The European Commission unveiled its first-ever Affordable Housing Plan on Tuesday, setting out a roadmap for tackling the bloc-wide housing crisis. The wide-ranging legislative package seeks to free up public cash for new homes, reining in short-term rentals and reducing administrative procedures for construction projects.

“Europe must collectively take responsibility for the housing crisis affecting millions of our citizens, and act upon it,” said Housing Commissioner Dan Jørgensen, pointing out that home prices across the bloc have increased by more than 60 percent over the past decade. “Housing is not just a commodity: It is a fundamental right.”

And if the EU fails to act, he warned, it risks “leaving a void that extremist political forces will take,” using voter discontent to secure power.

In a bid to boost housing stocks, the Commission’s plan includes a  revision of state aid rules to expressly authorize the use of public funds for the construction of affordable housing. These new rules will allow national governments to pour cash into homes for the middle-class families increasingly priced out of the housing market.

In collaboration with the European Investment Bank, national banks and other financial institutions, the Commission will also mobilize public and private cash for new social and affordable housing via a pan-European investment platform. The construction of these kinds of homes will be listed as a specific objective within the national partnership plans, which member countries will use to distribute the EU cash allocated to them in the bloc’s next seven-year budget.

To further boost supply, the plan also includes a new European Strategy for Housing Construction to simplify and digitize permitting processes, which will be complemented by a housing simplification package in 2027.

Brussels additionally proposes major investments to modernize the bloc’s construction sector, as well as measures to establish common standards for building materials. Similarly, it foresees the presentation of a Construction Services Act in late 2026, which will enable construction companies to ensure labor and working standards while offering services across borders.

Tackling speculation and short-term rentals

In a bid to ensure homes are sold at fair prices, the plan proposes tackling the broader issue of speculation through a careful analysis of the housing market. Over the course of the next year, the Commission will gather data on the scale of this phenomenon, which has led vital homes to be treated like “gold or Bitcoin and other investments made for the sole purpose of making money,” Jørgensen said.

As part of its analysis, Brussels will also examine how speculative practices can be curbed, and help national governments design transparency mechanisms and taxation policies to reduce the market’s financialization.

The package also takes on the housing shortage in Europe’s most popular cities by giving national, regional and local authorities the legal tools to rein in short-term rentals. Through a legislative act due out next year, Brussels will aim to help authorities identify the areas negatively impacted by tourist flats and lay out “justified and proportionate measures.”

“We cannot sit back while local citizens are pushed out of the housing market in the places where they were born or where they want to build a life,” Jørgensen said. He added that authorities would now be able to curb the impact of short-term rentals by setting caps on the number of nights rented per year, limiting their operation to specific seasons or temporarily halting the approval of new licenses.

The plan also seeks to address the needs of vulnerable groups like younger Europeans, who often have to delay starting their independent lives because they can’t afford to live outside their family home. To help them, Brussels proposes allocating public cash for new student housing, as well as launching an Erasmus+ scheme to offer affordable housing solutions for students with disadvantaged backgrounds.

The Commission also calls for mobilizing funds to build social housing for homeless Europeans, and to promote the so-called housing first model that’s been a success in countries like Finland, which offers unconditional permanent housing to the unhoused.

The plan additionally recovers Commission President Ursula von der Leyen’s signature New European Bauhaus scheme, tapping it to provide guidance on how to make construction materials and the resulting new homes and neighborhoods more sustainable and efficient.