‘Affordability crisis’: How the Western housing crisis spiralled | Housing
Housing Crisis Forces Attention from Wealthy Nations
In 2026, a growing housing crisis has emerged as a significant issue for affluent governments in Western nations. In the United Kingdom, a landmark law enhancing renters’ rights commenced on May 1, which effectively ends “no-fault” evictions. This reform marks one of the most substantial changes to the private rental sector in decades.
Meanwhile, the European Commission and Parliament have initiated a renewed focus on housing affordability. In the United States, the Senate has advanced a bipartisan bill aimed at reducing barriers to new construction and increasing the supply of affordable housing.
Experts warn that the lack of affordable housing is a widespread concern across Western countries. Cities like London, Toronto, Berlin, and Sydney are experiencing rapidly rising rents and home prices, which are outpacing wages. Young buyers are increasingly excluded from homeownership, prompting governments to grapple with whether housing should be regarded primarily as a basic necessity or as a financial asset.
“In Canada and various Western European countries, the onset of neoliberalism in the late ’70s and early ’80s began to erode public spending on housing,” said Leilana Farha, global director of THE SHIFT, an international human rights organization focused on housing. Farha noted that the affordability crisis had initially affected only the lowest income households, due to the targeted reduction of social housing in favor of privatization.
In February, Dutch Prime Minister Rob Jettan announced a plan to construct 100,000 homes annually, alongside the development of 30 large-scale housing projects across the Netherlands. He pointed out the stark contrast in housing availability, stating, “Every pig in this country has a roof over their head, but a student or young person can’t even find an affordable broom closet.”
Defining ‘Affordable Housing’
The term “affordable housing” generally reflects a situation where housing costs exceed a certain percentage of household income, often viewed through the lens of sustainability. According to the United Nations Human Settlements Programme (UN-Habitat), housing is often considered unaffordable when costs surpass 30 percent of a household’s income. The OECD adopts a stricter metric, categorizing households spending more than 40 percent of their disposable income on housing as facing a “housing cost overburden.”
In many urban areas, however, this definition may not fully capture the realities faced by renters and potential homeowners. Families often pay significantly more than 30 percent of their income, leading to overcrowded living conditions, longer commutes, delayed homeownership, and financial strain. Experts express concern that unaffordable housing may exacerbate inequality.
According to the 2025 State of the Nation’s Housing report by the Joint Center for Housing Studies at Harvard University, there is an inadequate supply of homes suitable for families. The report notes that the boom in multifamily construction is waning, signaling tighter rental markets ahead.
The Historical Context of Housing Affordability
Historically, wealthier nations benefitted from a combination of social housing, rental construction, and lower-cost homeownership options. This approach was predicated on the belief that housing is a fundamental human need rather than merely an investment tool.
“In Canada during the 1960s and 1970s, there was a broad understanding of the essential nature of home, alongside a commitment to diverse housing options—social housing, rental properties, and various homeownership opportunities,” Farha explained.
For much of the 20th century, various policies bolstered access to affordable housing. In the UK, the 1919 Addison Act expanded council housing. The United States saw the establishment of a federal housing framework through the National Housing Act of 1934 and the Wagner-Steagall Act of 1937, which created the US Housing Authority. Canada’s National Housing Act and the Canada Mortgage and Housing Corporation also set precedents for federal housing intervention. Singapore’s Housing and Development Board initiated public housing projects in 1960.
However, the trend began to reverse later in the 20th century as governments reduced investment in public and social housing, leading to reliance on private markets which subsequently dictated housing prices and accessibility. By November 2022, the average house in the UK cost nine times the annual income, a sharp increase from a ratio of four times in 1957.
In the United States, the price-to-income ratio reached 5.0 in 2024, rising from 4.1 in 2019 and averaging 3.2 in the 1990s, according to Harvard’s 2025 housing report.
The Shift from Public to Private Housing Policies
The shift toward greater privatization of housing has persisted into the 21st century. The OECD’s 2024 affordable housing overview indicated that public investment in housing development among OECD countries nearly fell by 90 percent between 2009 and 2016.
As policies transitioned away from large-scale public housing construction toward incentives for private developers, institutional investors increasingly began to enter the housing market. The OECD report highlighted significant reductions in public investment in housing and community amenities, ultimately transforming housing from a necessary shelter into an asset class.
Institutions have often prioritized profitability over affordability, leading to rising housing costs. “Institutional investors have not alleviated affordability pressures; in many instances, they have exacerbated them by profiting from the existing housing shortage,” stated a report from the Leibniz Institute for Research on Society and Space in 2023.
Since the 2008 financial crisis, significant capital has flowed into residential real estate, turning rental housing into a prime investment target. This profitability focus often results in pushing out existing tenants from affordable units, especially when landlords can increase rent once a unit becomes vacant.
Addressing the Housing Affordability Crisis
According to the UN-Habitat’s 2025 Adequate Housing For All report, over 2.8 billion people face some form of housing inadequacy, with approximately 1.1 billion living in informal settlements. In conflict-affected regions, the shortage of adequate housing escalates significantly. Conversely, in wealthier OECD nations, issues often revolve around rising rents, financialization, homelessness, and the decline of public housing.
Experts assert that the housing crisis cannot be resolved through increased homebuilding alone. The 2024 UN-Habitat report emphasized the need for a long-term strategy to align housing production with actual needs, warning of potential spatial planning issues and increased socioeconomic inequalities if such strategies are neglected.
Farha advocates for redefining housing as a fundamental human right rather than simply an investment opportunity, asserting that government policies will likely fall short without this recognition.
“In a recent address at the G7 summit in Davos, President Trump echoed this sentiment, emphasizing that homes should be built for people, not corporations. He subsequently signed an executive order aimed at curtailing large institutional investors’ involvement in single-family home purchases, further directing federal agencies to prioritize housing availability for individuals over corporate entities.”
