A novel data-driven approach to identify EU areas under housing stress

The European Commission announced today its proposal for an Affordable Housing Act, addressing the ongoing EU housing crisis. The Act introduces a new evidence-based method that competent authorities across the Union can use to assess areas under stress, address local causes of housing pressure, and take targeted measures to make housing more available and affordable. The methodology was developed by the Joint Research Centre and other services of the European Commission.

Between 2013 and 2024, house prices have risen by nearly 60% and average rents by 20%, with new rental contracts becoming even more expensive (as mentioned in the European Affordable Housing Plan). In the same period, household income has only grown by 40%, not keeping pace with rising prices (Eurostat). A crucial factor contributing to this issue is the growing gap between housing demand and available supply: projections for the period 2025-2035 show that over 7 million dwellings will be needed by 2035 to meet demand, in addition to the 17.06 million housing units already planned.

Affordability issues affect territories differently

The impact of housing affordability challenges, however, varies substantially across different territories. Due to population growth, urbanisation trends, and limited land availability, major cities and capital regions are expected to face the most acute housing pressures: the top 30 metropolitan areas account for more than a third of the total expected EU housing needs. Higher housing demand is also projected in coastal regions and tourist hotspots. Conversely, an increasing amount of housing stock in some EU rural areas is vacant due to ageing and declining population.

Against this framework, assessing housing pressure at local level is crucial to ensure that investment efforts are targeted appropriately and that competent authorities across the EU can implement measures tailored to the needs of local communities.

A data-driven approach to identify areas under housing stress

The Joint Research Centre, in collaboration with other services of the European Commission, developed a two-tier methodology that competent authorities across the EU can use to assess areas under housing stress based on relevant indicators in a more coordinated manner across EU countries. The indicators are based on house price data from JRC and the Commission’s Mapadomo database, and household income data from Eurostat.

The framework helps assess housing affordability using price-to-income data – comparing the average house prices with average annual incomes. An area can be flagged as under potential housing stress when the price-to-income level is high, or when it is medium but has been growing over the previous 10 years. Additionally, competent authorities should also identify at least one source of housing pressure (e.g., related to population dynamics, widening gaps between supply and demand, or impacts of short-term rentals on the availability or affordability of housing) which is unlikely to ease in the next three years.

Competent authorities in areas considered under stress according to these criteria can take adequate measures to safeguard housing affordability and availability.