In the last decade, housing accessibility has become an increasingly significant problem worldwide. Cities that were once affordable have now reached astronomic property value levels. Ultimately, the global housing crisis is hindering the growth of the middle class. The proposed solutions, such as building more properties, setting rent caps, investing in subsidized housing, or limiting their purchase by foreigners, have proven ineffectual.
According to the Organisation for Economic Co-operation and Development (OECD), between 2015 and 2024, global housing prices increased an average of 54% in the United States, 32% in China, and nearly 15% in the European Union – including a 26% hike in Spain. This increase was even more significant in large cities – in some, rents doubled during the same period. Today, nearly 9% of the population in the world’s most industrialized countries spend over 40% of their income on rent or lease payments. This crisis, affecting a significant part of developing economies, has become a key issue in the US presidential campaign and a priority for the British Prime Minister Keir Starmer and German Chancellor Olaf Scholz.
When digging deep and analyzing the causes of the current state, I traced back to the late 20th century when many Western government administrations decreased the number of social houses being built. The advent of Ronald Reagan and Margaret Thatcher’s governments signaled a turn towards liberalism. Aging social housing, instead of undergoing regular renovations and upgrades, started to degrade. Worse still, these properties were often demolished, with no new ones built in their place.
Soon after, many cities found themselves in a situation where their resources diminished, and the demand for housing kept increasing, hence, they could not meet it. Marc Roark, a law professor at the University of Tulsa, Oklahoma, believes that austere policies played a “significant role in deteriorating the state of these buildings, to the extent that they became a hazard for families – like in the case of Grenfell Tower in London, where flames rapidly spread through aluminum and plastic facades – as well as isolating poor communities in areas with limited economic opportunities.”
Rapidly rising prices
Despite the housing market bubble at the start of our century, there was still insufficient housing supply. It should be noted that a housing market bubble is a price increase driven by high demand, speculative spending until a crash occurs. It occurs when prices reach absurd levels, where residents’ incomes or potential rental profit doesn’t matter. Purchases are made solely because buyers believe it will be even more expensive soon, hoping to gain significant profit quickly. At one point, demand decreases or stagnates while supply increases, causing a sudden drop in prices – causing the bubble to burst.
The infamous 2008 crisis halted all construction investments and prompted a sharp increase in prices, primarily in urban areas. The lack of access to services and employment opportunities in large cities further exacerbated the situation. Moreover, economic growth concentrated in leading metropolises, leading to fierce competition for housing and subsequently triggering their rapid transformation and character change.
— The supercity model promoted worldwide since the early 21st century has created the belief that cities should attract talent and capital, regardless of the consequences it brings to their current residents. You can’t aspire to be the Silicon Valley of the Mediterranean and expect rents to remain low — Sergio Nasarre-Aznar, director of the UNESCO housing building chair at the Rovira i Virgili University in Spain, explained during a recent interview with the leading newspaper El País. He highlighted that much of today’s global housing crisis results from inconsistency in regional policy.
Housing as an Investment, Not a Right
Nowadays, housing is theoretically a right and not a commodity, as in practice it is not viewed as a fundamental right of citizens, but a financial investment. — Speculation encourages the building of homes that provide the highest profit, while affordable homes, which are needed the most, have been overlooked — Christoph Schmid, professor of economic law at the University of Bremen in Germany, explained in a recent interview.
For example, companies like Zillow — which operates in the real estate technology industry, and Redfin — which offers services for residential property brokerage and mortgage lending, play a crucial role in this phenomenon. They facilitate property purchases for investors, eliminating the need for the investors to be physically present during transactions. Meanwhile, wages haven’t increased at the same rate as property prices. According to Eurostat data, the median rent in the European Union between 2010 and 2022 increased by 20% with purchase and rental prices rising by 48%.
Furthermore, OECD data reveals that unregulated markets are creating havoc. For example, in the United States and Spain, 20% of tenants are already spending over 40% of their income on housing, while in France, Italy, Portugal, and Greece, this percentage ranges between 10 and 15%. Another source of price increase due to climate change is the rising insurance premiums — due to natural disasters. Additionally, climate anomalies can cause an increase in energy costs as record-breaking hot years require more electricity to cool homes.
Although many countries have created programs aimed at increasing future social housing supply, their effectiveness has yet to be determined, and analysts claim the results will be limited — unless wiser decisions are made regarding regional planning. It’s also worth noting that European Union member states have committed to ensuring appropriate housing conditions for everyone under the 2030 Sustainable Development Goals and the New Urban Agenda. The Universal Declaration of Human Rights by the United Nations and the Charter of Fundamental Rights of the European Union also mention housing as a right, but in reality, the governments of most EU countries cannot effectively address this issue.
Housing accessibility has become a serious issue for many households across Europe. This crisis, however, may look completely different depending on the country, region, or demographic group. While a character change in some city areas raised rents for some, others experienced an increase in housing costs due to recent interest rate hikes.
Although housing is not a direct competency of the European Union, the housing accessibility crisis is a topic that European policymakers cannot ignore and should serve as a significant warning signal. Because the availability and affordability of decent housing are increasingly concerning for many Europeans, especially young people, the European Economic and Social Committee explores housing conditions and needs and ways to simplify and make the multiple systems of financing affordable social housing more consistent.
During the conference titled “Housing Crisis in Europe – The Way Forward?” that took place in Brussels in February this year, European Commissioner for Jobs and Social Rights Nicolas Schmit bluntly stated that “the housing problem divides our societies and can be a risk to our democracies”. After all, public spending in the housing sector is not only an expenditure but a critically important social investment. Positively put, affordable, good quality housing in accessible neighborhoods can be an answer to some of the most significant social challenges.
For example, secure and inexpensive housing is already provided to many Europeans by non-profit communal associations. Moreover, they played a crucial role in alleviating some effects of recent economic crises. However, the percentage of affordable rentals on national and regional markets varies considerably — from over 20% in the Netherlands, Denmark, and Austria to less than 5% in Italy, Germany, and Spain. The speculative construction boom in the wake of the global financial crisis raised land prices, making it progressively harder to secure affordable land for future investments. In reality, despite the urgent need to launch affordable housing construction in the EU, its share in most countries is actually decreasing.
In Poland, there has been a massive demand for new housing, which is being built insufficiently and is continuously becoming more expensive. According to conservative estimates, there is a shortage of over two million homes. Price stabilization would be possible if supply could catch up with demand, but that seems unlikely. If we look at the elements that make up the final property price, we can clearly see the reasons for the continuous price increase for properties. Bureaucratized procedures, lack of land for construction, unclear regulations, rising costs of financing, construction materials and labor, discretionary civil service, prolonged time for issuance of legally required permits, shifting the cost of building infrastructure around the settlement onto the investor, or blocking investments by neighbors — are some of the factors slowing down the development of housing construction and contributing to continuous price increase.
In a recent interview I conducted, the president of the developer and hotel company Arche SA, Władysław Grochowski, listed on the Catalyst, indicated that “bureaucracy significantly increases costs, and additionally, we live in times of expensive money. Ultimately, it results in a 20-30% increase in the final apartment price that clients pay”. As a way to improve the situation, the entrepreneur pointed to the need for opening the market for smaller companies, thereby increasing free-market competition and simplifying the currently absurdly lengthy and arbitrary bureaucratic procedures.
The author, Adam Białas – is a construction and real estate market expert, a manager at the “Bialas Consulting & Solutions” agency, and a business journalist.
Source: https://managerplus.pl/rosnace-ceny-nieruchomosci-poglebiaja-globalny-kryzys-mieszkaniowy-i-hamuja-rozwoj-klasy-sredniej-65461
