European Affordable Housing Plan explained: what the EU proposes and what it leaves to cities

Housing has long been left to national governments, regions and cities. The European Affordable Housing Plan, which the European Commission presented in Strasbourg on 16 December 2025, is the first time the EU has written a plan for it. It arrived with a package: a European Strategy for Housing Construction, a revised state-aid decision for services of general economic interest, and new material on the New European Bauhaus. This week our programme is working through the housing problems raised in Democracia 21's launch speech, and several of them, from red tape to the use of unspent EU funds, run straight into what this plan does.

The diagnosis

The Commission starts from prices. In its press release, house prices across the EU rose on average by more than 60% in the past ten years and rents by more than 20%. Its questions-and-answers document adds the supply side: housing demand is expected to grow by more than two million units a year, building permits have fallen by more than 20% since 2021, and short-term rentals grew by almost 93% between 2018 and 2024.

From there it puts a number on the gap. On top of the roughly 1.6 million homes now built each year, the EU would need to add about 650,000 more, at a cost of about €150 billion a year. The Commission says the plan focuses on increasing housing supply, triggering investment and reforms, addressing short-term rentals in areas under housing stress, and supporting the people most affected.

What is in it

Building more and faster. The plan promises to cut red tape at EU level through a housing simplification package, and to work with member states, regions and cities on building codes, zoning, planning and permitting. The construction strategy pushes modern methods of construction, more circularity and digital processes, which is the EU's way of saying it wants building to become more productive.

State aid. This is the most technical piece and possibly the most useful. The revised decision expressly adds a new category, affordable housing, to the kinds of public support that don't have to be notified to Brussels, with no maximum cap on compensation. It is aimed at households that are outside the disadvantaged groups and still cannot find housing on affordable terms, which describes a great many young workers in Madrid or Barcelona.

Money. The Commission counts €43 billion already mobilised for housing, plus about €10 billion expected under InvestEU in 2026 and 2027 and at least €1.5 billion from reprogrammed cohesion funds. It proposes a pan-European investment platform with the European Investment Bank, the Council of Europe Development Bank, the EBRD and national and regional promotional banks, and welcomes their aim to invest €375 billion by 2029.

Short-term rentals and speculation. The EU's existing regulation on short-term rental data applies from May 2026. The plan promised a new legislative initiative so local authorities can take targeted and proportionate measures, particularly in areas of housing stress, and an analysis in 2026 of housing price dynamics, including any evidence of speculation.

People. The Commission cites more than one million homeless people in the EU, including 400,000 children, and announced a Council recommendation on housing exclusion. It will also look at a guarantee scheme to reduce or remove security deposits for students.

What happened next

On 9 September 2026 the Commission presented an Affordable Housing Act. According to the Commission's housing site, it has two parts: a proposed regulation that sets clearer, practical conditions for assessing certain housing-related restrictions, and a recommendation on affordability and supply in areas under housing stress. The regulation still has to pass the European Parliament and the Council.

Parliament had already given its view. On 10 March 2026 MEPs adopted the final report of their special committee on the housing crisis by 367 votes to 166, with 84 abstentions; the rapporteur was the Spanish MEP Borja Giménez Larraz. Housing Europe, the federation of public, cooperative and social housing providers, called the plan a welcome first step and insisted that the most affordable housing is public, cooperative and social.

Who decides

The plan is careful about competences, and rightly so. The Commission's own Q&A says housing is a very decentralised policy, and that primary responsibility lies with member states, regions and cities. The EU's role is to support, coordinate and amplify. For Spain that means land classification, general urban plans, licences and most housing taxes stay with regions and town halls. Brussels can change state-aid rules, lend money and set common data standards, and that is about it.

A radical-centre reading

The plan contains a left-wing idea, a market-liberal idea and something that fits neither, and its strength is that it uses all three. From the left it takes the case for more public, cooperative and social housing and for protecting the homeless and the young. From the market-liberal side it takes the conviction that supply is the core problem, that permits and red tape need cutting, and that state-aid rules should let more builders, public and private, build affordable homes. What fits neither is subsidiarity done properly: Europe does what needs scale, common rules, money and comparable data, and the choice of where, what and how much to build stays with the cities and regions that answer for the result to their voters.

Spain should take the plan at its word. The new affordable-housing category in state aid lets regions back limited-profit builders for middle-income renters without long fights with Brussels. The investment platform is a natural partner for the kind of stable housing fund Democracia 21 proposes. And the rules on short-term rentals give councils a European basis to act where tourist lets squeeze residents, with the duty to show the data that justifies it. The plan sets a target of 650,000 extra homes a year for the Union. A Spanish version of that number, broken down by region and published every year, would be a good place to start.