollution and greenhouse gas emissions, adds to the housing crisis by further limiting construction projects. Addressing these multifaceted issues in the housing sector requires comprehensive policy changes to ensure affordable housing for all.
Volt envisions a Europe where affordable housing is accessible to all, marking a significant reduction in housing concentration among investors, the elderly and the wealthy. In this vision, both homes, and places of work prioritise comfort, sustainability, and health for everyone.
To combat rising costs and inflation, Volt proposes increasing income eligibility for housing subsidies and introducing rent caps where needed. Taking a step further, Volt advocates reversing the underinvestment trend in the public sector. By investing in state-owned housing units, financially vulnerable citizens and young families can be supported, through innovative housing models such as co-housing, rent-to-own, and lifelong renting programs. Finally, Volt encourages the repurposing of long-unused buildings as public housing, increasing available dwellings in collaboration with private owners, companies, and housing associations. These measures are essential towards shaping a Europe with less housing wealth concentration, where affordable, sustainable housing is a reality for everyone.
On addressing tax advantages in real estate, Volt supports the EU Commission's direction to raise real estate taxes, generating funds for public housing investment. Additionally, the introduction of a progressive vacancy tax on unoccupied buildings can encourage investment in more productive parts of the economy. To mitigate the "Airbnb effect," Volt proposes regulating digital platforms offering short-term accommodations, by limiting rental days, and taxing revenue gained from such platforms.
In terms of sustainability, Volt recommends adopting low- and zero-waste construction materials, insulating buildings, and using energy-saving appliances. Sustainable energy sources should replace fossil fuels for heating and cooling. These steps are crucial in achieving carbon neutrality for all buildings.
Finally, Volt promotes investing in liveable cities and towns with accessible green spaces, and active transportation, to reduce carbon emissions, improve health, and ensure safety. By dedicating European funds to the development of green infrastructure, Volt aims to realise the concept of the "15-minute city," making essential services reachable in short time and space. This comprehensive approach addresses the interconnected challenges of housing, urban planning, health, and sustainability to create a more inclusive and sustainable Europe.
Article by Pavlos Ferlachidis.