If the official statistics are to be believed, housing in Europe is getting more affordable. The housing cost overburden rate as measured by Eurostat, the EU’s statistics office, has been trending downwards over time, despite clear evidence that housing is becoming less affordable for many people.
The problem lies with the nature of the statistics. Marie Hyland, research officer with Eurofound, European Foundation for the Improvement of Living and Working Conditions – the EU agency which provides knowledge, to assist in the development of better social, employment and work-related policies, points out that the Eurostat metric is an average and doesn’t necessarily reflect the experience of different cohorts of the population including young people and lower paid individuals.
She also notes that it only counts what currently housed people pay and misses those shut out of the market, those living in overcrowded, poorer-quality homes and anyone trying to enter the market now.
There is an issue with how the costs are calculated as well, she notes. “It’s a technical point, but for homeowners, it takes into account their mortgage interest costs, but not the repayment on the principal, because that’s considered an investment or savings. There’s definitely a good logic for looking at it that way, but it means that renters tend to look relatively worse off, partly because all of their rent costs are accounted for in the statistic. If you look at the average, it has homeowners and renters together, but if you look at homeowners and renters separately, the rate of overburden is much higher among renters than among homeowners.”
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The overburden calculation is another pertinent issue. The official threshold for overburden is where the individual or household spends more than 40 per cent of their income on housing, but that is rather a blunt instrument.
“A high income household can probably afford to spend 40 per cent of their income on housing and still have plenty left over for their other essentials whereas for lower income households struggling to pay for goods and services, 40 per cent is going to leave them with much less to pay for those essentials,” Hyland explains.
The situation of newcomers to the market is masked by the average rate, she adds. People in the market for a long time with lower mortgage payments having bought their homes a long time ago when prices were much lower or renters fortunate enough to have been living in rent-controlled accommodation for a long period will bring down the average.
“People trying to get into the rental market can’t necessarily access the long-standing rent controls that long term tenants have benefited from,” she says. “Their incomes are lower and often they’re looking to rent in places where there’s quite a high demand. They’re moving to cities for work and for opportunities to study. You also have to bear in mind that the statistic is for people who are housed. It doesn’t account for the people who want to get into the housing market but can’t.”
To give a more accurate picture of the reality on the ground, Eurofound produced the Foundational Challenges, the Housing Struggle of Europe’s Youth report.
“Our definition of young is quite wide at 18 to 40,” she explains. “Traditionally we would have looked at people under the age of 30, but we’ve found that the housing affordability crisis is moving up the age spectrum. Unfortunately for younger people, when it comes to ambitions about independence and when they can expect to be able to buy their first home, it’s getting later and later.”
The report utilised a four-part framework developed for its earlier Unaffordable and Inadequate Housing in Europe report. According to the framework, unaffordable housing causes four different types of problems. These are housing exclusion – people living on the streets or in shelters, or people who are living in the parental home longer than they would like to because of housing unaffordability; housing insecurity – people at risk that their home is going to become unaffordable to them; problematic housing costs where people spend so much of their income on housing that they’re struggling to make ends meet; and housing inadequacy where people are living in either overcrowded or poor quality dwellings because there’s nothing else they can afford.
“We took that four-part framework and applied it to the situation of young people,” she says. “As part of the analysis of housing affordability, we combined data on the median wages of young people with the sale and rental prices of typical starter homes. The prices came from property listing websites across the EU. We looked at how many years of income it would cost a young person on an average wage to buy a home, or what percentage of their salary they would have to pay per month to rent one.”
The findings were quite stark, if not alarming, in Ireland’s case. “In Ireland, as well as Bulgaria, Poland, Portugal and Spain, and in parts of Austria and Italy, unaffordability is such that in many areas more than 80 per cent of a young adult’s average wage is required to rent a starter flat. Ireland has values above 60 per cent in all regions, above 80 per cent in some regions including Dublin. This indicates that two incomes are likely required to afford a starter flat.”
This translates directly into young people living at home for longer. “The proportion of Irish 25 to 34-year-olds living in the parental home rose by 17 percentage points, from 23 per cent in 2018 to 40 per cent in 2023,” says Hyland. “This was the largest increase of any member state.”
The impact of housing cost overburden extends beyond the ability to find a home. “We did a case study in Czechia, the Netherlands, Spain and Sweden. We found that there’s a large misalignment between where young people are living and where they want to be. We asked them about the consequences, and they spoke of not being able to take up employment opportunities, opportunities for education, delaying moving in with partners, delaying family formation. These are some of the long-term consequences of housing unaffordability and the housing crisis.”
There are some ways that the headline statistics can be made to reflect reality more closely, she believes. “It’s important to look beyond the averages and look at the specific situation of certain groups, be it young versus old, low and middle income versus high income households, people living in capital cities and tourist destinations versus places that are under less demand stress,” she says.
“For example, we wrote a short paper on approaches to measuring affordability at the request of the Danish presidency of the Council of the EU last year. One metric we looked at is the 30-40 indicator of housing affordability stress. This says that a household is overburdened with housing costs if it spends more than 30 per cent of its income on housing and is in the bottom 40 per cent of the income distribution. It takes into account not just the ratio of the housing cost to income, but also the household income level.”
She concludes on a positive note, saying that the Foundational Challenges report does point to actions being taken to improve housing supply and affordability across EU Member States, including in Ireland. “There are also some examples of policies in place in Ireland that aim to increase the supply and availability of housing. These include the Capital Assistance Scheme, Part V social housing requirements under planning law, the vacant homes tax, and the Repair and Leasing Scheme.”
