Housing in the EU - Current situation and main challenges

• Author: Zuzanna Kowalik - Piotr Lewandowski - Egidijus Barcevicius - Dovydas Caturianas - Jakub Sokolowski
• Pages: 9-27

Policies to e nsure access to aff ordable housing

9 PE 652.729

1. HOUSING IN THE EU – CURRENT SITUATION AND MAIN

CHALLENGES

1.1. Af forda ble and decent ho using – definit ions, recen t trend s and

mai n cha llenges in the EU

1.1.1. Affordable housing – definition(s) and indicators

The a ffordability of housing gener ally refers to th e cost of housing s ervices and shelter – bo th f or

renters and owner-occupie rs – often relat ive to a given in dividual's o r h ouseh old 's disp osab le in come1.

In many developed countries, the affordability of housing has become a focal point in discussions

abou t ho usin g policy ov er the pas t few decade s. The s ignificance o f housin g affordab ility has increased

as the relationship between rental costs/house prices and household incomes has transformed

significantly, i.e. ren tal costs/house prices have increased relative to household incomes2,3. Th is pr ocess

is t he result of t hree main facto rs:

• Developers continue t o build for upper-income households, which increases the number of

housing units, without addressing the affordability of housing4;

• Old and affordable housing units are torn down and replaced with new, expensive ones5; and

• National and local governments have limited affordable housing policies6.

Measuring housing affordability

No official, legal or statuto ry defi niti on of the t erm 'af fordable housi ng' or 'housing affordability'

is uni versally accepted across the M ember States. According to expert interviewees, this often

prevents systematic comparison and assessment of housing policy initiatives at European level.

However, for practi cal purposes , housing aff ordabili ty is us ually oper ationali sed by poli cymakers

based on an assumption that households shoul d not spend more than 30–40% of their income

on housing expenditures7. Fo r example, Euros tat8 measures the sha re of the EU-27 popu latio n living

in hou seholds that s pend 40% or more of th eir equivalised disposable income9 on housing. Ac cording

to t his m easu re of hous ing af fordabilit y, in 2018, 10.2% of all hou seholds in the EU-27 spent over 40%

of their disposable income on housing costs. This proportion of households ranged from 4% to more

than 25% depending on the tenure status (Figu re 1).

1 Bieri, D .S. (2014), Housing A ffordability, in: Michalos, A.C. (ed) Encyclopedia of Quality of Life and Well-Being Research, Springer, D ordrecht.

2 Lenna rtz, C., Ronald, R. (2017), Asset-based we lfare and social inv estme nt: Competing, compatible, or compleme ntary s ocial policy strate gies

for the new welfare state? Housing , Theory an d Society, 34(2), pp. 201–220, d oi:10.1080/14036096.2016.1220422.

3 Le Rou x, J. , Moren o, R. (2018), Recent house price increase s and housing affordability, ECB Economic Bulletin, Issue 1 / 2018 – Boxes , p. 29,

available at: https://www.ecb.europa.eu/pu b/pdf/other/ebb ox201801_03.en.pd f?503b1397497df 5287ba3a2e7a752b 612.

4 Sherman, R. (2017) , Uneasy street: The anxieties of affluence, Princeton, NJ: Princeton University Press.

5 Harrington, B. (2016), C apital without borders: Wealth managers and the one percent, Cambridg e, MA: Ha rvard Un iversity Pre ss.

6 Ronald, R., Dewilde, C. (2017), Why hous ing we alth and welfa re? In : Dewild e, C., Ron ald , R. (eds), Housing Wealth and We lfare , North amp ton,

MA: Edward Elgar, pp . 1–34.

7 Colini, L. ( 2016), EU Urban Age nda: The challenge of "af fordable housing" in Europe , available at:

https://ec.europa.eu/futurium/en/housing/eu-u rban-a genda-ch allen ge-affordable-housing-europe -laura -colini-u rba ct-expert.

8 Eurostat (2019), Housing Stat istics Explained, Eurostat [Online], available at:

http: //ec.europa .eu/e urostat/s tatistics-ex plain ed/in dex .php /Hou sing _statis tics.

9 The equivalised disposable income is the total income of a househ old, after tax and other deductions that is available for spending or

savin g, d ivided by th e nu mber of household members converted into equalised adults.

IPOL | Policy Department for Economic, Scientific and Quality of Life Policies

PE 652.72 9 10

Figure 1: Housing cost overburden rate by tenure status in the EU-27

Source: Author s' own elaborat ion based on Eurostat, EU-SILC survey (ilc_lvho07c).

The EU-27 av erage, however, does not reflect the significant differences between and within the EU

Member Stat es. Moreover, so me of the experts interviewed indicated tha t Eurostat's cu rrent m easure

of ho usin g affo rdability /housing cost overburden reflect s the situat ion at national level and is therefore

becoming less an d less relevant , since housing affor dabilit y levels are becoming increasingly different

within countries, e.g . between large cities, towns and rural areas, and from city to city within the same

country.

There are a num ber of a lt ernative definitions an d measur es of a ffordable housing. The European

Inves tm ent B ank (E IB) defin es housing affordabilit y as "the 'gap' between social housing (the sector for

low-inco me pers ons, t ypically eligible f or hou sing allo wances) and 'marke t rat e ho usin g". This gap is

identified through comprehensive local housing market analy sis by the EIB10,11. In o ther def initions,

hou sing is a ffordab le if it leav es a m inimum in come (acco rding to a specific, nationa l definition ) for

other expens es (such as food, health and education)12. This relative de finition is in co ntrast to a fixed

ratio/benchmark of affordable housing.

Finally, in some cases the term 'affordable' (often used inter changea bly with 'so cial') h ou sing d oes not

denote a s ingle criterion/ factor, but instead encompasses a complex range of factors that can make

housing a ffordable. For example, Housing Europe (the European federation of Public, Cooperative and

Social Housing) takes int o account a range of affordable housing factors13, including: t he impact of

environmental policy and legislation (standards) on the cost of delivery of affordable housing; the

effects of h ousing policy and practice on social exclusion; and financial mechanisms that enable the

delivery of affor dable housing, etc.

10 Rosenfeld, O. (2017) , Analysis of interpretations of the term affordable hous ing in the EU Urban Agenda Partners hip for Housing, a b riefing

note prepared for DG REGIO and the EU Urban Agenda Partnership for Housin g, Eu ropean Commission , DG REGIO , Bru ssels, ava ilable a t:

http s://ec. europ a.eu /fu turiu m/en /sys tem/file s/ge d/briefing_note_2017_interpreting_the_term_affordable_housing_-

_march_2017.pdf .

11 EIB, Social and Af fordable Housing with the EIB: Advance d Finance for a Basic Nee d, 17 September 2019, available at:

https://www.eib.org/attachments/thematic/social_and_affordable_housing_en.pdf.

12 Rosenfeld, O. (2017) , Analysis of interpretations of the term affordable hous ing in the EU Urban Agenda Partners hip for Housing, a b riefing

note prepared for DG REGIO and the EU Urban Agenda Partnership for Housing, European Commission, DG REGIO, Brussels, available at:

https://ec.europa.eu/futurium/en/system/files/ged/briefing_note_2017_interpreting_the_term_affordable_housing_-

_march_2017.pdf .

13 Ibid.