News / Insights

The report—the fourth in a series of studies published by INREV in recent years on the role of institutional capital in the development of European housing—highlights that the housing crisis is not caused by a lack of capital or the industry’s construction capacity, but primarily by a misalignment between public policy and private investment. Institutional investors already have substantial resources and have invested approximately €573 billion in European residential real estate, largely in housing solutions for the middle-income bracket; however, regulatory uncertainty, frequent regulatory changes, and the fragmentation of planning systems limit the ability to deploy this capital on a large scale. The analysis therefore highlights the need to strengthen dialogue between public institutions, investors, and industry players to create more stable conditions and foster the development of affordable and sustainable housing.

According to the report, investor interest in the residential sector is driven by long-term structural trends, such as urban population growth and demand for rental housing. Institutional investments focus primarily on housing for the second and third income quintiles, with rent levels considered sustainable when they do not exceed approximately 30% of households’ net income. However, the profitability of these strategies—generally characterized by moderate but stable returns, in the range of 7–11% for develop-to-hold strategies over the entire development cycle—depends heavily on the predictability of the regulatory framework. In the face of regulatory changes or restrictive policies, capital tends to shift toward other real estate segments or less risky financial asset classes.

The document highlights how well-designed public policies can rapidly mobilize private capital, while inconsistent or overly restrictive regulations risk reducing the housing supply. Positive examples emerge in cities such as Madrid or Helsinki, where the availability of public land, clearer urban planning procedures, and rent control systems linked to inflation encourage institutional investment. Conversely, more rigid systems adopted in some major European cities can limit profitability and discourage new projects. To address the European housing crisis on a large scale, the report calls for the establishment of stable partnerships between the public sector and institutional capital, ensuring predictable policies, access to land, and rent regulations that balance affordability for tenants with the economic sustainability of investments.