EU household spending on housing, utilities surges over 20 years

Over the past two decades, the proportion of household expenditure dedicated to housing and utilities has surged significantly, reflecting broader economic shifts and mounting living costs across Europe.

The share of household spending on housing, water, electricity, gas, and other fuels has seen a notable increase over the past two decades, Caliber.Az reports, citing foreign media.

According to The European Parliament's Autumn 2022 Eurobarometer, the escalating cost of living is a major concern for over 90 per cent of Europeans. Official data provides insights into the factors driving this growing worry. Household consumption expenditure reflects how residents allocate their budgets to meet daily needs, including food, housing (rent), clothing, energy, health, and transport.

In 2022, spending on housing, water, electricity, gas, and other fuels constituted the largest portion of household consumption in the EU, making up 24.1 per cent, as reported by Eurostat. This was followed by food and non-alcoholic beverages at 13.6 per cent and transport costs at 12.5 per cent. While the order of these expenditure categories has remained stable, their proportions have shifted over time.

What does expenditure on "housing, water, electricity, gas" encompass?

Eurostat outlines that this expenditure covers:

• Actual rent for housing
• Imputed rent for housing
• Maintenance and repairs of the dwelling
• Water supply and related services
• Electricity, gas, and other fuels

Imputed rent refers to the estimated value of housing services provided by owner-occupiers who are not renting their homes, according to the Office for National Statistics. It reflects the amount these homeowners would theoretically pay for the housing services they use.

Examining how household spending has evolved in the EU reveals significant shifts in financial burdens.

From 2002 to 2022, household expenditure on housing and utilities rose from 21.1 per cent to 24.1 per cent, marking a 3 percentage point increase over two decades. For example, if a household spent 1,000 euros in 2002, 211 euros would go towards housing. By 2022, this amount would have increased to 241 euros. This rise highlights the growing financial strain of essential living costs, driven by escalating housing and energy prices.

Health expenditure also grew by 22 per cent over the same period, compared to a 14 per cent increase in housing costs. Despite the smaller percentage increase, the larger share of housing expenses amplifies the overall impact.

In the early 2000s, the proportion of household spending on housing and utilities was just above 20 per cent. This share steadily increased, peaking at nearly 25 per cent in 2013, reflecting significant growth in housing and utility costs. After a slight drop, the proportion surged again during the Covid-19 pandemic, reaching a record high of 25.6 per cent in 2020.

The increase in housing and utility expenditures over the past twenty years demonstrates that these costs have become a more significant portion of household budgets across the EU, reflecting broader economic pressures and changes in living expenses.

Ireland Experiences the Largest Rise

In certain countries, the rise in these expenses has been notably steep, exceeding 5 percentage points. Ireland saw the most substantial increase, with a remarkable 7.1 percentage point rise from 2002 to 2022. Spain and Italy followed with increases of 6.3 and 5.4 percentage points, respectively. Ten EU countries experienced increases of more than 4 percentage points, indicating a widespread upward trend across the region.

Conversely, several Eastern European nations, along with Sweden and the UK, witnessed decreases in housing expenditure share. Romania saw the most significant drop, with a reduction of 4.1 percentage points, while Bosnia and Herzegovina and Serbia also experienced notable declines.

Impact of the Covid-19 Pandemic

During the Covid-19 pandemic, household spending on housing surged to record levels across nearly all countries. However, by 2022, as the pandemic's impact eased, this share began to decrease. The peak levels observed during the pandemic make the overall increase in housing expenditure over the past two decades even more pronounced.

Countries with the Highest Housing and Utility Expenditures

In 2022, Slovakia topped the list, with over 30 per cent of household expenditure going toward housing, water, electricity, gas, and other fuels. Finland and Denmark followed closely, with 29.6 per cent and 29.1 per cent of their expenditures allocated to these costs, respectively. This suggests that Northern and Central European countries are facing significant financial pressures related to housing and utilities, likely due to higher energy costs or expensive housing markets.

In contrast, Southern and Eastern European countries like Montenegro, Türkiye, and Albania have much lower shares, with Montenegro at 11.6 per cent, and Türkiye and Albania at 12.4 per cent and 12.5 per cent, respectively.

Impact on Lower-Income Households

A recent OECD report on affordable housing highlights that housing costs can be particularly burdensome for lower-income households. In Europe's major economies, the housing cost overburden rate is notably high. In 2022, nearly half of low-income private renters in the UK (49 per cent) spent over 40 per cent of their income on rent, followed by 32 per cent in France and 28 per cent in Italy.