Almost all major European cities are experiencing rent increases and, as a result, some form of housing crisis. Rising rents hit low-income workers and those without stable employment hardest, as they have to spend a significant proportion of their income on housing, if they can afford it at all. In general, higher wages can soften the blow of the housing crisis, but the real solution may be government intervention, which remains rare.
A data collected on rent-to-wage ratios and the reasons for rising housing costs in 26 major European cities in order to identify the causes and potential remedies for Europe’s housing crisis. The findings are twofold. First, cities with higher nominal wages are generally still better off. Rising rents hit residents particularly hard in cities where wages are already low, and the impact of tourism, low supply or gentrification, to name but a few problems, push rents up much more in proportion to incomes. Second, it is still helpful if states, municipalities or cities protect tenants and introduce programmes to support social housing.
One of the best-performing cities in our data, Vienna, has avoided most of the effects of the factors driving up rents in other places due to its extensive social housing stock, strict rent control policies and extensive tenant support systems.
On the other hand, Budapest, the worst performer in data, has a minimal number of such policies. The Hungarian government’s now decade-long commitment to family home ownership at the expense of regulating the rental property market has left the Hungarian capital in a disastrous housing situation with no prospect of a solution in the near future.
The website Housing Anywhere produces an annual rent index for different types of property advertised on their website, based on all advertisements that appear in the period. Housing Anywhere, claimed that while their data reflects market conditions in the cities where they operate, the properties advertised on the platform tend to be in better condition than the average rental unit, they are usually furnished and the prices often include some bills.
The salary data on Salary Explorer, one of the most popular salary comparison websites. and similar websites reflect the self-reported incomes of the people contacted by the site. Some may therefore report incomes below the minimum wage, and the mean and median may differ from official national statistics
Using this information, was created wage-to-rent ratios for the lowest and median wages in each city to rent a room, studio or apartment, respectively. In addition to the 23 cities available in the Housing Anywhere data, we collected similar price information for Belgrade, Bucharest and Dublin.
Findings in the cities studied by the Housing Anywhere index don’t leave much room for optimism. Lisbon and Budapest are the most critical on this list, with rents advertised at 88% of the median wage, making it virtually impossible for a single median earner to rent an apartment on their own. The problem is not confined to the EU: in Belgrade, data collected by CINS suggests that renting an apartment would currently cost almost 58% of the average wage in the city. Dublin is not much better, where this ratio would be 69%, suggesting that it would be difficult for anyone to afford such rents on their own.
Europe’s housing crisis is obviously a multi-dimensional issue, but some themes seem to recur when examining the commonly cited causes of house prices getting out of control. The first culprit, common to many cities, is the excessive presence of tourism, particularly Airbnb and other similar rental sites, which allow property owners to rent out potential residential properties as temporary accommodation for tourists. The profitability of Airbnb units means that many houses remain unoccupied, i.e. not occupied by a regular tenant.
