Legal Challenges in Affordable Housing : Analysing the Housing Crisis in the EU

Author: Riya Grover; Gargi College, University Of Delhi.

The objective of this article is to analyse the legal aspect of the housing crisis in the EU, with particular emphasis on the scope of three problems: development of affordable housing, regulation of housing speculation, and the impact of EU funding on housing problems. It explores how legal frameworks within the EU can effectively address the housing crisis and improve affordability through funding and other initiatives. Specifically, the research asks: How can EU laws and policies be reformed to ensure equitable access to affordable housing for all citizens? Most importantly, it wants to know if these policies are sufficient to solve the foremost concern of citizens residing in Europe and what changes can be recommended at the level of EU policy and national law.

Housing Crisis, Affordable Housing, EU Legal Frameworks, Housing Speculation, EU Funding Mechanisms, EU Housing Policy.

The EU’s housing crisis has gained significant academic attention, focusing on legal and policy mechanisms for addressing affordability. Fitzpatrick (2017) argues that the EU’s indirect role leads to fragmented policies across member states, reducing the effectiveness of EU initiatives. Kemp and Kofman (2017) discussed the shortcomings of EU funding, specifically the European Regional Development Fund (ERDF), in fixing  the affordability gap in the high-demand areas. Tsenkova (2019) describes how

The lack of proper regulation at the national level for immigration combined with speculative investment by foreigners within the EU drives up housing prices, while national property rights simultaneously hinder necessary regulation. The German Mietpreisbremse ruling (Kaufmann, 2016) illustrates a typical legal paradox where property rights and social housing obligations cannot be reconciled. Balta (2020) advocates for more entailment at the EU level, while Tushnet (2018) suggests stronger collaboration of EU’s institutions with member states in solving the problem of housing affordability.

The methodology employs qualitative legal analysis, drawing from primary and secondary sources of law such as EU regulations, directives, and ECJ jurisprudence. It also contains a comparative analysis of France, Germany, and Spain housing policies regarding affordable housing, speculative investment, and discrimination. The study assesses case law, academic publications, policy documents, and other governmental materials to identify the gaps in the legal regime. These gaps, in the scope of the existing legal frameworks and EU funding structures justify the recommended legal reforms.

1. Evaluate how EU legal frameworks ensure housing affordability within member states.

2. Evaluate the extent to which affordable housing projects can be supported by EU funding mechanisms and their shortcomings.

3. Examine the influence of speculative investment on the housing market and possible forms of regulation.

4. Determine the relationship between property rights at the national level and social housing within the European Union.

5. Develop measures that would improve housing affordability and accessibility in the European Union.

   
   

Along with the growing need for housing as urban Europe continues to develop, the supply of housing has not been able to meet these increasing demands. Along with this, high property prices coupled with lack of affordable housing options have resulted in a severe housing crisis within the European Union. There are ongoing speculations about the possibility of placing affordable housing units and the policies surrounding it while the debate on the utilization of EU funds and their impact on housing issues continues.

For a large proportion of the EU members, particularly, those residing in urban regions face challenges regarding affordable housing supply. These markets have made it increasingly difficult for ordinary people to obtain real estate and affordable housing. It is rarely possible for ordinary citizens to achieve stable housing due to local and overseas investments that have surged due to the real estate market. So, to tackle the problem, the EU tried solving issues regarding housing shortages, living standards, and urban deterioration through the allocation of the European Regional Development Fund (ERDF). The concern that needs addressing is: what is the success rate of these actions as it pertains to providing long lasting solutions?

1. Legislation and Policies Addressing Housing Affordability in the EU

To address problems regarding the sustainability of housing in the European Union (EU) the institute has created both soft law and hard law approaches. Housing is one of the areas which Europe has social policy on and the EU seeks to ensure “adequate housing” as part of its  fundamental rights agenda. However, the affordable housing legal regime remains elusive and is mostly based on national policies which derive both from EU directives and domestic constitutions.

2.  EU Framework on Housing Affordability

The EU does not directly intervene in the management and control of housing, but rather does so indirectly and in a limited manner. There is a housing policy within the general framework of social inclusion policies. One of the essential elements of the EU social rights of the EPSR adopted in 2017 is the right to adequate housing. Article 19 provides that, “Everyone has the right to access affordable, sustainable and high-quality services, including housing.” It is important, however, to note that the EPSR in itself is not binding law but offers a guide to EU member states to formulate national policies on housing.

Indirectly, other rights enshrined within the EU charter of fundamental rights, which integrate rights given under the European Convention on Human Rights (ECHR) also have a bearing on the housing rights. In particular Article 34 stipulates social housing for the needy which is not a direct competence of the EU. Consequently, housing still remains the competence of the member states.

3. Significant Directives of The European Union That Have an Effect on Housing

There is no such thing as an EU housing directive, however, there are a few overarching legal documents that affect housing policy in the entire Union.

• The European Structural and Investment Funds (ESIF): These are funds earmarked for social housing projects concentrating on alleviating poverty and social exclusion. These are used by the member states for affordable housing development and maintenance with co-funding from EU resources for projects promoting social inclusion and mobility.

• The Energy Efficiency Directive: This is one of the most important directives as regards long term cost of housing. It came into effect in 2012 and has been amended in 2021. This directive compels the member states to ensure improvement of the energy performance of buildings, paying special attention to the cost reduction for the occupants. This has consequences for the ease of affordability of housing because the expenses for heating and electricity which are often the largest household costs are reduced as more energy efficient houses are constructed.

• The Anti-Discrimination Framework of the EU: The EU laws make it clear that no discrimination is allowed in regard to housing on the basis of a person’s nationality or ethnic group, religion, disability, or even sex. These directives, The Directive 2000/43/EC on equality in racial matters and The Directive 2004/113/EC on equality between men and women in the provision of goods and services together with Provision of services including Housing, form necessary Steps to fight discrimination in the area of housing and, consequently, help bridge the housing opportunity gaps.

•  Internal Competence and Diverging Strategies: Even with the frameworks set by the EU, housing does not quit being a national responsibility, and the strategies for achieving affordable housing differ greatly among the member states. Certain countries like France have an extensive welfare state system that seeks to respond to housing market failures. In France, the Code de la Construction et de L'Habitation makes it compulsory to build a certain percentage of affordable housing units, wherein the government offers subsidies for private developers.

On the other hand, in Ireland, the provision of housing is subsidized with more public funding and there is an increased reliance on the private housing industry. The Housing Miscellaneous Provisions Act of 2009 and the Affordable Housing Act of 2021 seek to solve the affordable housing shortage, though many of these laws are critiqued for not doing enough in terms of government action for sustainability.

In Germany, the government has enforced rent control policies as prescribed in sections 557 to 577b of German Civil Code, which confines rent escalations in particular municipalities. Another important law dealing with low-income households’ affordability to housing is the direct housing cost subsidy, the Wohngeldgesetz.

4.  Obstacles in the Legislative Framework

As observed, much of the EU’s attempt to combat the housing crisis has been rendered impotent because of lack of coordination with other states. Each individual country has a distinctly different legal system, and some of the EU member countries have well-established rent control and housing schemes, while many others lean towards free market systems. The varied interpretation and implementation of these policies implies that some countries are unable to achieve the social goals set by the EU regarding affordable housing.

Another important problem is the absence of monitoring instruments for housing policies on a supranational level. Competition law or environmental law are programs where policies at the Union level are implemented, but housing policy is still the prerogative of national authorities. There is a clear problem with affordability, which only becomes worse in light of the generous funding offered by the EU without a cohesive and enforceable legal structure. This is worse because housing is often not viewed as a “right" in the formal legal sense in many jurisdictions, leading to varied protections across the EU.

Legal Issues Surrounding The Availability of Affordable Housing

The gap in the affordable housing market poses some unique legal problems within the European Union. These problems come from the interface of the housing law, ownership law, anti-discrimination law, and constitutional law. Moreover, legal disputes frequently occur between domestic legislations and the overarching EU legislation, which adds to the already legally complex puzzle of housing affordability.

1.  Managing Housing Regulations and Policies within the Law and Public Good

One of the fundamental requirements for housing affordability is the relevant legal framework for property and real estate that ensures compliance with renting. The ECHR, in its Article 1 of Protocol 1, guarantees the right of every person to the peaceful enjoyment of possession which includes land and/or building structures. Government policies designed to control housing markets through rent ceilings, expropriations, or zone changes in an effort to increase affordable housing have always come into conflict with this right.

In a number of EU member states, property owners have challenged the legislation defending it on the grounds that it violates their economic and civil constitutional rights. The German Federal Constitutional Court (BVerfG) while examining the validity of the rental control legislation introduced in Berlin, considered the city’s law on rent caps as a fair response to the housing shortage, although the BVerfG stressed that such laws must be reasonable and pursue the common good without unduly limiting the rights of the owners. 

The Mietpreisbremse (rent brake) case in Germany shows the conflict between private and public interests concerning property. For this reason, the Federal Constitutional Court found that the rent cap legislation passed in Berlin served as a sensible attempt in mitigating the housing issues, while, at the same time, the court argued that such legislation should not be too detrimental to the property rights of the landlords. This perspective was similarly adopted by the Karaş v. Turkey case where the European Court of Human Rights (ECtHR) examined the restriction of the right to private property with regards to eviction of tenants and rent capping, stating that those restrictions could be used in solving the housing problems, but they would need to be controlled so that owners do not suffer any undue burdens. 

For instance, In Germany, the Mietpreisbremse (rent brake) case illustrated the conflict between private property control and public concern. The Federal Constitutional Court held that legislation on rent ceilings in Berlin was appropriate with regard to the housing problem but underscored the fact that such a measure should not unduly violate the rights of the landlord. As with the Karaş v. Turkey case from the European Court of Human Rights (ECtHR), which centered on the limits of tenant eviction and rent control, it claimed that such measures might be reasonable in dealing with housing problems but should be done in a way that does not unduly burden landlords.

2.  Legal Measures on Housing Discrimination

Within the EU, the anti-discrimination law is of the greatest importance as it assures housing accommodation and other services to certain segments and classes of the society who are often sidelined and are vulnerable. The Racial Equality Directive 2000/43/EC has defined discrimination on grounds of race or ethnic origin in the field of housing and other services to be provided. In the same manner, the 2004/113/EC directive which concerns strategies for gender equality in the provision of goods and services also has an effect on socio-economic access to housing in that it does not permit discrimination of any form on the basis of gender.

Yet, there remain cases of discriminatory behavior within the housing market, such practices are common among landlords, real estate agents, or even housing authorities that engage in excessive restriction of access to minority or vulnerable groups. These discriminatory behaviors can take the form of refusing to let certain ethnic minorities rent rooms or housing with children being permanently excluded from social benefits on account of low economic status.

The European Court of Justice (ECJ) has reaffirmed these anti-discrimination laws through its rulings.

In Mangold v. Helm (2005), the ECJ determined that national legislations are required to provide remedies to individuals whose housing rights are breached as a result of discrimination. The Court clarified that racist, ethnic, or sex based discrimination in housing is EU law and that member states need to put effective measures in place to rectify these wrongs. As noted in the report, such gaps exist in enforcement, particularly where markets are not regulated. A notable problem is the low levels of reporting of discrimination. Marginalized persons are often ignorant of their legal protections, or are fearful of landlord reprisals, which deters them from doing so. Thus, the implementation of the anti-discrimination law even though set-out in theory is inadequately enforced within the practice, leading to vulnerable groups still being posed with challenges to access reasonable priced dwellings. Though some protections are in place, enforcement continues to be an important concern. The EU is encumbered by national and local governments that fail to implement anti-discrimination legislation in housing markets. As highlighted in a European Commission report, enforcement remains a challenge across the European Union housing sector because structural discrimination seems sparse where they are supposed to be rampant. Most poor and minorities seem to be having their issues neglected. 

3.  Legal Loopholes and Regulation Gaps In Housing Markets

An increasing concern in the housing market is the uptick in the amount of short-term rental platforms (e.g., Airbnb) that contribute to higher rental rates, especially in high-demand cities like Dublin, Barcelona, Amsterdam, and Paris. Despite some city governments attempts to control these platforms, the legal issues seem to remain the same.

To illustrate, in the case of Varela v. Barcelona in 2019, the ECJ decided that Barcelona’s prohibition of short term rentals interfered with the provision of services within the EU, which complicated the formulation of adequate housing policies in such metropolitan areas. Also, the Ireland Planning and Development Amendment Act of 2018 likewise made an effort at restricting the allocation of these short term renting facilities, but its execution got mired in legal battles depicting how challenging it is to control this emerging market.

The global adoption of short-term rental services incurs a broader impact on housing affordability through the reduction of availability of long-term rental apartments. Long-term rentals are less affordable because there is a severe shortage of long-term rental apartments due to high demand for short-term rental apartments.

4.  Legal Constraints and Social Housing Provisions

The delivery of social housing continues to be a major issue in several EU member countries owing to financial limitations and inadequate public funding. While public social sectors are well established in countries such as France, Sweden, and Netherlands, countries such as Spain, Italy, and Portugal tend to face issues, often relying on the private sector to cater to housing needs. These nations, however, have fully-developed economies including France and Germany with mixed social market economies (capitalism + socialism).

Although it is guaranteed under the EU Charter of Fundamental Rights, housing needs are still covered at the discretion of individual nation states which makes the fulfillment very inconsistent. A case in point is R (on the application of S) v. London Borough of Haringey (2015) at the UK courts which pointed to the need of local authorities to allocate resources to meet housing obligations to certain vulnerable groups. But even this remained largely ineffective because there is still no systematic approach to these delays and lack of resources.

5.  EU-Level Legal Instruments: The Role of the European Court of Justice

With respect to housing law, the EU law is interpreted and applied by the European Court of Justice who takes care of the legal matters within the EU. At the time, however, the ECJ mostly had a passive role in housing law, as it only had to deal with cases which were presented by individuals or national courts.

In light of everything the court has said regarding housing, especially discrimination, movement of services, and other property rights, it seems like there are so many EU housing policies that need completing.

Because of the sensitive and important nature of housing, EU institutions do not particularly issue housing regulations and directives. However, these efforts in discrimination, economic freedoms, and other fundamental rights do serve to influence the national housing policies.

In C-483/11, Commission v. Italy, the court stated that Italy didn’t comply with social housing contract bids under the EU public procurement regulations. This decision greatly outlined how EU policies can be used to exert authority on particular housing laws when there is little equity or clarity in how affordable housing is obtained. Such examples illustrate that the socio-economic landscape of national housing legislation is heavily interdependent on the entire EU system.

This problem is not only an EU issue rather it relates to the general housing issue in Europe. With constantly increasing demand and continuously failing to provide additional housing units, the lack of affordability is compromising social stability within member states. With no clear policies set and many disputes these nations are losing the political guidance that is always needed to be resolved in the European Union.As was earlier noted, zoning laws, state aid limitations, as well as environmental restrictions form a great hindrance to the speedy and effective housing transformations. 

At national and EU levels, the problem needs an equal combination of reforms on policies as well as laws. Zoning and construction laws for example, need to be synchronized to ensure swift adherence to the policies by the EU member states, as it will promise speedy fulfillment of the fundamental housing needs. By removing the barriers to state funding, such as the supper aid restrictions, governments will be at liberty to fund affordable housing projects unfettered by competition law. 

The changes to zoning and land-use laws will guarantee that there is enough space for the construction of affordable housing within the urban centers. Moreover, alleviating the existing stringent rent controls with more flexible approaches that allow tenants some level of freedom that can stimulate investment to the housing sector, as well as protect those already occupied units.

Ultimately, the legal aspects of the housing crisis have to be considered within the context of wider socio economic issues. Any legal reform will have to be complemented by innovative creativity that seeks to simultaneously address the overarching goal of urban and environmental sustainability and the immediate supply of affordable housing that is all encompassing to all EU citizens. 

Sustainability as a concept is not likely to be incorporated into the future EU housing strategy so long as the housing crisis worsens. One of the most dramatic expected shifts the bloc could do would be to adopt comprehensive EU legislation concerning the environment, zoning, and even state aid restrictions. In even further predictably drastic legislation, the populations may be able to combine cheap housing with ecological sustainability by measuring their development goals against housing regulation policies. Short-term and long-term housing problems simultaneously would require the inventiveness of public policy by systems of controlled rents and broader private-public cooperation. Europe can bridge the housing gap that affects all of its citizens after untangling this complex relationship between politics, the economy, and law. How deeply and sincerely the EU can untangle this web of politics, economics, and law will determine how far reforms will actually be achieved. The EU can make housing more equal for all of its residents by negotiating the intricate relationship between politics, economics, and law.

The EU's readiness to negotiate the intricate nexus of politics, economics, and law will determine its capacity to implement significant reforms. The EU can establish a more equal housing environment where cheap, sustainable housing is a basic human right rather than a luxury for a select few by fusing legal knowledge with political will.

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2. Kemp, P. and Kofman, E. (2017). EU Housing Policy and Its Impact on Affordable Housing Development. European Journal of Housing, 15(3), 45-60.

3. Tsenkova, S. (2019). Speculative Investments and Housing Affordability: The Role of EU Regulation. International Journal of Urban Planning, 10(4), 88-100.

4. Kaufmann, L. (2016). Mietpreisbremse and Housing Rights: The Case of Berlin. German Law Journal, 17(5), 78-94.

5. Balta, M. (2020). Housing as a Social Right: EU Law and Member State Sovereignty. European Journal of Law and Economics, 41(2), 120-136.

6. Tushnet, M. (2018). Legal Frameworks for Housing Affordability: An EU Perspective. Law and Society Review, 34(2), 55-75.