The European Affordable Housing Plan: how the EU aims to address the affordable housing crisis

Finding affordable housing has become one of the biggest headaches for millions of Europeans. And the figures bear this out: the European Commission itself acknowledges that, since 2013, buying a home has become more than 60 per cent more expensive, and renting around 20 per cent more so, with even steeper rises in certain cities.

The problem is not just one of prices, but also of a lack of available housing. Social housing accounts for barely 6–7 per cent of the total European housing stock, whilst, paradoxically, nearly 20 per cent of homes stand empty. Added to this is the boom in short-term holiday rentals, which soared by 93 per cent between 2018 and 2024.

Faced with this situation, Brussels has decided to take action and has launched the European Plan for Affordable Housing. The aim is twofold: on the one hand, to boost the construction of affordable, sustainable and high-quality housing; on the other, to give Member States and regional and local authorities more tools to tackle their own housing problems.

Building more with less bureaucracy

One of the plan’s key pillars is quite simply to build more. According to the Commission’s calculations, Europe would need to build more than two million homes each year to meet current demand, which translates into some 650,000 additional homes annually and an investment of around 153,000 million euros a year. These figures give an idea of the true scale of the problem.

To try to move closer to these targets, the Commission has drawn up a European Housing Strategy, designed to make the sector more productive and competitive, and to facilitate the introduction of new materials and construction systems.

It also aims to streamline much of the red tape that currently slows down new projects: speeding up and digitising planning procedures and permits, and reducing the administrative burdens imposed by European regulations.

Tourist rentals under the microscope

One of the points likely to be of greatest interest in tourist areas is the Commission’s explicit focus on short-term rentals.

Brussels acknowledges something that is already well known in many destinations: in cities and tourist areas, the cost of accommodation makes it very difficult for the local population to access housing at a reasonable price.

For this reason, a new Affordable Housing Act is due to come into force in 2026, which should provide national, regional and local authorities with specific tools to tackle short-term rentals in areas where pressure on the housing market is greatest.

For the time being, however, the Commission has not gone into detail: it does not specify what these tools will be or the full scope of this future regulation. What it does reveal is that the initiative will also need to tackle certain speculative practices and support the reforms being driven forward by the various countries.

This is an issue worth monitoring closely in places such as the Balearic Islands, where tourism and the housing market are so intertwined that access to housing has for years been one of the major problems for those who live there all year round.

More money on the table

The plan is not limited to regulatory changes. Another key element is securing more funding for social and affordable housing.

To this end, the Commission aims to launch a pan-European housing investment platform capable of mobilising both public and private funds. Furthermore, it proposes to simplify the European rules on state aid to make it easier to allocate public money to this type of project.

In the current 2021–2027 budgetary framework alone, the EU has already mobilised more than 43,000 million euros for housing, to which a further 10,000 million will be added in 2026 and 2027. Financial institutions involved in the project estimate that around €375,000 million could be mobilised by 2029.

The European Investment Bank will also play a key role: it plans to allocate more than €75,000 million over the next three years to housing and energy efficiency projects.

Young people and other vulnerable groups at the heart of the plan

The Commission is paying particular attention to the groups struggling most to access housing: young people, students, trainees and key workers who, in many cases, cannot even afford to live near their place of work.

Among the measures announced, one that stands out – on a pilot basis – is a guarantee scheme that would reduce or even eliminate the need to pay a deposit to access certain properties.

Measures have also been announced to prevent homelessness and housing exclusion, alongside initiatives aimed at improving the energy efficiency of buildings and easing the burden of electricity and gas bills on households.

What happens next?

Many of these measures have yet to be finalised, but the plan makes one thing clear: housing is already a major priority on the European agenda, and its importance is growing.

The EU will not replace Member States in their housing policies, but it can influence aspects that ultimately affect them directly: funding, public support, construction, energy efficiency and the regulation of the internal market.

Also planned for 2026 is the first summit of EU Heads of State or Government dedicated exclusively to housing, as well as the launch of a new European Housing Alliance, involving cities, regions, Member States, European institutions and representatives from the sector.

In the coming months, we will need to keep a close eye on how the future Affordable Housing Act develops and, above all, on what measures are ultimately proposed regarding short-term lettings. Its scope could be particularly decisive for regions such as the Balearic Islands, where tourism-related pressure has, for years, coexisted with serious difficulties in accessing housing.

At ILLESLEX, we closely monitor regulatory developments affecting the property and tourism markets in the Balearic Islands. The forthcoming European regulations on affordable housing and short-term lettings may bring about significant changes for property owners, investors, developers and tourism operators in the coming months.

Our team provides comprehensive advice on property, town planning, tourism and regulatory law, anticipating the legal impact of regulatory changes and supporting our clients in making strategic decisions.

If you would like to discuss how these measures might affect your property, investment or project in the Balearic Islands, our team is at your disposal.