When the European Commission published the European Affordable Housing Plan in December, it was not a single political initiative but rather the linking of several previously separate regulatory and funding lines into a single framework.
Here in Brussels, there have long been signs of how the preparation of the programme will be linked to the Green Deal's energy efficiency requirements, the reform of the Energy Performance of Buildings Directive (EPBD), the Renovation Wave initiative and the EU taxonomy of sustainable finance. The review of state aid rules is also part of the package: the Commission wants to support investments related to affordable housing more flexibly without Member States being forced to violate EU internal market regulations.
The aim is to respond to the rapidly worsening housing shortage in parts of the EU, which has already reached the dimensions of a political crisis in many member states. Rising interest rates, soaring construction costs and rapid urbanization have made affordable housing a social, economic and climate policy issue at the same time.
Strict criteria as a condition for financing
A new pan-European investment platform designed by the Commission and the European Investment Bank aims to channel €10 billion in seed capital into new production and renovations over the next two years. However, discussions are clear that the real leverage will come from private financing, according to the report.
Public money is used as an incentive, but projects must meet certain criteria set by the EU. Support will not be granted if a project does not meet minimum criteria for both energy efficiency and social sustainability.
This could mean, for example, communal spaces, accessibility or housing solutions that bring different generations together, i.e. things that not only add value but also create conditions. In Finland, this may seem natural, because we have long supported housing for special groups and drawn up MAL agreements between the state and cities. However, it is good to remember that new reporting requirements are also being prepared at the EU level to monitor the actual social and environmental impact of projects.
Emission reductions and social responsibility must be taken into account
While the program's drafters talk about simplifying permit processes and removing administrative barriers, they are also preparing technical requirements that will tighten practically everything from building design to material choices. These policies are not made in a vacuum.
The background is the Commission's commitment to ensure that all new and renovated buildings support the EU's climate target. The aim is to reduce greenhouse gas emissions by at least 55% by 2030. This is also linked to the reform of the Construction Products Regulation (CPR), which aims to harmonise environmental requirements and circular economy criteria for construction materials. However, in practice, the renewal of harmonised product standards under the new Construction Products Regulation will take years.
In the European Parliament, the Special Committee on the Housing Crisis in the EU (HOUS) began its work at the end of January last year and has spent twelve months mapping the needs of member states and building a political foundation for the implementation of the program.
Two themes have repeatedly emerged in the hearings of the Special Committee: on the one hand, the need to achieve a rapid and tangible increase in the number of affordable housing units, and on the other hand, the concern that the programme should not be the sole prerogative of large cities and strong construction markets. For this reason, there is also active discussion on supporting less attractive regions and how to correct regional imbalances without diverting funding to ineffective projects.
Finland to ensure its share of financing
Housing policy is fundamentally a national issue, and the EU has little authority over it. The EU has also traditionally taken a cautious approach to subsidized housing. Now that the EU is changing its policy, Finland should be vigilant.
For Finland, the program offers a real opportunity to utilize advanced state support models and high energy efficiency levels as a competitive advantage. We are used to building within the framework of ARA and interest subsidy models, and a large part of the financing is already green or social lending through MuniFin. However, recently ARA has changed to VARKE and the financing mandates have been significantly cut.
High costs and a sharp decline in new construction may slow down our ability to fully utilize EU funding. In addition, the concentration of housing demand in growth centers while other areas are losing population complicates the situation.
The construction industry has a clear role in this development. It must be able to influence the final criteria of the program so that they take into account the special conditions and cost structure of northern construction. At the same time, solutions must be developed that meet EU requirements and attract investments to Finland. The Affordable Housing program must be understood as part of its own long-term development path and not as an independent EU project.
In Brussels, the debate revolves as much around policy content as it does about timetables. The Commission wants to get the programme moving quickly, but parliamentary committee rounds and negotiations between member states take time.
How quickly and ambitiously the Affordable Housing programme is implemented will also depend on how well the real estate and construction sector itself seizes the opportunity and is able to demonstrate that affordable, energy-efficient and socially sustainable construction is not only possible but also profitable. Those who can prove this first will likely be the ones who benefit the most when the EU's billions start to flow.
About the author
Mika Horelli is a freelance journalist who has lived in Brussels for eight years and closely follows the political processes of the European Union and their effects on Finland. He also writes For RT on key EU issues for the construction industry. Previously Horelli has worked as a freelance journalist in Denmark and the United States.
The EU once drew attention to housing construction support in Sweden, which was thought to be prohibited business aid. However, the system turned out to be open, meaning that anyone who wanted it received support: the support was permitted. This also meant that the requirement in Finnish law to be “approved as being in the public interest” was meaningless and anyone could have applied for support on the same grounds as public interest actors, but no one applied because it did not generate business.