Europe cannot simply build its way out of the housing crisis

How can affordable housing be ensured within planetary boundaries?

Housing is on the agenda, but insufficient conventional approaches prevail 

Years of following the conventional solution to “simply build more” have exposed cities to a housing crisis compounded by an ecological crisis. The financialisation of housing markets, increased social inequalities, and a devastating environmental impact create a crisis more significant than the sum of its parts, where old tools don’t work and new ones need to be invented.

The current housing situation in Europe is not good. Between 2010 and 2022, EU house prices increased by 47% and rents increased by 18%. On the worst end of the scale, in Estonia, house prices went up 192% and rents 210% during the same period. Housing affordability is one of the most pressing issues in European cities today. 

It is no wonder that the housing crisis is on the European Commission’s agenda, and more political pressure is building. Recently, 10 mayors from major European cities urged Commission President Ursula von der Leyen to tackle the challenge. For the first time, the European Commission has a commissioner on housing, and the European Parliament has set up a Special Committee on the Housing Crisis. Moreover, the ongoing EU citizens’ initiative HouseEurope! signals growing public demand for systemic change, advocating for policies prioritising housing justice while respecting planetary limits.

However, one key insight from Demos Helsinki’s work on housing within planetary boundaries in Finland and the EU is that housing policy often develops in a vacuum. The traditional approach to housing policy does not make it easy for housing actors (cities, policymakers, and developers) to see and consider environmental and social impacts, or how housing questions and climate and biodiversity crises may be interlinked. Many still rely on business-as-usual solutions, failing to integrate social and ecological imperatives into urban planning and policy. As a result, potential pathways to both affordability and sustainability remain underexplored. 

Why more construction is not the solution

For city governments, builders and developers, increasing the housing supply is the primary solution to making housing more accessible and affordable. However, this approach has adverse environmental implications.

The built environment is one of the most significant sources of greenhouse gas emissions, making up to 40% of emissions globally. It can be divided into operational and embodied carbon. For example, operational carbon can consist of heating and energy emissions, whereas embodied carbon refers to the emissions generated by the extraction, production, and transportation of building materials and demolition of buildings. Embodied carbon emissions are often not included in city-level climate targets, as they are categorised as part of scope 3 emissions.

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To illustrate, a study shows that the UK’s previous government’s target to build 300,000 new apartments annually in England would consume the entire 1.5°C carbon budget by 2050. The current Labour government has a similar target. Urbanisation is also a major driver of biodiversity loss.

As energy is getting cleaner and buildings are being made more energy-efficient, it is estimated that half of the carbon footprint of new construction will consist of embodied carbon between 2019 and 2050. As we need to keep on renovating and retrofitting the existing building stock to decrease its carbon and ecological footprint, there is also a need to change the way we build, be it removing the barriers from circular construction or creating sustainable solutions to use wood in the construction sector.

Without a fundamental shift in approach, pursuing affordable housing through continued urban expansion and new construction risks deepening the ecological crisis. 

Increasing housing supply through innovation and sufficiency

City leaders can develop new tools now to avert the worst possible scenarios and preserve the legacy of cities as drivers of governance innovation.  

Emerging approaches rooted in the concept of housing sufficiency offer promising alternatives. Housing sufficiency shifts the focus from endless expansion to better utilisation of existing housing stock and more sustainable living arrangements. 

Here are innovative policies to increase housing availability without building more: 

• Incentives for downsizing and moving to smaller apartments
• Regulations on short-term rentals to free up housing for long-term residents
• Higher property taxes on vacant and underutilised housing
• Co-housing with shared spaces aiming to reduce per capita floor space 
• Subdivision of large apartments into smaller units to respond to the needs of rapidly decreasing average household sizes in many European countries.

These policies are stackable and mutually reinforcing. They address both the affordability and environmental crises simultaneously, demonstrating that it is possible to ensure housing for all while reducing the negative ecological impact of urban living. However, when designing sufficiency policies, it is still essential to move away from individual policy responses and ensure a systemic approach. Even radical measures, such as large-scale retrofits, or repurposing and reallocating existing building stock on a massive scale through public investments, regulation and taxation, might need to be utilised if the housing and ecological crisis are taken seriously.

The present and future of housing affordability depend on cities setting the right direction now

A more just and sustainable approach requires new policy and planning solutions, alternative funding models, and concrete housing innovations. The transition to genuinely sustainable urban housing must align social and ecological goals rather than treating them as competing priorities.

The housing crisis is not just about numbers; it is about values, priorities, and systemic transformation. European cities must move beyond the outdated paradigm of ever-increasing construction toward a model that genuinely integrates social equity with ecological responsibility. The future of affordable and just housing lies not in building more but in rethinking how everyone can live well within planetary boundaries.

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Demos Helsinki has recently worked on the future of affordable housing in Finland with a consortium of partners and has also approached the topic as part of the NetZeroCities consortium.

Feature image: SevenStorm JUHASZIMRUS/Pexels