The OECD is Falling Short on a Basic Need: Affordable Housing

The Organization for Economic Co-operation and Development (OECD) was formed in 1961 with the intention of bolstering economic growth and building policies to improve the lives of its citizens. But even as their members’ economies thrived over subsequent decades, their efforts continue to fall short of some stated goals. In one glaring case, this group of high-income countries struggles to provide a basic human necessity, namely, affordable housing. The housing crisis that plagues OECD countries has devastating effects on families, communities, and local economies.

There are several factors that have contributed to this lack of affordable housing around the globe, chief among them that investment funds and other property owners treat housing more as a financial asset than a crucial service or indispensible product. Additionally, the last few years have seen demand for housing increase in response to the COVID-19 pandemic and the trend toward working from home. With the steady financialization of housing, real estate prices have skyrocketed in the face of this increasingly high demand, even as supply growth remains feeble. For instance, Germany currently lacks more than 700,000 apartments, especially in the affordable segment.

Even regulatory efforts designed to curb real estate prices are often thwarted via loopholes: Germany introduced a rental price cap in 2015, which dictated that upon signing a new rental agreement, the rent could not be more than 10% above the local comparative rate. However, this cap does not apply to furnished apartments, so now more than half of all apartments in Berlin are offered as "furnished," avoiding the cap altogether. Historically high rent increases coupled with an insufficient supply of housing means that even financially stable, working citizens find no affordable living spaces where they have raised their children or near their jobs.

The housing crisis has gotten so bad in some countries that young people simply emigrate because they cannot afford to live there. For example, Ireland is experiencing a wave of emigration sparked by overinflated market prices and a lack of regulations to protect renters. Despite enjoying near-full employment, homelessness in Ireland is at an all-time high. Prices are too much for most people to afford. Even those who can afford record high rents are often still at risk: 4,329 properties in Ireland were given a notice of termination in the last quarter of 2022 alone, with 58% being issued because the landlord intended to sell the rental property.

Adequate housing is a basic human right, recognized in international human rights law, but the governments of OECD countries are failing to effectively provide it. Though there are no easy solutions to the problem, there are steps that can be taken to address this housing crisis and provide much needed relief. Governments can establish and expand affordable housing trust funds, which would provide financial incentives to encourage investors and private companies to put their money towards construction. They must also establish more effective renter protections and be more stringent in enforcing them, to better curtail price gouging and unfair evictions. Lastly, governments should adopt policies that facilitate tenants’ right to organize and wield their collective power, ensuring that landlords aren’t in a position where they hold all the cards. Finally, it is time to retire the cultural view that homeownership is the only way to secure a financial future – a view that fosters the belief that housing is an asset instead of a human need. The example of Vienna illustrates one way to achieve this.

For too many people, the lack of affordable housing has created an existential crisis, one that cannot be addressed through individual action alone. Given that the financialization of housing is a product of larger economic trends, it will require a collective effort to scale back its impact. Both structural and cultural change will be necessary to get OECD countries moving in the right direction. It will undoubtedly be a challenge, but these governments owe it to their citizens to make adequate housing available and affordable.