In this legislative mandate, there are many expectations for housing. The EU Commission has appointed its first-ever commissioner for energy and housing, and Ursula von der Leyen addressed the issue in her political guidelines, outlining that the commission will need to “urgently address the housing crisis facing millions of families and young people.”
Danish commissioner Dan Jørgensen will be responsible for the first-ever European Affordable Housing Plan.
In addition to this, the commission will revise the state aid rules to enable housing support measures and plans to double cohesion fund investments in affordable housing.
Over the past 10 years, average rents within the bloc have risen by 19 percent, while house prices have surged by 47 percent.
Just under nine percent of the EU population spends more than 40 percent of their disposable income on housing. People at risk of poverty spend an average of 38 percent of their income on housing. In some areas, such as large cities, the situation is even worse. Housing-related challenges are sparking protests across Europe, with thousands rallying in major cities.
According to the post-electoral Eurobarometer, the two most common reasons for voting in the European elections were rising prices and the cost of living, as well as the economic situation of the voters. In many countries, the housing crisis has been a major issue in relation to the rising cost of living.
In other words, Europeans are expecting a lot.
But what does “affordable” housing actually mean? There is no common definition.
Sometimes, housing is defined as affordable if you pay no more than 30 percent of your gross income; other times, the limit is set at 40 percent. However, when examining the types of models that have been effective in reducing housing costs in the market, it is clear that what we should actually be discussing is the non-profit rental market.
According to Sorcha Edwards, secretary-general of Housing Europe, the housing shortage stems from a fundamental cause: public authorities halted construction efforts decades ago, transferring their responsibility to private real estate and construction companies.
Private actors do not follow social incentives in their construction and pricing decisions. The causes of the lack of affordable housing vary greatly between different countries and areas, but it is clear that public intervention is widely needed.
First, I support the calls for coordinated action and funding at the EU level. Key proposals include establishing an EU task force on housing and creating a major funding scheme, similar to the Next Generation EU package, to support public housing and green renovations.
To meet climate goals without increasing inequality, a housing deal with targeted investments is essential. Additional measures should include allocating more cohesion funds for renovations, implementing transparency rules to counter speculative investments, and using EU financial and state aid regulations to reshape housing markets across the bloc.
Second, the EU should focus on financial instruments to support municipalities and cities in developing non-profit rentals. This is key to influencing the overall housing market. In Finland, good results have historically been achieved through a model where cities own their own municipal housing companies that build, rent, and maintain rental flats on a non-profit basis.
In this model, publicly supported housing production has also acted as an automatic stabiliser, and it has been possible to increase it when private construction slows down.
In this way, radical slumps in housing production can be moderated.
Research also shows that Finland is among the few countries that have successfully reduced homelessness over the past decades. The key factors behind this achievement have been the 'Housing First' approach and the construction of publicly subsidised apartments.
In the Finnish model, companies obtain financing for investments from the market but receive support for interest rates exceeding a certain level from the housing finance and development centre of Finland, a fund run by the national government.
They can also receive loan guarantees and subsidies.
The interest rate support can last for up to 40 years and is provided to the non-profit companies on the condition that the flats constructed are below the private rental level. In agreement with the national government, municipalities have set local targets for the share of all newly constructed flats that should be built on a non-profit basis, usually around 25–30 percent.
These types of models should be used when the commission begins developing concrete proposals for the housing agenda.
The European Investment Bank could provide similar guarantee support schemes and loan guarantees directly to municipalities in EU countries, on the condition that the projects are enacted on a non-profit basis and are publicly owned.
We are talking about an EU-wide crisis that calls for EU-wide solutions.
Li Andersson is a Finnish Left MEP and chair of the committee on employment and social affairs.
Li Andersson is a Finnish Left MEP and chair of the committee on employment and social affairs.