It is unusual to see “Europe” and “housing” in the same sentence. Except, perhaps, for mortgage interest rates and European Central Bank-inspired loan-to-value and loan-to-income limits on mortgage lending. The European Union does not provide housing. It has no plans to do so. Housing is really seen as a national competence. It is up to the governments of member states to define their housing policies and frame housing rules.
However, at a recent housing event at NUI Galway , the influence of EU macroeconomic policy on housing was made very clear. The event was held in the framework of the Conference on the Future of Europe and will feed into the final report, which will emerge as a joint European Commission, European Parliament and member state outcome next year.
What emerged was that there was a real opportunity for the European Union and its member states to reassess the relevant framework policies that have an impact on national housing policies. Already, it is clear that too many EU citizens cannot access or afford housing suited to their needs.
The legacy of the reckless lending on housing, and the risks it posed for the stability of the euro, still inform much EU policy-making. But many of us remember 2015, when Mario Draghi, then governor of the European Central Bank, said that the bank would do “whatever it takes” to preserve the single currency. What happened? Historically low and zero mortgage interest rates were at first sight a gift for home-loan borrowers. But it just led to higher prices. Quantitative easing or the printing of money also had a significant and intended consequence. But with cheap and plentiful money rolling around the system, there were limited safe investments giving a good return.
The 'bank of mam and dad' is the only option for a lucky few. Meanwhile, rents spiral and mortgage opportunities dwindle
That’s where housing comes in. What better and safer return than investment in housing? This coincided with a period when many member states, to a significant extent, following the recession years after 2010 when there was significant underinvestment in housing, had allowed their local housing markets to be driven by investors. At first it seemed like a match made in heaven. Until you considered the consequences.
Priced out
More and more ordinary working people are priced out of the housing market in major cities round Europe. In Ireland, it is taking longer and longer for young people to find a decent place to live away from home. The recent National Longitudinal Study of Children indicated that 17- to 21-year-olds put housing as their number one concern. The labour market is distorted as housing costs deter movement. Marriages and families are being delayed. The “bank of mam and dad” is the only option for a lucky few. Meanwhile, rents spiral and mortgage opportunities dwindle. Housing is the topic of our time.
What can be done?
Fundamentally, this is an issue concerning the welfare of all citizens across Europe. National and European central banks point out that the stability of the financial system is a priority. However, the financial system is there to serve people, and when central banks are supporting a financial system that is stacking the odds against our citizens and causing real hardship and despair, then it is time to reflect.
According to Stan Jourdan of Positive Money Europe, who spoke at the Conference on the Future of Europe Housing event, there are a number of things that the European Central Bank can do, including:
– Issue credit guidance policies that discourage bank lending for real estate speculation;
– Direct cash transfers to households and non-financial firms instead of quantitative easing and negative interest rates, and
– Co-ordinate with fiscal authorities to foster real (rather than speculative) economic activity, including the supply of affordable housing.
Irish lead
In addition, the EU can tackle the financialisation of housing – where housing is seen as a commodity and investment rather than as a home to be lived in – and encourage member states to eliminate subsidies for international investors.
Housing unaffordability is not just an Irish issue. We have seen recently how it was critical to the formation of coalitions in Germany and the Netherlands
The EU can also support policies for affordable housing in a number of ways. At a time when states can borrow at zero interest, and EU fiscal rules have been suspended due to Covid-19, surely we need long-term investment in social housing. How can it be good for state budgets to be locked into long-term high-cost leasing arrangements for social housing, where these payments take priority in state budgets for the next 25 years, and there are no state asset acquired? How EU rules are being interpreted nationally requires serious reconsideration.
Housing unaffordability is not just an Irish issue. We have seen recently how it was critical to the formation of coalitions in Germany and the Netherlands. Denmark, Spain and France, among others, are suffering the effects of the financialisation of their housing markets too.
So it is possible that now is the right time to form a coalition of like-minded people who will tackle the housing challenge in a broader context. The Conference on the Future of Europe provides an opportunity for Ireland to take a lead. Housing for All has set the national agenda for housing. We can do something similar at EU level if we engage with others across Europe, recognise the common problems and develop sustainable solutions.