Europe needs 23m homes to tackle affordability crisis

The number of affordable homes in major European markets should double to support households living with excessive housing costs, new research from JLL reveals.

There are an estimated 23m households in the UK and EU countries living with costs exceeding 40% of disposable income, meeting the EU definition for housing overburden, according to analysis of local data and Eurostat figures.

This represents a significant unmet demand for affordable housing, which is highest in Germany (5.6m), the UK (3.9m) and France (2.6m).

In the UK and EU countries, there are currently 26.4m affordable rented homes, including social rented and intermediate affordable tenures. The market has grown by just 1% over the past decade.

Countries have struggled to raise stock levels amid public housing sales and limited government investment. In 80% of major European countries government housing spend as a share of GDP has not increased over the last decade.

Over this same period private tenures have rapidly expanded. There has been a 15% increase in private rental households and 5% in home ownership. As these tenures have grown, they have also become more expensive, with recent rental growth exceeding wage growth, putting greater pressure on housing affordability.

Private investors are responding to this demand. Fundraising for specialist affordable strategies and transactions are both growing. In 2023, investment in the sector peaked at €2.6bn, accounting for 9% of multihousing investment, up from 3% a year earlier.

Of the 23m homes needed, some 70% are located in cities. If these homes were provided at a 20% discount to current local market values, this would represent a €5.3 trillion investment requirement – demanding significant intervention from both private investors and government bodies to boost the delivery of new homes.

Emma Rosser, director for living research, EMEA, at JLL, said: “Affordable housing is a major challenge across all markets in Europe. The market has seemingly stagnated and, despite the obvious need, in most cases public funding has not grown. Though crucially, government actions to improve affordability have paved the way for private investment to really make a difference.”

Alex Buller, director for living capital markets, EMEA, added: “The investment case for affordable housing is underpinned by highly secure income with stable growth prospects and an opportunity to work with experienced partners.

“The social benefit of investing in affordable housing is significant, investors are no longer purely focused on the environmental performance of real estate but increasingly on the social impact. This social responsibility is driving interest in the sector.”