When COVID-19 struck in the spring of 2020, the EU vowed to “emerge stronger from the pandemic.” But five years on, Europe is instead still grappling with a cost-of-living crisis that first took hold during the pandemic and was made worse by Russia’s invasion of Ukraine.
What began as an inflation shock has hardened into a prolonged grip on households, exposing fundamental flaws in Europe’s economic and social systems. Today, 93 per cent of Europeans say they are seriously worried about making ends meet while 40 per cent of young people rank rising prices and living costs among their top concerns.
Public worries
Surging energy bills, climbing food prices, and a shortage of affordable housing have dealt a heavy blow to millions, with low-income households hit hardest. And the problems persist. During the European Economic and Social Committee (EESC)’s presentation of its roadmap to emerge from this crisis in late July, EESC rapporteur Thomas Kattnig noted that although inflation has started to slow down, prices remain well above pre-crisis levels.
Public sentiment shows little sign of growing optimism. A Eurobarometer survey earlier this year found that one in three Europeans expects their standard of living to fall over the next five years. In the Netherlands, a Deloitte poll revealed that nearly half of Generation Z (47 per cent) and millennials (46 per cent) feel they are living paycheck to paycheck.
Housing at the heart of the crisis
Few sectors reflect the cost-of-living crisis as sharply as housing. In 2023, almost one in ten Europeans crossed the EU’s “housing cost overburden” threshold, spending more than 40 per cent of their disposable income on housing.
Between 2015 and 2023, average house prices jumped nearly 50 per cent across the EU, with Hungary recording a massive 173 per cent surge. Meanwhile, wages have failed to keep pace. On average, EU households now spend 20 per cent of disposable income on housing and utilities, while that figure rises to 35 per cent in countries such as Greece. For low-income households, those earning less than 60 per cent of the median income, face a burden that climbs to 38 per cent EU-wide (and over 62 per cent in the case of Greece).
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Mayors appeal to Brussels
European mayors have urged Brussels to act swiftly, as more than 60 per cent of Europe’s mayors now list affordable housing among their top priorities. They are asking Brussels to release more funds, including €15bn already being reallocated through the EU’s Cohesion Policy, and to relax competition and state-aid rules so municipalities can invest directly in affordable housing.
This (cost-of-living crisis) isn’t just hitting the most vulnerable, it’s hitting the backbone of our society. — Thomas Kattnig, European Economic and Social Committee rapporteur
Currently, EU state aid for social housing is allowed when it targets disadvantaged groups as a “Service of General Economic Interest” (SGEI), provided public funding is proportionate to costs, accounts are transparent, and market competition is not unfairly distorted. The European Commission closed a public consultation on these rules at the end of July, in which several stakeholders urged Brussels to expand the scope of SGEI beyond disadvantaged groups narrowly defined in the current rules.
In a statement, Eurocities and the Mayors for Housing Alliance, for example, said: “By restricting public support to narrowly defined target groups, the existing rules risk reinforcing spatial segregation, concentrating disadvantaged populations in isolated areas and undermining efforts to foster socially mixed, inclusive neighbourhoods.” The Commission’s updated state-aid rules for housing are scheduled for adoption in the second quarter of 2026.
The road ahead
In late July, the EESC adopted its “Roadmap to Ease Cost-of-Living Pressures and Build Resilience,” a plan to move beyond short-term fixes and address the roots of the crisis. As rapporteur Kattnig put it: This (cost-of-living crisis) isn’t just hitting the most vulnerable, it’s hitting the backbone of our society. We need to improve access to affordable housing, boost the creation of quality jobs and increase investment in public services and preparedness.”
EU funding could be used far more effectively if it were co-designed and implemented in genuine partnership with cities. — Eurocities network
The EESC wants to prioritize public investment in accessible and affordable homes, with particular focus on young people, who are disproportionately affected by high rents. According to Commission President Ursula von der Leyen, the EU’s long-term budget plan (MFF) also supports that ambition by several funding pillars that are brought together under the National and Regional Partnership Plans (NRPs). City leaders, however, have expressed their concerns about that plan, arguing they risk sidelining cities. “Local and regional governments understand what is needed on the ground and enjoy the highest levels of public trust. EU funding could be used far more effectively if it were co-designed and implemented in genuine partnership with cities,” the city leaders network Eurocities said.
Energy-efficient housing
Energy policy is another pillar of the EESC’s roadmap. The EESC argues that enhancing the EU’s capacity to build energy-efficient housing at scale is crucial for both maintaining an affordable housing sector and reaching climate goals. It therefore wants accelerated investment in renewables and infrastructure. To make Europe more future proof, and resilient to energy price volatility, it also suggests gradually ending fossil fuel subsidies.
At the same time, the EESC argues that Europe should rebuild its industry sector to overall become more economically resilient. In this regard, it supports ongoing simplification efforts by the EU to reduce administrative burden on European companies, in particular SMEs, albeit while maintaining high social and environmental standards.
