Housing – a privilege for the wealthy?  Affordability slips out of reach

Foreign media outlets are sounding the alarm: the problem of rising housing prices is gradually becoming global, affecting an increasing number of countries, including those once considered islands of prosperity and social equality.

For example, The Wall Street Journal reports that in recent years, the issue of housing affordability has spread from the U.S. to Canada, Australia, the United Kingdom, and other European countries. A study conducted by the Munich-based Ifo Institute for Economic Research and the Swiss Institute for Economic Policy (IWP) at the University of Lucerne found that over the next 10 years, an average annual increase of 10% in property prices can be expected.

According to American journalists, the population of Ireland has been particularly affected. Due to a business-friendly tax policy, many multinational companies operating in the EU are registered there. Today, minimum rental prices in Dublin are around €2,500, and 59% of Irish people under the age of 34 still live with their parents because they cannot afford their own housing. In Estonia, Lithuania, and Hungary, rental prices for apartments and houses have risen by 60% since 2015.

In Germany, according to DW, renting a good apartment in a prestigious district of Berlin requires enormous sums: “A ‘wonderfully spacious 4-room apartment’ in Berlin's upmarket Charlottenburg district: 182 square meters, furnished, the rent is €8,190 ($8,947) per month. Plus heating, electricity and other incidental costs, that amounts to over €50 per square meter.”

According to a report by the French research centre Institut Montaigne, 68% of housing in France is owned by 24% of the population, and a middle-class family can no longer afford to buy an apartment. In France, the number of homeless people regularly increases from April each year – the period when, by law, tenants who have fallen behind on rent for several months can be evicted. Among them are many who are considered “ethnic French” in Eastern Europe, as well as professionals with higher education.

Since buying property is virtually impossible, people are forced to rent, which exacerbates the shortage in the rental market and leads to further price increases. On average, European Union residents spend 20% of their salary on housing. These figures were reported by EuroStat in its study “Share of housing costs in disposable household income.” Housing is the largest single expense, with the next biggest category, food, accounting for only 12%.

According to the Eduard Pestel Institute for Systemic Research, Germany lacks more than 700,000 apartments, particularly in the affordable segment. The German government has announced plans to build 400,000 new homes per year, but experts at the Institute for Macroeconomic Research and Business Cycles believe this goal is unattainable.

The situation in Europe is further strained by the ongoing influx of refugees from war-torn regions. Among those who arrived in Germany in 2015–2016, about 25% still live in government shelters because they were unable to find housing. In 2022, more than one million refugees arrived in Germany from Ukraine.

Belgrade has faced a similar problem due to the influx of wealthy Russians into the city since the start of the war in Ukraine. “The Russians came here without asking how much rent costs, and we already had a shortage of rental housing on the market, and, let’s say, a shortage of standard apartments that could be sold at affordable prices,” says Kacha Lazarević, a Belgrade real estate market specialist with over 30 years of experience. “Now we have rental housing, especially in the Old Town, and when the Russians arrived, rents doubled because people realised it was a chance to make money. What used to rent for €300 now costs €600 or €700 with the arrival of the Russians.”

Another factor driving property prices is the growth of tourism. Housing rental platforms such as Airbnb allow property owners to rent out potential housing to tourists. The profitability of Airbnb listings means that many homes remain unoccupied—that is, without long-term tenants.

“In Budapest, the share of vacant apartments has increased over the past two decades from 10% in 2001 to 13% in 2011 and 17% in 2022,” says Bálint Misetic, chief advisor to the mayor of Hungary’s capital on housing and social policy. “Many of these vacant apartments are likely rented out on a short-term basis, which is especially common in Budapest. It is reasonable to assume that this has contributed to the sharp rise in rents in the city. Our pre-pandemic analysis showed that, relative to population size, Airbnb was far more popular in Budapest than in Belgrade, Bratislava, Bucharest, Vienna, Warsaw, or Zagreb.”

To address this problem, some tourist cities, such as Barcelona and Florence, have recently introduced restrictions on short-term rentals in the hope of lowering rental costs.

The third reason for rising prices is gentrification: the influx of wealthier residents into poorer neighbourhoods, changing their character. In Austria, a well-established and extensive system of social housing addresses supply issues and prevents wealthier residents from turning affordable areas into expensive ones. However, in neighbouring Hungary, years of reduced government support for tenants have created serious problems.

Hungarian experts emphasise that “the government’s housing policy is very one-sided and focused solely on encouraging homeownership (with a strong nativist motive, primarily for families with three or more children), without any policy supporting public or affordable housing. In the Hungarian social welfare system, there is no support mechanism for tenants—no housing allowances, rent subsidies, housing vouchers, or anything similar.” Municipalities try to support residents, but their capacities are limited compared to what could be achieved through national measures.

Rising rents hit low-income workers and those without stable employment the hardest, as they have to spend a significant portion of their income on housing—if they can afford it at all. While wage increases can help mitigate the effects of the housing crisis, real solutions can only come from government intervention, which has become increasingly rare today.

Financial experts agree that no more than 30% of one’s income should be spent on rent. This traditional rule is becoming increasingly irrelevant, at least for those who want or are forced to live in major European cities. People with low and even middle incomes are increasingly unable to afford this. Low-paid workers—such as part-time employees, freelancers, and gig workers—often struggle to cover rent. Even middle-income citizens, those in the middle of the income distribution, are frequently forced to spend more than 30% of their earnings on housing.

Housing problems have long-term socio-economic consequences: unemployment, obstacles to career development for young professionals, family conflicts, and, ultimately, deterioration in public safety and crime rates.