Introduction

Determining housing affordability presents a complex challenge because this is subject to fluctuations over time, varying calculation methodologies, and interdisciplinary approaches. Broadly speaking, it can be defined as housing that meets standards of adequacy in terms of quality and location, while not imposing financial burdens that hinder occupants from meeting other essential living expenses or threaten their fundamental human rights. These expenses encompass both the initial purchase or rental costs of the property and ongoing maintenance expenses. Moreover, affordability measures can absorb some of the financial pressures which come from the high energy prices of the last few years. Over the past decade, COVID-19 and the energy crisis have highlighted the importance of buildings for people. To meet sustainability and energy efficiency targets, it is pivotal that EU citizens have access to affordable energy, and good quality energy efficient housing.

Recent trends have introduced new forms of spatial inequalities, transforming housing affordability into an urban issue affecting not only the less affluent but also middle-income and younger generations. Social housing plays varying roles and yields diverse effects across European Union (EU) and Member States (MS) due to the array of concepts and approaches adopted throughout the EU, including variations in beneficiaries, funding mechanisms, tenures, and providers. Social housing may be provided by either private or public entities, encompassing both public housing and other forms. Consequently, social and public housing is presented as a solution for certain segments of the population with housing needs, given the diverse spectrum of individuals requiring affordable, adequate, accessible, and sustainable housing, ranging from homeless populations to middle-income households. Due to the evolving and multifaceted nature of the affordable housing concept, along with varying perspectives and circumstances, the methodologies for calculating it differ, yielding divergent results and necessitating a range of potential policy responses.

The 2020 ´Renovation Wave Strategy´, together with measures to mitigate the economic and social impact of COVID-19 as part of the Recovery and Resilience Facility, other incentives to achieve the climate and energy targets, and the revised Energy Performance of Buildings Directive (EPBD), are driving fresh investments over an extended period, starting with public and less efficient buildings. In particular, the new EPBD requires Member States to deliver national building renovation plans, which include, among other aspects, an overview of implemented and planned policies and measures to empower and protect vulnerable consumers and the alleviation of energy poverty, including policies and measures pursuant to housing affordability. As stated by Housing Europe, it is crucial that sufficient financing is planned with the revised EPBD in a `socially just manner´, which means by activating inclusive renovations and zero-emission in construction. In this way the new EPBD can act as a driver for affordable and sustainable housing.

These endeavours might spur digitalisation, fostering employment and growth opportunities throughout the renovation supply chain. Within this framework, the Affordable Housing Initiative aims to ensure that social and affordable housing complexes also reap the benefits of the renovation push. Its purpose is to secure technical expertise and project assistance for local, social, and affordable housing facilities by:

• Launching 100 exemplary renovation and construction zones, employing a smart neighbourhood approach that prioritises energy efficiency, livability, and innovation, while also furnishing replicable models to support analogous projects throughout Europe.

• Mobilising collaborative project alliances across sectors and connecting them with local stakeholders, such as social enterprises, small and medium-sized enterprises (SMEs) engaged in construction or renewable energy sectors, local governments, housing associations, investors, and civil society.

• Advocating for streamlined access to and utilisation of innovative processes such as circular and modular construction, renewable energy production, and engagement frameworks designed to empower residents and local communities.

In summary, the affordability of housing is intricately linked to various factors, including household income and macroeconomic conditions such as unemployment, education, and health. It also encompasses issues like energy poverty, which relates to the inability to ensure adequate warmth, cooling, lighting, and energy for appliances. The revised EPBD aims, among other things, to address energy efficiency and reduce greenhouse gas emissions but does not solely define housing affordability. Concepts like sustainable and inclusive housing add further dimensions to the discussion, encompassing economic, social, and environmental aspects as well as considerations for specific demographics, such as older and disabled individuals.

Policy context and linked initiatives

Housing policies represent one of the key challenges in the EU and Member States. Concerning the Affordable Housing Initiative, it builds upon previous efforts, including the housing partnership of the urban agenda (2015-2018), opinions on housing from the Committee of the Regions and the European Economic and Social Committee, resolutions from the European Parliament on maximising energy efficiency in EU buildings (2020) and ensuring decent and affordable housing for all (2021), as well as the Council Recommendation on ensuring a fair transition towards climate neutrality (2021). The initiative is one of the flagships of the New European Bauhaus (NEB) which is an interdisciplinary initiative calling for a sustainable and inclusive future connecting to the European Green Deal goals. It specifically bridges the gap between science and culture while also leveraging on green and digital technologies to improve our lives. The initiative is based on three main values:

• Sustainability (including circularity, zero pollution and diversity)

• Aesthetics (style beyond functionality)

• Inclusion (securing accessibility and affordability while valuing diversity)

The NEB has forged a wide-ranging community comprising organisations and citizens across Europe, united by a shared vision that intertwines sustainability, inclusion, and aesthetics. Core activities of the NEB, such as the NEB Prizes, inaugural Festival, and NEB Lab, are effectively fulfilling their objectives and have established a transnational network.

What began as an initiative has evolved into a movement, engaging an increasingly active community spanning all EU Member States and beyond. With more than 600 official partner organisations ranging from pan-European networks to local initiatives, the NEB is reaching millions of individuals. From its inception, the NEB has inspired and empowered local, regional, and national entities to start their own NEB initiatives.

The Affordable Housing Initiative aligns with the cohesion policy and the European regional development fund (ERDF), while also being in line with several other EU-level actions and initiatives, including:

• The NextGenerationEU recovery plan and the Recovery and Resilience Facility.

• The REPowerEU plan whose implementation is directly linked to the Recovery and Resilience Facility.

• The recast of the Energy Efficiency Directive (EED) which puts a stronger focus on alleviating energy poverty. In fact, the introduced changes require European countries to prioritise energy efficiency improvements for vulnerable customers, individuals affected by energy poverty and those living in social housing. It also aims to empower consumers and raise awareness on energy efficiency, while also offering technical and financial advice, such as through one-stop-shops.

• The revision of the Energy Performance of Buildings Directive (EPBD) as explained before.

Funding and financial instruments

• The Council of Europe Development Bank (CEB) is a multilateral development institution with a distinctive mandate to foster social cohesion among its 43 Member States across Europe. Its primary objective is to finance investments in social sectors such as education, healthcare, and affordable housing, prioritising the needs of vulnerable populations. The CEB extends loans to various entities including governments, local and regional authorities, public and private banks, as well as non-profit organisations. Leveraging its strong credit rating, the bank raises funds from international capital markets. Project approvals adhere to rigorous social, environmental, and governance standards, and the CEB offers technical assistance as needed.

• The ELENA programme of the European Investment Bank (EIB) offers many possibilities in terms of investments on social housing. Through this programme, the EIB provides technical support for investments in energy efficiency and renewable energy for buildings. It is a subsidy programme making funds available to investigate the possibility of investments in energy efficiency and renewable energy.

• Through targeted funding from various EU programmes, the NEB has initiated tangible transformations on the ground. In 2022, the first six NEB demonstrators (comprising large-scale, replicable local transformation projects) were selected and financed through Horizon Europe. Subsequently, in 2023 an additional 10 demonstrators were launched under the Cohesion Policy's European Innovative Actions. Alongside numerous smaller-scale projects across Europe, over €100 million has been allocated to NEB initiatives supported by EU programmes during 2021-2022. All Member States have integrated mentions of the NEB into their cohesion policy programmes for the period of 2021–2027, thereby facilitating the pathway for NEB-inspired projects to access cohesion funding.

• The LIFE Clean Energy Transition subprogramme offers funding opportunities for projects aiming to alleviate households energy poverty and vulnerability in Europe.

EU-funded projects

Affordable Housing Initiative (SHAPE-EU)

As explained above, the Affordable Housing Initiative was announced by the Commission´s Renovation Wave strategy for Europe and aims to ensure social and affordable housing facilities which would use smart and circular technologies managed jointly with the local communities. The Handbook of best practices can be consulted here.

Horizon Europe

• drOp aims to develop an Integrated Renovation Methodology (IRM) to transform social housing districts into inclusive smart neighbourhoods. To do so, the project will adopt a human-centred approach and will integrate innovative technologies.

• ProLight develops solutions for buildings that lead to finding suitable social responses for awareness creation, knowledge uptake, the establishment of behavioural changes regarding energy efficiency and the integration of renewables within an appropriate local political frame.

• SUPERSHINE aims to contribute to the EU Green Deal by tackling energy poverty. The main focus will be on the renovation of social housing to assist low-income households struggling to pay their energy bills. The project focuses on some main principles, such as energy efficiency as a priority, affordability, decarbonisation, and renewable integration.

• PREFIGURE aims at identifying and analysing emerging and active ´prototypes of change´ with regard to energy efficiency and energy poverty nexus in housing. One of the objectives is to identify how housing policies trigger sustainable housing and energy transition and how financial incentives are accessed by different types of owners and tenants.

• EqualHouse aims to identify the most significant dimension of housing inequality across Europe, analyse them, and provide local, regional, national, and European policymakers with guidance on how to address them in a sustainable and affordable way.

• HouseInc aims to apply innovative methodologies to analyse interlinked dimensions of housing inequalities in the context of marginalised communities. To do so, it will assess impacts of various indicators on housing inequalities to develop policy recommendations to overcome these inequalities in Europe.

• ReHousIn aims to understand the mechanisms affecting the (re)production of housing inequalities under the recent crisis condition and the impact of the EU green transition in different national contexts with different levels of urbanisation.

• NEBULA builds on Built4People (B4P) and the New European Bauhaus initiative to activate a network of B4P innovation clusters. The project aims to spread increasing awareness of benefits from innovation and better access to co-financing.

LIFE programme

• LIFE21-CET-ENERPOV-RENOVERTY aims to foster energy efficiency upgrades in Central and Eastern Europe (CEE), southeastern Europe (SEE), and Southern European countries (SE) by building renovation roadmaps of vulnerable rural districts in a financially viable and socially just manner. The project will also ensure replicability of the models to scale up to whole Europe.

• LIFE21-CET-ENERPOV-EP-0 aims to bridge and build on existing initiatives, such as Energiesprong, that supports price decrease of deep energy retrofit solutions using prefab elements. The project will develop `industrialised retrofit potential´ assessment tools for cities to better assess their scalability and replicability potentials.

• LIFE21-CET-ENERPOV-REVERTER will develop roadmaps to alleviate energy poverty by addressing the poor energy efficiency of dwellings. The roadmaps will target the worst performing homes first and will be tailor-made to the characteristics of the building stock, the vulnerable households, and the climate conditions, allowing for a larger-scale rollout and replication. The project will thereby maximise energy and cost savings while reducing GHG emissions.

• LIFE22-CET-LIFE ReHABITA aims to tackle energy poverty by fostering deep energy renovations of the energy inefficient homes of vulnerable families in the municipalities of Lorca (ES), Ploiești (RO), Plovdiv (BU), Saldus (LV) and Gospić (HR). The project will set up ReHABIT Offices (one-stop-shops) to deliver an integrated home renovation service in some of the most deprived neighbourhoods of the participating municipalities.

Conclusion

In conclusion, the challenge of housing affordability is multifaceted, and it is influenced by a myriad of factors including economic conditions, energy prices, and social policies. The evolving nature of this issue demands comprehensive approaches that encompass not only financial considerations but also social and environmental dimensions. Initiatives like the Affordable Housing Initiative and the New European Bauhaus highlight the importance of inclusive and sustainable housing solutions. These initiatives, supported by various EU policies and funding mechanisms, aim to address the complex interplay between affordability, energy efficiency, and social cohesion.