EU Tax Symposium on the Affordability Crisis

Introduction

Across Europe, housing has become one of the most urgent policy challenges of the decade, yet one of its key drivers, EU housing taxation, rarely makes it into the mainstream debate. At the 2026 EU Tax Symposium, a panel of economists, trade union leaders, MEPs and youth advocates spent an afternoon doing exactly that. What followed was more honest than these discussions usually get.

The panel was moderated by Matthew Baldwin, who leads the European Commission's first-ever task force on housing. He was joined by Esther Lynch, General Secretary of the European Trade Union Confederation, Mikis Hajipantella, MEP from Cyprus and member of the ECON Committee, and Cena Risa Pora, board member of the European Youth Forum and youth housing activist from Switzerland.

Europe’s Housing Crisis in Numbers: An Economic Issue

Since 2015 house prices in the EU have risen by up to 60% on average, with some records increasing above 200%. In major EU cities, 10% of citizens are forced to allocate 40% of their disposable income to housing. A similar trajectory has been followed by rents, which have registered a 28% rise between 2010 and the last recorded data of 2025, with dramatic spikes in Estonia and Lithuania, increases of over 150%. More than a third of European mayors acknowledge the housing crisis, reporting housing costs as unaffordable in their cities. With a threshold for affordability set at one third of the monthly wage, cities like Milan and Rome absorb well over half of the average monthly wage on housing alone and in Lisbon the ratio is dramatically over 100%.

The consequences go beyond personal finances. Workers, many of whom are essential for our cities, nurses, teachers, public servants, are being priced out of the cities they are serving. What was once described as a social issue has become an economic emergency, affecting competitiveness in the long term, labour mobility and above all demographic decisions. Research conducted by the European Investment Bank estimates that in order to satisfy demand, the EU would have needed 2.25 million additional housing units in 2025 alone. However the supply gap is only one contributor to the crisis.

How EU Property Tax Systems Shape Housing Affordability

This year's symposium proposed an important, often unspoken premise: housing markets are not simply the result of the interaction of supply and demand. Instead tax systems heavily influence the market and across Europe they might distort it in uncomfortable ways.

Residential property across EU countries accounts for around half of household assets with higher weight in low and middle income families portfolios. Yet, despite this major role in household wealth, property taxes account for a minor slice of government revenue. Across OECD countries property taxes account for just 5.1%, declining from 7.9% in 1965, of total tax revenues, a figure in sharp contrast with housing values.

The reasons for this mismatch are structural and political. Many countries update their property valuation regime for tax purposes only periodically, meaning that while market value soars, tax liabilities do not catch up. These systems allow the wealthiest property holders to sit on appreciated assets while being taxed on figures calculated decades ago. I'd argue that often these are not oversight failures but rather political choices.

Who Really Benefits from Housing Tax Incentives in Europe?

Provisions like mortgage interest deductibility, capital gains exemptions and preferential rates on long-term rental income, which reduce the tax burden on housing, were originally designed to promote middle-class wealth accumulation and homeownership.

However, the OECD's Housing Taxation report shows clearly how the current tax systems affect the market. Capital gains exemptions for primary residences disproportionately benefit wealthier households and tend to distort savings decisions. Benefits like mortgage interest relief incentivise household debt and have shown limited evidence of raising homeownership rates.

Therefore, as reinforced by Esther Lynch during the panel, despite the original goal, tax design can reinforce inequalities, benefitting those with the financial capacity to accumulate property and constraining others by distorting the supply of affordable housing.

How EU Tax Policy Opened the Door to Housing Financialisation

Another key driver of housing unaffordability is the growing financialisation of the sector. Institutional investors, real estate funds and large-scale property managers have increasingly entered the residential market across Europe. This has shifted what was once a locally bound and illiquid market into an interconnected one responding to global capital flows and external influences. Tax systems and policy have enabled this shift. These preferential capital gains treatment and incentives frameworks for rental investment have made residential properties attractive for institutional investors.

As a result, Esther Lynch noted:

"Working people are competing with hedge funds who have access to much cheaper capital and more favourable taxation treatment."

This phenomena pushes the market to sort not by need or income but rather by access to capital. Yet the same asset unaffordable to a young renter in Dublin is a yield-generating instrument for a pension fund in Amsterdam. The real policy question should be which goal are tax systems supposed to be optimising for.

Why EU Housing Policy Depends on Member State Cooperation

The predominant responsibility for housing lies within the member states and their local authorities. This means that possible solutions to the housing crisis must come through cooperation rather than a top-down regulation, especially through tax reform, which remains a predominantly national competence.

The added value of a European approach would be to mobilise finance. The way to achieve this is the creation of the new Pan-European Investment Platform which is being set up jointly with the European Investment Bank and National Promotional Banks. This platform aims to understand how to draw in the type of responsible private finance, also called patient capital, towards welfare-creating initiatives.

Despite the need for adequate capital and the benefit this vehicle would bring, a structural issue remains. As argued by Esther Lynch, EU fiscal rules "put such a constraint on member states that it doesn't allow them to allocate the necessary spending to housing." Given the seriousness of the housing crisis and the central role it plays in the economy, building affordable homes should be recognized as a productive investment rather than a budget cost.

Conclusion

The symposium closed with an occasion for the panelists to express their wishes on housing and taxation. Mikis Hajipantella went first, calling for tax incentives to increase supply and genuine simplification of the building process. Cena Risa Pora wanted a tax system that levies those with significant wealth, including accumulated property wealth, heavily enough to fund housing as a basic right for everyone. Esther Lynch had the shortest answer of the three:

"Open up the fiscal rules. Let member states build it."

Three different panelists provided three very different answers, which would be impossible to realize simultaneously. However, they each provide a political approach to solving a growing and urgent crisis. Which, as Deputy Baldwin reminded, can lead to homelessness, overcrowding and degradation.

Should EU fiscal rules be relaxed to let member states invest in public housing, or is reforming housing taxation at the national level the more realistic lever?

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