The very serious problems faced by thousands of renters in the country, especially in urban centers, have been confirmed by a new report from the Bank of Greece on housing costs. The findings show a clear deterioration in housing affordability, particularly in urban areas, with young, unemployed and low-income households being the most vulnerable.
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According to Eurostat, Greece is in the worst position among European Union member states regarding housing affordability. Notably, in Greece nearly 1/3 of households in urban areas spend more than 40% of their disposable income to cover housing-related costs.
This includes not only rent, but also utility bills, mortgage payments and municipal taxes. In some cases, taking into account emergency expenses arising from seasonal factors (heat waves, temperature drops) that drive up utility bills, the percentage of disposable income exceeds 50%.
Deterioration in urban areas and vulnerable groups
The study, using cross-sectional data from two waves of the Household Finance and Consumption Survey (HFCS) for 2018 and 2021, constructs a housing affordability index, defined as the ratio of housing costs to household disposable income at national and regional levels, as well as by degree of urbanization.
The evolution of the index indicates that housing affordability decreased between 2018 and 2021, while highlighting the particular heterogeneity that exists between regions, as the issue is more intense in urban areas and especially for renting households. Furthermore, the study shows that younger and smaller households, the unemployed and households with lower income are those for whom the housing affordability issue is most acute. Through these findings, the study provides useful information that can help in formulating policies to address the issue.
According to the latest available Eurostat data for 2023, Greece is in the worst position among European Union member states regarding housing affordability. In conditions of rising property prices and energy costs and high borrowing costs, housing costs are gradually increasing, making housing even less affordable for domestic households. At the same time, public housing expenditure as a percentage of GDP is among the lowest among member states for 2022.
The combination of these circumstances highlights the importance of the housing affordability issue, as increased household housing expenditure has direct social and economic impacts. On one hand, Greek households are called to adjust their consumption patterns, given that housing demand is generally inelastic. On the other hand, wealth accumulation through savings becomes more difficult, which has direct impacts on investments in the real economy and the financial system.
The index results initially reveal that housing affordability decreased between 2018 and 2021. Also, significant variations are observed by degree of urbanization, with the percentage of households spending more than 40% of their disposable income (housing cost overburden rate) being higher in urban areas compared to semi-urban and rural areas.
A main difference is the structure of households by tenure status (owner-occupied or rented housing), as renters are more numerous in urban areas than in semi-urban or rural areas. At the regional level, and for the two largest urban centers, the housing cost overburden rate shows greater variations than the median housing expenditure percentage, suggesting that more difficult access to affordable housing may also affect income inequality.
Specifically, in regions such as the South Aegean, Epirus, Attica, Thessaloniki and Central Macedonia, the highest percentages of households without access to affordable housing are observed. These results, in conjunction with the evolution of housing costs and disposable income, suggest that rising energy costs and structural changes in household composition regarding tenure status are among the main factors that contributed to the decrease in affordability between the two survey rounds, as well as to geographical heterogeneity.
Factors affecting housing affordability in Greece
Beyond the differences in housing affordability by geographical area, the study focuses on identifying the characteristics of households that face the greatest barriers to accessing affordable housing.
The analysis results show that the housing affordability issue:
- Is related to the ownership status of the dwelling, which shows great variation by region, based on the finding that in both survey rounds approximately 60% of renting households spend more than 40% of their disposable income to cover their housing needs.
- Affects younger households more severely.
- Becomes more acute when the household head is unemployed.
- Is related to family status, as well as household size.
Beyond the descriptive findings, the study also examines how household characteristics affect outcomes. The model results confirm that household size, employment status and age have strong effects on the probability of facing unaffordable housing.
However, the most significant impact on the probability of lack of affordability, due to statistical significance, appears to be tenure status, as renters and owners with mortgages have much higher probabilities of not having affordable housing compared to households that own their homes outright.
Also, regarding the housing market, we find that property price levels correlate negatively with housing affordability. The fact that these findings remain statistically significant even after using other control variables and macroeconomic variables at the regional level allows the most important factors affecting housing affordability to be highlighted, and therefore the study can assist in formulating targeted policies.
