Housing as a European Challenge: What Added Value Can the EU Bring?

1. Introduction: why is Europe talking about housing now?

Housing is an economic asset, a welfare policy domain and a fundamental human right. International human rights law recognizes the entitlement to adequate housing as part of the right to an adequate standard of living, encompassing security of tenure, affordability, habitability, accessibility and location (UN HABITAT & OHCHR, 2009). This rights-based perspective provides the normative backdrop for understanding the growing policy relevance of housing in Europe.

Housing occupies a unique position within European policymaking. Unlike competition policy, environmental protection or monetary affairs, the responsibility for housing has remained firmly within the competence of the member states, reflecting the principle of subsidiarity enshrined in the European Treaties1. Decisions concerning housing provision, land use planning, tenure arrangements, social housing and rental regulation continue to be designed and implemented primarily at national, regional and local levels. Housing is therefore a territorially embedded public policy: while national governments establish the legal and financial framework, housing outcomes ultimately depend on local planning decisions, land availability, institutional capacity and market conditions.

Yet this apparently settled institutional arrangement is being challenged more and more – not because subsidiarity itself is under question but because the drivers of the contemporary housing crisis increasingly transcend national borders. Rising house prices and rents, demographic change, financialization, climate policies and growing territorial inequalities have transformed what was once considered a predominantly domestic policy field into an issue with clear European implications. Housing affordability now affects labour mobility, economic competitiveness, social cohesion and citizens’ confidence in public institutions.

These pressures are reflected in recent Eurostat data: in 2025, 7.7% of the population of the European Union (EU) lived in households spending more than 40% of their disposable income on housing, with substantially higher burdens among market renters (Eurostat, 2025). Beyond these aggregate figures, however, affordability is increasingly understood as a multidimensional phenomenon. Rather than representing a simple expenditure-to-income ratio, it reflects the interaction between housing markets, labour market conditions, financialization, energy costs and the institutional characteristics of national housing systems (Dewilde, 2018; M. Haffner & Boumeester, 2015; M. E. A. Haffner & Hulse, 2021; Hulchanski, 1995). As Whitehead (1991) observed, affordability is not only a market outcome but also a policy construct shaped by the design of housing systems and welfare arrangements.

The appointment of a European Commissioner responsible for Housing, the establishment of the European Parliament’s Special Committee on the Housing Crisis (HOUS), the creation of the European Housing Alliance, the preparation of the first European Affordable Housing Plan and the forthcoming Housing Simplification Package all point towards the emergence of a new governance architecture through which the EU increasingly seeks to shape housing outcomes while fully respecting the principle of subsidiarity.

This evolution raises a fundamental question: if housing remains primarily a member state competence, what role can the EU realistically play in addressing the affordability crisis? Rather than acquiring new competences, the EU is progressively assembling a set of policy tools – including financial instruments, regulatory frameworks, knowledge production, policy coordination and multilevel partnerships – that shape housing outcomes within existing national competences. This is particularly relevant for countries with distinctive housing traditions, such as Sweden. Historically associated with the social-democratic welfare model and public housing programmes, Sweden illustrates how even long-established housing institutions continue to face important challenges related to affordability, housing supply, labour mobility and access to housing.

This paper develops the concept of a European Housing Governance Framework to explain how European influence over housing has expanded despite the absence of formal competence. The key question is therefore: how can European action strengthen national and local capacity to address shared housing challenges – through finance, regulation, coordination and policy learning – while respecting subsidiarity and the territorially embedded nature of housing systems? The added value of this framework lies in supporting policy learning, comparative evidence and coordination, helping identify common bottlenecks and strengthening nationally tailored reforms without undermining the diversity of member states’ housing systems.

The paper proceeds as follows. Section 2 examines how the EU influences housing through multilevel governance and identifies the main sources of European added value. Section 3 analyses the structural transformations, long-term drivers and contextual pressures that have brought housing onto the European policy agenda, while Section 4 examines their differentiated market and social outcomes across member states. Section 5 develops the European Housing Governance Framework and its main components, and Section 6 considers the Affordable Housing Plan as its first comprehensive policy expression. Section 7 concludes by discussing the implications for European, national and local housing governance.

2. Housing beyond competences: how the EU shapes housing policy

This section examines how housing responsibilities are distributed across levels of government and how the EU increasingly shapes housing policy despite its limited formal competence. It then identifies the governance mechanisms through which European action can add value while preserving subsidiarity.

2.1 Housing, subsidiarity and multilevel governance

Housing occupies a distinctive position within European public policy because responsibilities are shared across several levels of government. While the EU increasingly shapes the regulatory and financial framework, the primary responsibility remains with member states and, in many cases, regional and local authorities, making housing one of the clearest examples of multilevel governance in practice (Hooghe & Marks, 2003).

This institutional distribution reflects more than the allocation of competences under the Treaties. Because housing is territorially embedded, outcomes depend on local conditions, including land availability, planning systems, demographic dynamics and construction capacity (Phillips, 2020). National governments establish the legal and fiscal framework, but municipalities largely determine where and how housing is delivered.

The diversity of European housing systems reinforces this logic. Member states differ substantially in tenure structures, social housing provision, financing mechanisms and planning traditions. As comparative housing research has consistently shown, these differences reflect distinct historical trajectories and welfare arrangements rather than variations around a common European model (Scanlon et al., 2014). Subsidiarity has therefore provided an appropriate governance framework, allowing housing policies to evolve according to national priorities and local needs.

The following comparative snapshot illustrates the asymmetry in competences: the EU sets broad regulatory and financial frameworks, but outcomes depend heavily on the institutional architecture of national housing systems.

Table 1. Illustrative examples of EU influence on selected national housing systems
Country	National Housing System	EU Influence in Practice	National Effect
Netherlands	Historically strong, near-universal social housing sector managed by Dutch housing associations (woningcorporaties).	EU state aid/competition rules (SGEI).	Following the Dutch housing associations case, the Commission required stricter targeting of subsidies. Eligibility for social housing was tightened (income ceilings), shifting the system from universalist to residual.
Austria	Large, integrated public and cooperative housing sector, embedded in welfare state.	EU climate regulation (EPBD), European Semester.	National programmes aligned with EU renovation targets, using strong public providers to deliver large-scale upgrades. Semester recommendations flagged supply constraints in Vienna and other urban areas.
Spain	Predominantly owner-occupied system, with a very small social rental sector (< 2% of stock).	EU funding (NGEU/RRF), European Semester.	Recovery funds earmarked for affordable rental housing and large-scale retrofitting. Semester guidance stressed need to stabilize rental market amidst rapid affordability deterioration.
Portugal	Low public/social housing provision; fragmented private rental market.	EU climate policy (EPBD), EU funding.	Renovation targets rely heavily on private homeowners and small landlords. NGEU support channelled into retrofitting, but affordability concerns persist due to weak public sector capacity.
Source: Author’s elaboration based on United Nations Economic Commission & Housing Europe (2021) and national case studies.

Table 1 illustrates how common EU instruments – including competition policy, climate legislation, economic coordination and funding – interact differently with national housing systems. The experiences of the Netherlands, Austria, Spain and Portugal demonstrate that common European instruments generate differentiated outcomes depending on institutional arrangements and implementation capacity. This is equally relevant for countries such as Sweden, where European instruments interact with national institutions without altering member states’ primary responsibility for housing policy. The distinction between competence and policy influence is therefore fundamental: while subsidiarity determines who is formally responsible for housing policy, European regulation, funding and coordination increasingly shape the environment within which national choices are made (Scanlon et al., 2014).

2.2 From competence to governance: European added value

Recognizing the growing European dimension of the housing crisis does not imply that every housing challenge requires a European solution. Although the allocation of competences has remained largely unchanged (Table 2), the instruments through which housing policy is shaped have evolved considerably creating new opportunities for European coordination within the existing division of responsibilities.

Table 2. Housing policy across levels of government: key competences and responsibilities
Level of Government	Role in Housing Policy	Key Competences/Instruments (Non-exhaustive)	Examples
EU	Provides the overall framework, resources, rules and coordination. Does not have a general competence for housing policy.	Funding and financial instruments (InvestEU, Cohesion Policy, RRF, EIB). Regulation (state aid, competition, financial regulation, EPBD). Coordination and soft law (European Semester, policy guidance, peer learning). Data, statistics and knowledge (Eurostat, Housing Observatory, platforms). Support for innovation and capacity building.	State aid rules for social housing; cohesion funds; EPBD standards; European Semester recommendations; European Housing Alliance.
National government	Sets the legal, financial and institutional framework for housing. Designs national strategies and ensures redistribution and social protection.	Housing legislation and regulation. National housing strategies and plans. Fiscal policy (taxes, incentives). Social housing policy and funding. Regulation of tenure, rents and landlord–tenant relations. Mortgage and financial market regulation. National data collection and reporting.	National housing plans; rent regulation; tax incentives; social housing programmes; mortgage prudential regulation.
Regional government (where applicable)	Adapts national frameworks to regional needs and implements specific policies in planning, funding allocation and land management.	Regional planning and spatial strategies. Land use planning frameworks. Management of regional housing funds. Oversight of social housing providers. Support for municipalities and coordination across territories.	Regional housing strategies; land management agencies; co-financing of affordable housing; oversight of social housing providers.
Local/municipal government	Delivers housing policies and services on the ground, near citizens and local markets.	Urban planning and zoning. Land management and allocation. Building permits and standards. Development and management of affordable housing. Local housing allowances and support services. Prevention of homelessness and social inclusion. Community engagement and local partnerships.	Local land allocation for affordable housing; inclusionary zoning; municipal housing companies; local rent supplements; homelessness services.
Source: Author’s elaboration based on EU Treaties, national legislation and practice.

European added value therefore lies where collective action enhances the ability of member states and local authorities to address housing challenges that increasingly transcend national borders while respecting the diversity of housing systems (Ferry et al., 2025).

While the EU does not legislate directly on housing, its policies in adjacent domains exert significant indirect influence over national housing systems. One of the clearest examples is competition and state aid policy. Under the Services of General Economic Interest (SGEI) framework, public support for social housing is permitted under specific conditions. The best-known example is the Dutch housing associations case, in which the European Commission (EC) required social housing subsidies to be more narrowly targeted at disadvantaged households. As a result, the Netherlands introduced stricter income thresholds, shifting its historically broad social housing system towards a more residual model.

The European added value emerges through five complementary governance mechanisms:

1. Financial instruments: Financial instruments constitute the most visible expression of European added value. Through the European Investment Bank (EIB), InvestEU, Cohesion Policy and the Recovery and Resilience Facility (RRF), the EU expands the investment capacity of member states and municipalities. NextGenerationEU marked an important turning point by demonstrating how EU-level financial capacity could support affordable housing and renovation without altering the formal allocation of competences.
2. Regulatory instruments: State aid rules, the SGEI framework, the Energy Performance of Buildings Directive (EPBD) and other sectoral regulations establish the common regulatory environment within which national housing policies operate. While implementation remains national, these instruments increasingly shape investment decisions and renovation strategies across different housing systems. The forthcoming Housing Simplification Package is expected to complement this framework by reducing administrative barriers and facilitating housing delivery while leaving planning and implementation responsibilities with member states and local authorities.
3. Coordination: Through instruments such as the European Semester, the Housing Alliance and the Housing Advisory Board, the EU promotes policy learning and dialogue without harmonizing national housing policies. These soft-governance mechanisms increasingly influence domestic agendas through recommendations and structured exchange.
4. Knowledge production: Eurostat, benchmarking exercises and emerging knowledge platforms reduce information asymmetries and strengthen policy capacity across diverse housing systems, while enabling mutual learning among member states.
5. Agenda setting: By defining common priorities and creating spaces for collective debate, the EU increasingly shapes housing policy agendas despite lacking formal competence.

European added value therefore lies in strengthening national and local capacity through complementary governance instruments rather than through the transfer of formal competences. This is particularly relevant for countries such as Sweden, where long-established housing institutions continue to face challenges related to affordability, access and labour mobility. While these remain national responsibilities, they illustrate how a European Housing Governance Framework can support comparative learning, evidence-based reform and coordination without regulatory harmonization.

3. From structural transformations to emerging housing pressures

Housing affordability is increasingly shaped by pressures operating beyond national boundaries. While outcomes remain locally differentiated, the forces driving them increasingly operate at European and global scales, progressively transforming housing from a domestic policy concern into a shared European challenge. This section examines this evolution by considering the long-term transformation of European housing systems, the structural drivers of affordability pressures and the contextual shocks that have intensified them.

3.1 The evolution of European housing systems

The current housing affordability crisis did not emerge suddenly, nor can it be explained solely by recent increases in house prices or construction costs; rather, it reflects a series of long-term structural transformations that have progressively reshaped European housing systems over recent decades. These changes have altered the relationship between housing markets, welfare states and public policy, reducing the capacity of many national systems to respond to growing social and economic pressures. Although European housing systems remain highly diverse, comparative research has consistently shown that they have undergone significant institutional change since the 1980s. The liberalization of financial markets, greater reliance on market-based housing provision, demographic change and the gradual retrenchment of welfare states have reshaped the way housing is produced, financed and allocated across Europe. While these transformations have followed different trajectories, they have created vulnerabilities that are increasingly shared across member states.

These developments unfolded from markedly different institutional starting points. Countries such as the United Kingdom, the Netherlands and Sweden entered this period with comparatively large social or public housing sectors and well-developed institutional frameworks, whereas southern European countries, including Spain, Italy and Greece, relied much more heavily on homeownership, family support and comparatively limited social housing provision. Consequently, similar economic pressures have produced very different housing outcomes across Europe. Sweden illustrates this dynamic well: despite its distinctive housing model, it has become increasingly exposed to affordability pressures linked to demographic change, housing supply constraints and broader economic transformations, illustrating how common structural drivers interact with different national housing systems. These institutional legacies remain essential for understanding both the diversity of current affordability challenges and the unequal capacity of member states to respond to them.

3.2 Long-term structural drivers

The structural transformations described above do not, on their own, explain the growing prominence of housing on the European political agenda; rather, they have interacted with a series of economic, demographic, environmental and financial pressures that increasingly transcend national borders. While these drivers affect member states differently, they share one important characteristic: they operate at scales that often exceed the capacity of individual housing systems to respond effectively in isolation.

Demographic and territorial transformations

Demographic change has become one of the principal structural drivers of housing affordability across Europe. While population growth has remained relatively modest in many member states, profound changes in household composition, population ageing, migration patterns and the concentration of economic activity in metropolitan areas have substantially increased the demand for housing. These transformations have altered not only the volume of housing required but also its location, size and tenure characteristics.

Particularly significant has been the steady decline in the average household size. Rising numbers of single-person households, delayed family formation and increased life expectancy mean that housing demand continues to grow even where population growth remains modest. As Figure 2 illustrates, the number of households has increased substantially across the EU, while average household size has steadily declined. This helps to explain why housing demand can continue to grow even in contexts of relatively modest population growth.

These demographic trends have coincided with the growing concentration of employment, higher education and innovation in metropolitan regions, increasing housing demand in areas where land availability, planning constraints and construction capacity have struggled to keep pace. At the same time, residential construction across much of the EU has remained persistently below estimated needs (Figure 3), reflecting planning constraints, rising construction costs, limited land availability and labour shortages. The result has been a sustained mismatch between the growing demand and relatively inelastic housing supply, contributing to persistent affordability pressures across many European housing markets. This pattern is also evident in Sweden, where metropolitan regions have experienced increasing affordability pressures despite the country’s long-standing housing institutions and extensive involvement in housing provision, illustrating how common demographic drivers interact with different national housing systems.

Migration has become one of the most visible and politically contested dimensions of contemporary housing debates. According to Eurostat, positive net migration is now the main driver of population growth in the EU, with around 4.3 million immigration arrivals from non-EU countries recorded in 2023. However, housing affordability problems cannot be attributed to migration alone, as its impact depends largely on the capacity of housing systems to respond through adequate supply, planning and institutional adaptation.

Financialization and changing investment patterns

One of the most profound transformations affecting European housing systems has been the growing financialization of housing. Increasingly, housing is treated not only as a place to live but also as a financial asset attracting institutional and global investment (Aalbers, 2017). More broadly, financialization refers to the growing integration of housing into financial markets through the expansion of mortgage finance, institutional investment, cross-border capital flows and national fiscal arrangements that encourage debt-financed homeownership. Together, these processes have reshaped housing markets by influencing ownership patterns, investment behaviour and housing affordability across Europe.

Financialization operates through multiple and interconnected channels. Beyond the growing role of institutional investors and global capital, it is also shaped by national fiscal and institutional arrangements that influence household borrowing, tenure choices and housing investment decisions. Sweden illustrates this mechanism: long-standing tax incentives favouring debt-financed homeownership, combined with relatively low recurrent property taxation, have contributed to high levels of household indebtedness and reduced the relative attractiveness of rental housing (European Commission, 2026). Although these are national policy choices, they can amplify broader European challenges related to affordability, labour mobility and macroeconomic resilience.

Institutional investors have become increasingly prominent in several European housing markets, particularly since the global financial crisis. Residential real estate attracted around €46 billion in investment across Europe in 2024, becoming the largest real estate asset class for institutional investors for the first time (CBRE, 2025). Europe also became the world’s leading destination for cross-border real estate investment. Pension funds, insurance companies, private equity firms and real estate investment trusts have expanded their presence, particularly within the private rental sector. While this has increased investment capacity, it has also intensified concerns about affordability and the social function of housing. More fundamentally, it illustrates how housing markets are increasingly shaped by capital operating across national borders, while regulatory capacity remains largely national and local (Fernandez & Aalbers, 2020; Fields & Uffer, 2016).

Financialization should not be regarded as either inherently beneficial or detrimental. Institutional investment can expand the housing supply, support urban regeneration and strengthen rental markets, but it may also intensify competition for residential assets and affordability pressures. The challenge is therefore not financial investment itself but the governance frameworks through which it is channelled (see Box 1).

Box 1. Governing financialization: contrasting national approaches Spain: Disposal of social housing portfolios  Following the global financial crisis, several Spanish regional and local authorities transferred parts of their public housing stock to private investment funds. The best-known cases, particularly in Madrid, triggered intense political and legal debate regarding the role of public authorities in safeguarding affordable housing and the long-term consequences of transferring social housing assets to market actors. More broadly, these experiences highlighted the tension between short-term fiscal pressures and the long-term preservation of affordable housing stock. Denmark: Restricting speculative investment In contrast, Denmark has adopted regulatory measures aimed at limiting speculative investment practices in parts of the residential market. By introducing restrictions on rapid resale following major renovations in certain circumstances, policymakers sought to discourage short-term speculative strategies while preserving incentives for long-term investment. The Danish experience illustrates that member states continue to retain significant regulatory capacity to shape housing market outcomes despite increasingly international capital flows.

The contrasting examples in Box 1 illustrate that financialization does not produce uniform outcomes across Europe. Its effects depend on national institutional arrangements and regulatory choices, confirming that member states retain considerable capacity to shape how global capital interacts with domestic housing systems.

The green transition and the decarbonization of housing

The interaction between climate policy and housing provides another example of how European governance increasingly shapes national housing systems without replacing national competences. Unlike demographic or financial drivers, the green transition represents both an external pressure and an explicit policy objective. Climate objectives have progressively Europeanized important dimensions of housing policy, even though the responsibility for housing remains primarily national and local. Buildings account for around 40% of final energy consumption and 36% of energy-related greenhouse gas emissions in the EU, placing the decarbonization of the housing stock at the centre of the European Green Deal and the EU’s climate neutrality objectives. Housing has therefore become not only a social and economic concern but also a strategic component of Europe’s sustainability agenda.

The European Climate Law commits the EU to climate neutrality by 2050, with an intermediate target of reducing net greenhouse gas emissions by at least 55% by 2030. Improving the energy performance of buildings can reduce emissions, alleviate energy poverty and improve housing quality, but achieving these objectives requires unprecedented levels of investment, effective coordination and careful attention to affordability, particularly for lower-income households and ageing housing stock. Within this framework, the revised EPBD has become one of the most influential European instruments shaping national housing systems.

While climate objectives and the regulatory framework are increasingly defined at European level, implementation depends on national renovation programmes, local planning systems and individual property owners. The EPBD therefore illustrates how European housing governance combines common objectives with nationally and locally implemented policies (see Box 2).

Box 2. The revised EPBD The EPBD illustrates how the EU shapes housing outcomes through sectoral regulation rather than through direct housing competence. It establishes a common framework for improving the energy performance of buildings while leaving implementation largely to member states and local authorities.
Level	Main responsibility
EU	Sets common objectives, minimum standards and the regulatory framework for building decarbonization.
Member states	Transpose the Directive, prepare renovation strategies and design financing programmes.
Regional and local authorities	Implement regulations, grant permits and support renovation.
Housing providers and owners	Invest in renovation and improve building performance.
European added value Common climate objectives. Harmonized regulatory framework. Support for building renovation. Greater comparability across member states. Governance challenge. The EPBD demonstrates that the EU can significantly shape housing outcomes through sectoral regulation without acquiring direct competence over housing policy.

3.3 Contextual pressures

The structural drivers discussed above have reshaped European housing systems over several decades. However, the sharp deterioration in affordability during the first half of the 2020s also reflects a series of contextual shocks that exposed and intensified these underlying vulnerabilities. Unlike demographic change, financialization or the green transition, these factors did not transform housing systems themselves but accelerated existing affordability pressures and increased their political salience.

The post-pandemic recovery and inflation

The post-pandemic recovery acted as a stress test for European housing systems. Although affordability problems predated COVID-19, the rapid rebound in demand coincided with supply chain disruptions, labour shortages and rising construction costs, limiting the ability of the housing supply to respond. Inflation further increased construction costs, reduced household purchasing power and heightened energy poverty, particularly among households living in older and less energy-efficient dwellings.

Rather than creating new housing challenges, the post-pandemic recovery exposed the limited resilience of many European housing systems and reinforced housing affordability as a central European social and economic concern.

Interest rates and housing finance

The European Central Bank’s rapid interest rate increases between 2022 and 2024 substantially reduced mortgage affordability across the euro area following a prolonged period of exceptionally low borrowing costs. Higher financing costs reduced household borrowing capacity while simultaneously constraining residential development by increasing the cost of new projects. Although these effects varied in accordance with national mortgage systems and market structures, they illustrate how macroeconomic policy can profoundly influence housing affordability despite housing remaining primarily a national competence.

Countries with highly indebted households have proved to be particularly exposed to this tightening cycle. The Swedish housing finance system illustrates this dynamic. Long-standing reliance on mortgage finance, reinforced by debt-oriented fiscal incentives and historically low interest rates, has contributed to exceptionally high household indebtedness. The EC continues to identify this as a macroeconomic imbalance, illustrating how national housing finance arrangements can amplify the effects of wider economic shocks (European Commission, 2026).

Geopolitical uncertainty and energy prices

Recent geopolitical tensions have further increased uncertainty through energy market volatility, supply chain disruptions and changing investment conditions. Although these developments originate outside housing policy, they have increased construction costs, constrained residential development and reinforced affordability pressures across many member states. Their significance lies less in their long-term structural impact than in revealing the vulnerability of housing systems to external shocks.

These contextual pressures did not create Europe’s housing affordability crisis; they accelerated it. In doing so, they exposed the limited resilience of many national housing systems and reinforced the political urgency of housing across Europe. Their interaction with the long-term structural drivers discussed above helps explain why housing outcomes continue to differ across member states despite increasingly shared underlying pressures.

4. Housing market outcomes: evidence of a common European challenge

The structural drivers and contextual pressures discussed above interact with diverse housing systems and institutional capacities, producing markedly different outcomes across member states. This section examines these differences through housing market and social outcomes, identifying where common pressures coexist with persistent national diversity.

4.1 Market outcomes

Housing market outcomes are reflected not only in prices and rents but also in the effectiveness of housing systems at absorbing growing affordability pressures. This subsection considers how these dimensions reveal the growing scale of the European housing affordability challenge.

House prices and rental dynamics

Figure 4 shows the evolution of house prices and rents across the EU over the last decade. While both have followed an upward trajectory, house prices increased considerably faster, particularly between 2020 and 2022, reflecting the combined effects of supply constraints, demographic pressures, investment demand and, until recently, favourable financing conditions. The widening gap between prices and rents illustrates the increasing affordability pressures affecting housing markets across the EU.

Although house price inflation moderated following monetary tightening after 2022, affordability pressures persisted. Rental prices continued to rise steadily as demand increasingly shifted towards the private rental sector. For many households, declining access to homeownership translated into sustained pressure on rental markets. This divergence suggests that affordability challenges reflect deeper structural imbalances rather than short-term fluctuations in house prices.

Affordability pressures

Housing markets provide the context, but affordability is experienced at household level. A more direct measure is the housing cost overburden rate, which identifies the share of households spending more than 40% of their disposable income on housing. Figure 5 presents this indicator by tenure across the EU, revealing substantial differences in the financial burden experienced by households.

Figure 5 shows that tenants paying market rents consistently experience the highest housing cost overburden rates across the EU. By contrast, owner-occupiers without outstanding mortgages face the lowest levels of financial pressure, while subsidized and reduced-rent housing provides significant protection against excessive housing costs.

These differences demonstrate that affordability is shaped not only by market conditions but also by the institutional characteristics of national housing systems, particularly tenure structures and the availability of affordable and social housing. Similar market pressures therefore generate markedly different outcomes depending on the capacity of housing systems to protect households from excessive housing costs.

Housing systems and market resilience

The evidence presented so far shows that affordability pressures have become widespread across European housing markets. Yet similar market pressures do not necessarily produce similar outcomes. The resilience of housing systems varies considerably across member states, reflecting differences in tenure structures, the size of the social and affordable housing sector, regulatory frameworks and patterns of public intervention.

These institutional differences help explain why countries exposed to similar demographic, financial and macroeconomic pressures experience markedly different affordability outcomes. Housing systems with stronger non-market sectors and greater public intervention generally display higher resilience, whereas systems relying predominantly on market provision tend to be more vulnerable. Affordability therefore depends not only on market dynamics but also on the institutional strength of housing systems to protect households from those pressures.

These findings reinforce the central argument of this paper, i.e. that European housing governance should not seek to harmonize national housing systems but rather strengthen their capacity to respond to increasingly common pressures.

4.2 Social outcomes

While the previous subsection examined housing market outcomes, affordability ultimately materializes through its impact on households. Beyond prices and housing costs, it increasingly affects residential stability, housing quality and social inclusion, demonstrating that housing has become not only an economic issue but also a central welfare concern.

Across many member states, declining affordability is increasingly reflected in growing housing insecurity. Long waiting lists for social housing, difficulties accessing affordable rental accommodation and increasing residential instability have become common features of European housing systems. While these pressures continue to affect lower-income households disproportionately, they increasingly extend to younger households, middle-income groups and key workers in high-demand cities. Housing insecurity has therefore become a broader societal challenge extending well beyond traditionally vulnerable groups.

The social consequences of declining affordability also extend to housing quality. Persistent overcrowding and the inability to keep homes adequately warm illustrate that affordability affects not only housing costs but also living conditions and well-being. Marked disparities persist across Europe. Overcrowding exceeds 40% in Latvia and Romania but remains below 4% in Cyprus and the Netherlands. Likewise, more than a fifth of households in Spain, Bulgaria and Lithuania report difficulties keeping their homes adequately warm, compared with less than 3% in Luxembourg, Finland and Slovenia (Eurostat, 2025).

These challenges are particularly evident in relation to energy poverty, which illustrates the close interaction between housing quality, affordability and the green transition (Bouzarovski & Petrova, 2015; Thomson et al., 2017). Households living in poorly insulated dwellings face higher energy costs while often lacking the resources required to undertake energy renovations. As a result, the costs and benefits of decarbonization are distributed unevenly, reinforcing the importance of ensuring that climate policies remain socially equitable as well as environmentally effective.

Overall, these findings demonstrate that housing affordability is no longer simply a question of market performance but also of welfare, health and social inclusion. They also reinforce the central argument of this paper – that while European housing systems face increasingly common pressures, their social outcomes continue to depend on the resilience of national housing systems and welfare arrangements. European housing systems are increasingly exposed to common pressures but not equally equipped to absorb them.

5. The emergence of a European Housing Governance Framework

The preceding sections have shown that housing has become a European concern not because competences have shifted from member states to the EU but because many of the forces shaping housing affordability increasingly transcend national borders. At the same time, housing remains a territorially embedded policy domain, with national, regional and local authorities retaining the primary responsibility for housing provision, planning and regulation.

The publication of the European Affordable Housing Plan in December 2025 represents a significant institutional milestone in this evolution. Rather than proposing a transfer of competences, the Plan frames the housing crisis as a shared European challenge requiring coordinated action across levels of government. It reinforces the gradual emergence of what this paper conceptualizes as a European Housing Governance Framework: one based on financial support, regulatory coordination, knowledge generation and multilevel cooperation that strengthens the implementation potential of national and local housing systems while fully respecting the principle of subsidiarity. Following the distinction proposed by Bengtsson (2012) between housing policy as the outcomes of political decisions and housing politics as the institutional processes through which those decisions are shaped, this evolution is best understood as a transformation in housing politics rather than a transfer of housing policy competences.

The following subsections examine the main components of this emerging governance framework: political leadership, knowledge generation and policy learning, coordination, financial capacity and local implementation. Together, they illustrate how the EU can strengthen institutional effectiveness while leaving housing policy implementation firmly anchored at national, regional and local levels. Such added value is not automatic but depends on policy coherence, sensitivity to national contexts and sufficient implementation capacity across levels of government.

5.1 Political recognition and leadership

One of the clearest signals of the growing political importance of housing at European level has been the creation, for the first time, of a dedicated European Commissioner with explicit responsibility for housing. While housing remains outside the core competences of the EU, the establishment of this portfolio reflects the recognition that housing affordability has become a strategic European concern with implications for social cohesion, economic competitiveness, labour mobility and the green transition.

The appointment of Commissioner Dan Jørgensen should therefore be understood less as a transfer of competences than as an expression of political leadership. While the creation of a housing portfolio may raise expectations of a stronger European role, the formal allocation of competences remains unchanged, creating a potential gap between political expectations and the instruments available at European level. His role is to provide strategic direction, strengthen coordination across policy domains and enhance coherence between the European instruments that increasingly shape housing outcomes. The significance of this institutional innovation lies less in its formal powers than in its capacity to place housing firmly on the European policy agenda.

The creation of the portfolio has been accompanied by the launch of the European Housing Alliance, the establishment of the Housing Advisory Board and the preparation of the European Affordable Housing Plan. Although it is too early to assess the long-term impact of this institutional architecture, the speed with which these initiatives have emerged signals a clear political commitment to addressing housing affordability as a shared European challenge.

5.2 Knowledge generation and policy learning

An important feature of the emerging European housing governance framework is the growing recognition that effective policymaking requires a stronger and more systematic knowledge base. Given the diversity of housing systems across member states, European coordination depends not only on financial and regulatory instruments but also on the production of comparable evidence, the exchange of expertise and the development of shared analytical frameworks. In this respect, knowledge itself becomes a governance instrument, supporting informed decision-making while respecting the diversity of national housing systems. This is particularly valuable for member states such as Sweden, where strong domestic expertise can both contribute to and benefit from comparative European policy learning.

This evolution is reflected in a series of recent initiatives aimed at strengthening Europe’s housing knowledge infrastructure. The Housing Advisory Board provides the EC with independent expertise from researchers and practitioners, while the planned European Housing Observatory is expected to improve the availability and comparability of housing data across member states. Alongside these institutional developments, long-established research networks such as the European Network for Housing Research continue to generate comparative evidence, foster mutual learning and facilitate dialogue between researchers, policymakers and practitioners. Collectively, these initiatives strengthen the knowledge capability required to support a more coordinated European approach to housing.

Beyond generating evidence, these initiatives also strengthen policy learning and knowledge transfer, enabling experiences developed in cities or member states to inform housing policies elsewhere in Europe. In this way, European governance increasingly supports not only the production of knowledge but also its circulation and practical application across different institutional contexts.

5.3 Coordination

Beyond political leadership and knowledge generation, the EU is increasingly assuming a coordinating role across the wide range of actors involved in housing policy. This function is particularly relevant in a policy field characterized by fragmented responsibilities, where effective responses depend on collaboration between European institutions, member states, regional and local governments, financial institutions, housing providers, researchers and civil society organizations. Coordination therefore becomes an essential governance function, enhancing the coherence and effectiveness of actions undertaken across different levels of government rather than replacing formal competences.

Recent initiatives such as the European Housing Alliance, the Affordable Housing Dialogue and the work of the Housing Advisory Board illustrate this shift towards collaborative governance. Rather than producing binding legislation, these platforms seek to build shared priorities, facilitate policy learning and foster cooperation among actors that have traditionally operated in relative isolation. In doing so, they contribute to a more coordinated European approach to housing, although the challenge remains to ensure that greater coordination accommodates the diversity of national housing systems and remains consistent with the principle of subsidiarity. In this sense, coordination creates the institutional conditions through which European objectives can be translated into coherent action without requiring the harmonization of national housing policies.

5.4 Financial capacity

Perhaps the most tangible contribution of the EU to housing policy lies in its financial capacity. Although the Union does not finance housing through a dedicated housing policy, an increasing number of European financial instruments support affordable housing, urban regeneration and building renovation. Institutions such as the EIB, together with programmes including InvestEU, Cohesion Policy, the RRF and, where appropriate, the Multiannual Financial Framework, provide investment opportunities that complement national and local housing strategies.

The significance of these instruments extends beyond the volume of funding they mobilize. European finance can reduce investment risks, leverage additional public and private capital, encourage innovation and strengthen the implementation potential of local authorities and housing providers. Rather than replacing national housing expenditure, these instruments increasingly act as catalysts, enabling projects that might otherwise be difficult to realize.

Financial support illustrates particularly well the evolving role of the EU in housing governance. Rather than assuming direct responsibility for housing provision, the Union increasingly enables action by strengthening the investment capacity of member states, cities and housing organizations. European added value therefore lies less in direct intervention than in expanding the collective reach to address shared housing challenges.

Financial instruments therefore contribute not simply by mobilizing investment but by expanding the scope for member states and local authorities to respond to shared housing challenges. Yet financial capacity does not automatically translate into housing outcomes. Uneven administrative capacity and project pipelines may limit the effective use of European funding, while additional finance cannot by itself overcome constraints related to land, planning, permitting procedures or construction capacity.

5.5 Local implementation

Ultimately, the effectiveness of the emerging European Housing Governance Framework depends on implementation at the local level. While European institutions increasingly provide political leadership, financial support, regulatory coordination and knowledge infrastructures, housing outcomes continue to be shaped by decisions taken in cities and regions. Land use planning, permitting procedures, infrastructure provision, the allocation of public land, the management of social housing and the delivery of housing services all remain fundamentally local responsibilities. This is particularly relevant for countries such as Sweden, where municipalities play a central role in housing provision and spatial planning.

This reinforces rather than weakens the principle of subsidiarity. European governance does not seek to replace local decision-making but to strengthen the ability of local authorities to respond to increasingly shared challenges. Financial instruments, regulatory frameworks and knowledge exchange are valuable only insofar as they enhance local implementation and enable cities and regions to adapt European objectives to their own institutional, economic and social contexts.

The emergence of a European Housing Governance Framework therefore does not alter the distribution of competences; rather, it recognizes that effective housing governance requires stronger vertical coordination between European, national and local levels. As housing challenges become increasingly interconnected across Europe, the ability of local governments to translate common objectives into effective place-based policies becomes a central component of European housing governance. For Sweden, the emerging European Housing Governance Framework should not be understood as a challenge to national housing institutions but as an opportunity to address persistent structural problems – including housing affordability, supply constraints, labour mobility and access to housing for groups that remain poorly served by existing arrangements. In this sense, European coordination can complement national reforms by strengthening investment, policy learning and institutional capacity without undermining national responsibility for housing policy.

6. The Affordable Housing Plan

The EC is preparing its first Affordable Housing Plan through a year-long Affordable Housing Dialogue combining a call for evidence, the work of the Housing Advisory Board and a public consultation. Together, these processes will inform the final Plan (European Commission, 2025). The main stages in the preparation of the Plan are summarized in Box 3.

The consultation explicitly covers policy areas that cut across EU and member state competences, including affordable and social housing, financing, state aid, construction and renovation, planning, rental markets, short-term rentals, financialization and governance (European Commission, 2025). This broad scope suggests that the Plan will adopt a multi-instrument approach, combining financial support, regulatory guidance and coordination while working with, rather than overriding, national housing frameworks.

On 9 September 2026, the Commission proposed an Affordable Housing Act establishing a common framework for measures addressing housing stress, particularly restrictions on short-term rentals and the use of residential property and land for non-primary residence. Based on Article 114 TFEU, the proposal illustrates how EU influence over housing is advancing through internal market regulation rather than through a new housing competence, seeking to provide greater legal certainty while also defining the conditions under which national and local authorities may intervene.

The Plan combines the mobilization of existing European financial instruments with regulatory initiatives concerning state aid, short-term rentals, planning and permitting procedures. Rather than creating new regulatory competences, the Plan builds on existing European instruments – including the EPBD, competition and state aid rules – and is expected to be complemented by the forthcoming Housing Simplification Package, which is intended to reduce administrative burdens and accelerate housing delivery.

The success of the Plan will ultimately depend not only on finance and regulation but also on institutional capacity. In this respect, Housing2030 provides a useful benchmark by emphasizing multilevel governance, strategic land policy and sustainable investment as the foundations of affordable housing systems (United Nations Economic Commission & Housing Europe, 2021).

Given the current division of competences, the Affordable Housing Plan is unlikely to introduce a single European housing regime. Instead, it is expected to operate through three governance functions: coordinating and enabling member state action through guidance and state aid clarifications; mobilizing investment through European financial instruments; and supporting national reforms in areas such as planning, permitting procedures, rental markets and the reuse of existing housing stock, while fully respecting the principle of subsidiarity.

Table 3. Linking housing challenges with the main policy responses of the Affordable Housing Plan
Structural challenges	Governance response
Housing affordability	EU financing instruments
Financialization	Monitoring, state aid guidance
Land constraints	Planning and permitting reforms
Energy transition	EPBD + Renovation Wave
Fragmented governance	Multilevel coordination
Source: Author’s elaboration based on European Commission (2025) and United Nations Economic Commission & Housing Europe (2021).

The Affordable Housing Plan should therefore be understood not as a transfer of housing competences to the EU but as the first practical expression of an emerging European Housing Governance Framework. Its added value lies in strengthening the capacity of member states and local authorities to respond to shared challenges through finance, regulatory coordination and knowledge-based cooperation rather than in expanding European housing competences. Yet governance without formal competence also has inherent limits: European action remains dependent on national and local political choices and implementation, while dispersed responsibilities may weaken accountability for housing outcomes.

At the same time, the Plan reveals important challenges for the future of European housing governance. Housing-related instruments remain dispersed across policy domains – including climate, cohesion, competition, financial regulation and social policy – and continue to operate under separate governance logics. Its effectiveness will therefore depend less on creating additional instruments than on improving coherence, implementation capacity and coordination across existing policies. This also requires stronger monitoring and evaluation mechanisms capable of assessing not only financial absorption but also tangible improvements in housing affordability and access. Ultimately, the success of European housing governance will depend on its ability to strengthen national and local implementation while accommodating the institutional diversity of member states rather than promoting uniform policy solutions. The challenge is therefore not to Europeanize housing policy but to make European governance more coherent, evidence-based and capable of supporting effective implementation across diverse national housing systems.

7. Conclusions

This paper has argued that housing has become a shared European challenge without becoming a shared European competence. The growing involvement of the European Union (EU) in housing does not reflect a redistribution of formal powers but rather the recognition that many of the drivers shaping housing affordability increasingly transcend national borders. As a result, European action has progressively focused on strengthening implementation capacity through financial instruments, regulation, coordination and knowledge, while preserving subsidiarity as the foundation of housing policymaking. This evolution does not diminish the diversity of European housing systems. On the contrary, it confirms that common challenges increasingly require coordinated responses while remaining grounded in national, regional and local institutions and territorially embedded implementation.

European added value lies less in direct intervention than in strengthening collective capacity through complementary policy instruments. Rather than replacing national housing policies, the EU contributes by mobilizing finance, coordinating actors, establishing common regulatory frameworks and supporting the production and circulation of knowledge. In this sense, governance rather than competence becomes the principal mechanism through which European action creates value while preserving the diversity of national housing systems.

The emergence of European housing governance reinforces rather than weakens the role of local government. As housing challenges become increasingly European in scope, effective responses depend even more on local authorities being capable of translating common objectives into place-based solutions. European governance therefore combines strategic direction with local implementation, making subsidiarity not a constraint but the guiding principle through which common European objectives can be adapted to diverse territorial realities.

The Affordable Housing Plan represents the first comprehensive policy expression of this emerging governance framework. Rather than signalling a transfer of competences, it brings together financial instruments, regulatory coordination and institutional cooperation within a common European approach to housing. Its significance lies less in the individual measures it contains than in its recognition that housing affordability has become a shared European challenge requiring coordinated, multilevel responses.

Effective governance depends not only on financial and regulatory instruments but also on robust comparative evidence, policy learning and strong links between research, policy design and implementation. For Sweden, where long-standing institutional arrangements coexist with growing barriers to housing access for younger households, labour migrants and other outsiders, the European Housing Governance Framework represents an opportunity to complement domestic reforms through stronger coordination, knowledge exchange and investment rather than through regulatory harmonization. At the same time, countries with a stronger institutional capacity are well placed to contribute their experience to the development of a more effective European housing governance architecture. Conversely, where institutional and implementation capacity is weaker, European support may be particularly valuable but also more difficult to translate into effective outcomes, reinforcing the need for capacity building and context-sensitive support.

The future of European housing governance will therefore depend not only on stronger European coordination but equally on empowering local governments, where housing policies are ultimately designed, negotiated and implemented.

Although European housing systems are increasingly exposed to common pressures, governments and institutions are not equally equipped to respond to them. The added value of the EU lies in strengthening the capacity of national and local actors to respond to those pressures while preserving the diversity that characterizes European housing systems.

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1 Article 5(3) of the Treaty on European Union (TEU) and Protocol (No. 2) on the application of the principles of subsidiarity and proportionality.