Aiming higher in the affordable housing sector
Andrew Belt, PATRIZIA Corporate Communications thought leadership lead, considers the takeaways from a new report on affordable housing and analyses the need for private capital to boost the sector, before sharing how PATRIZIA’s impact strategy Sustainable Communities is one such vehicle stepping up to the plate.
It’s the perennial question: how do we solve the housing crisis in Europe? The supply/demand imbalance persists, but, more than that, making existing and new housing stock affordable remains an important challenge to overcome.
One key source cited when demonstrating the scale of the issue is the EU’s The Housing Partnership report from 2018 which revealed that more than 80 million people in Europe were ‘overburdened’ by housing costs, meaning that more than 40% of their household income is spent on their home.
More recent data suggests that the progress in removing that burden in subsequent years has been slow. For example, in JLL’s European Affordable Housing Investment Potential report published in November 2024, it was highlighted that 23 million affordable homes are needed in major European markets. JLL’s report focused on 14 European countries, including the UK, whereas the 2018 EU publication analysed the bloc’s 27 countries excluding the UK, so it’s hard to assess what movement there has been on the latter’s 80 million-plus people since since then.
A huge problem requiring huge investment
Nonetheless, what is far from ambiguous is the continued large scale of the issue. The JLL report goes on to note that the major European markets under its microscope currently supply 26.4 million affordable rental homes, meaning that this figure needs to be almost doubled to address housing overburden which is mainly concentrated in cities. Over the past decade, the market has grown by just 1%.
Unmet demand is highest in Germany (5.6 million), the UK (3.9 million) and France (2.6 million). To provide these homes, private investors and government bodies would have to invest EUR 5.3 trillion, the report goes on to state. More generally, recent rental growth has outstripped wage growth, putting further pressure on housing affordability.
So, how well-equipped is government and private investment to address this?
Looking purely at a governmental level, the picture is not good. As the report highlights, in 80% of major European countries, government housing spend as a share of GDP has not increased over the last decade. Over the same time, the number of households grew by approximately 7%, or 13.5 million, in the UK and the EU.
Private investment into affordable housing, however, is growing. Institutional investors currently account for just 0.3% of the affordable sector, but investment into the sector peaked at EUR 2.6 billion in 2023, and fundraising peaked at over EUR 3 billion in the first three quarters of 2024, with EUR 14 billion raised in more than 50 specialist affordable housing funds over the past decade.
PATRIZIA’s impact investing strategy
With both government and private investors keen to make a difference, a joint approach points to a way forward.
Many governments – local, regional, national and the EU – offer incentives, such as grants, loans and tax cuts, for the private sector to invest into affordable housing. In this way, institutional investors are encouraged to get involved.
One person who keeps a keen eye on the European affordable housing landscape is Marleen Bekkers. As PATRIZIA Global Partners Head of Investments Europe and Fund Manager for PATRIZIA Sustainable Communities, Marleen is leading the company’s main investments into social and affordable housing. Here, impact refers not only to the returns achieved for investors, but also to the social and environmental benefits of the investments.
In this way, now and in future, PATRIZIA Sustainable Communities is one small part of the solution to the vast affordable housing conundrum in Europe.