With the presentation of the first European Affordable Housing Plan, the European Commission is seeking to deliver a comprehensive response to the housing crisis across the EU. The initiative focuses on boosting housing supply, facilitating investment and reforms, regulating short-term rentals, and supporting social groups most affected by rising costs.
According to the Commission, housing prices across the EU have risen by more than 60% over the past decade, while rents have increased by over 20%. These trends have weighed heavily on labour mobility, access to education and family formation, ultimately undermining the competitiveness of the European economy and social cohesion. The Plan aims to generate European added value by strengthening the capacity of member states, regions and cities to respond effectively. In total, it mobilises €43 billion, with Cyprus and other member states required to submit national action plans by the end of the year.
Interior Minister Constantinos Ioannou, who will assume the presidency of the relevant Council of Ministers over the next six months, welcomed the initiative, describing it as the culmination of months of coordinated and collective work at EU level.
Referring to the “Housing First” approach, Ioannou said that housing policies already being implemented in Cyprus could serve as practical proposals for shaping targeted solutions, particularly for young people and low- and middle-income groups.
Key elements of the European Plan
The European Affordable Housing Plan includes a package of interlinked measures:
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A European Housing Construction Strategy, aimed at making the construction and renovation sector more productive and innovative, addressing supply–demand mismatches through simplified rules and procedures, particularly in spatial planning and licensing.
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Revised state aid rules, allowing easier public funding for social and affordable housing projects.
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A new legislative initiative on short-term rentals, designed to support areas facing housing pressure by addressing the impact of platforms such as Airbnb on long-term rental supply and prices.
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Financing and investment platforms, with €43 billion already mobilised and a pan-European investment platform being prepared in cooperation with the European Investment Bank (EIB) and national and regional development banks.
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The New European Bauhaus (NEB) initiative, linking sustainability, affordability and quality in the built environment, supported by skills retraining through the NEB Academy and innovation funding.
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Targeted social support, including investment in student and social housing, as well as the promotion of “Housing First” solutions for homelessness.
The Plan will be supported by the creation of a European Housing Alliance to oversee implementation, while the first EU Housing Summit is scheduled for 2026 to maintain political momentum.
Cyprus: current challenges
Although house prices and rents in Cyprus have not increased at the extreme rates recorded in countries such as Portugal or Estonia, the upward trend is clearly felt and widely acknowledged, including by the government. According to the Central Bank’s House Price Index, prices rose by 5% in the third quarter of 2025, compared with 4.7% in the previous quarter. Apartment prices accelerated to 6.4%, while house prices slowed to 2.6%.
Regionally, price growth accelerated in Limassol (7.1%) and Larnaca (7.3%), while slight declines were recorded in Nicosia and Famagusta (-0.5% and -0.3% respectively). Paphos saw a slowdown to 8.9%.
The government has announced and begun implementing a series of measures, including the “Build-to-Rent” scheme and planning incentives aimed at increasing housing stock, with a target of approximately 1,900 units, some of which will be affordable. The “Renovate-to-Rent” scheme seeks to bring vacant buildings back into use, while subsidies for people up to the age of 41 are intended to support home ownership in specific areas. Student housing remains a significant challenge, as existing accommodation is limited and major projects, such as the expansion of University of Cyprus dormitories, have long completion timelines.
Aligning European tools with national policy
The European Plan aligns closely with initiatives already underway in Cyprus, with the Commission taking national-level actions into account during its design to allow for rapid implementation.
Cyprus could make immediate use of the pan-European investment platform with the EIB, scaling up funding for municipalities and public bodies to support social, municipal and student housing, as well as energy-efficient renovations. Revised state aid rules also offer scope for enhanced subsidy, guarantee and low-interest loan schemes for young people, low-income households and vulnerable groups, potentially through the Cyprus Housing Finance Corporation.
Additional opportunities include the redirection of cohesion policy funds towards housing, the integration of New European Bauhaus principles into urban regeneration projects - such as in old Nicosia - and the establishment of a national “Housing Alliance” bringing together government, local authorities, universities, social partners, technical professionals and private providers.
Targeted student housing projects, delivered through smaller, faster and decentralised developments, and the reinforcement of existing Cypriot schemes with European funding and affordability safeguards could significantly expand supply while easing pressure on the wider housing market.
As the EU’s first Affordable Housing Plan moves from announcement to implementation, Cyprus faces a clear test: whether it can translate European resources and flexibility into a coherent, long-term housing strategy that delivers tangible results for citizens.