Selected macroeconomic and social aspects of housing affordability

Over the past decade, the housing market in the EU has been characterised by significant price growth, putting pressure on housing affordability. Despite a price moderation in 2022 and 2023 due to monetary tightening and increased mortgage interest rates, house prices remain historically high in approximately three-quarters of the EU, highlighting an underlying mismatch between demand and supply. On the demand side, urbanisation and demographic changes have driven up housing needs, while on the supply side, constraints in construction have hindered the market's ability to meet demand, leading to reduced affordability. To improve overall housing affordability, there is an urgent need to increase investments in new construction and in the renovation of existing stock as well as to review the role of regulation and to improve administrative capacity, which have been hindering the expansion of the housing supply in the recent decades.