The European Union will need to build more than two million new homes every year until 2035 to keep up with soaring demand, according to new projections released by the European

Commission. The findings highlight rapidly worsening housing shortages across the bloc, particularly in major cities and coastal regions, and point to major investment needs in the coming decade.

Home ownership has become increasingly out of reach for many Europeans. Since the 2010 financial crisis—and especially after the pandemic—house prices have surged far faster than household incomes. By the end of 2024, house prices in the EU were roughly 55% higher than in 2015, outstripping income growth over the same period. Housing-related expenses, including energy and water, accounted for nearly a quarter (23.6%) of all household spending last year.

In response to growing public concern, the European Commission unveiled a new European Affordable Housing Plan today. The initiative is supported by research from the Joint Research Centre (JRC), examining long-term housing investment needs, price drivers in local markets and generational disparities in affordability. It also links to the New European Bauhaus programme, which promotes innovation and design to create sustainable and accessible housing.

A decade of rapid construction required

Fresh projections by the JRC and the Directorate-General for Economic and Financial Affairs show that, between 2025 and 2035, the EU will need more than two million additional housing units each year to meet demand. That translates to an extra 7.14 million dwellings beyond the 17 million units already planned.

The shortfall is driven by three key factors:

• a backlog of construction shortages dating back to 2010,
• population and demographic shifts expected over the next decade, and
• the replacement of ageing housing stock.

Meeting these needs will require roughly €150 billion in additional investment per year—amounting to €1.68 trillion by 2035, according to a new JRC brief. Major metropolitan areas and capital regions will bear the brunt of the demand as urbanisation accelerates and land becomes scarcer. Top metropolitan centres alone are forecast to make up over a third of total EU housing requirements.

High demand is also projected for touristic coastal regions, where available development space is already limited. Officials say new construction will be essential to prevent prices from spiralling further.

Where prices climb the fastest

A separate JRC analysis finds that housing prices are highest in areas with strong job markets, good transport links and high digital connectivity. Small household sizes, high employment rates and strong regional earnings are also closely linked to steeper prices.

Coastal areas and cities continue to record some of the highest valuations, with price growth often spreading to neighbouring regions.

Short-term rentals: local pinch points, limited EU-wide effect

The rise of Airbnb and other holiday rental platforms has intensified debate over housing pressures, especially in tourist hotspots. In 2024, guest-night bookings on major platforms hit 854 million—well above pre-pandemic levels.

However, short-term rentals make up just 1.2% of all EU dwellings, and 1.5% in rural areas. The impact, researchers say, is highly localised: in some tourist hubs and specific city districts, up to one in five homes is used for short-term rental.

Young Europeans falling behind

Housing inequalities between generations are widening sharply. The JRC reports that people in their early thirties today are significantly less likely to own a home than those born in the 1960s and 1970s were at the same age.

Thirty-year-olds born in the 1980s are nearly seven percentage points less likely to be homeowners than those born a decade earlier. Younger generations are also far more likely to still live with their parents, the report notes, citing steep mortgage rates and stricter loan rules as major barriers to entering the housing market.

More young people are renting instead, often spending over 30% of their disposable income on rent—especially in urban centres. Researchers warn these pressures could have lasting demographic consequences, such as delayed family formation, while deepening wealth inequality threatens social cohesion across the bloc.

As Europe prepares for the coming decade, policymakers say the challenge is clear: build more housing, and build it fast, or risk worsening affordability and rising social divides.