Affordable Housing at a Turning Point: A Southern European Perspective from Greece

As housing affordability rises on the European real estate agenda, Greece offers a timely case study of a recovering market entering a more mature phase; one in which growth, capital, and housing access must be brought into closer alignment.

Housing affordability has moved from the margins to the center of Europe’s real estate debate. Once framed largely as a social issue, it is now widely recognised as a structural factor influencing market resilience, capital deployment, and long-term urban competitiveness. Its prominence on the agenda of international forums such as the London Summit reflects this shift.

Southern Europe provides a particularly relevant lens through which to examine these dynamics. Markets that experienced deep corrections after the financial crisis are now facing renewed demand, rising values, and increasing pressure on housing access. Greece stands out as a market where this transition is unfolding rapidly and where affordability is emerging as a defining issue in the next phase of growth.

Shared Pressures Across Southern Europe

Across Southern European markets, similar forces are reshaping residential real estate. Urban centers have regained momentum, tourism-driven demand has intensified, and construction costs have risen sharply. At the same time, housing supply has struggled to respond, constrained by planning processes, financing costs, and limited developable land.

Spain, Portugal, and Italy have addressed these pressures with varying degrees of success. While none has fully resolved affordability challenges, most have developed institutional mechanisms to manage them, such as affordable or social housing programs, rent regulation tools, and structured frameworks that allow private capital to participate under defined conditions.

These mechanisms have not eliminated pressure, but they have provided markets with buffers and clearer pathways as affordability concerns have intensified.

Greece’s Recovery: A New Phase, New Questions

Greece’s path has been distinct. After a prolonged period of crisis and limited development activity, the residential market has rebounded strongly. Major cities and tourist-driven locations have attracted renewed domestic and international interest, supported by economic stabilisation and improving investor confidence.

This recovery, however, has occurred without the parallel development of a structured affordable housing framework. Housing supply remains constrained, construction costs have increased materially, and the rapid expansion of short-term rentals has reshaped urban demand. As a result, affordability pressures have emerged quickly, particularly for young professionals and middle-income households.

This should not be seen as a weakness of the recovery, but rather as a sign of market maturation, where housing access becomes a strategic issue alongside growth and yield.

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The “Missing Middle”

Much of the affordability debate still centers on social housing at one end and high-end residential development at the other. In practice, one of Greece’s most acute challenges lies in the “missing middle”: households that do not qualify for subsidised housing yet are increasingly priced out of market-rate options.

For developers and investors, this segment presents both difficulty and opportunity. Delivering attainable housing is challenging under current cost structures, taxation, and planning constraints. Yet with the right incentives, financing tools, and regulatory flexibility, this segment could support new residential typologies and more stable, long-term demand.

Tax, VAT, and Housing Feasibility

An often-overlooked constraint on affordability is taxation, particularly the treatment of VAT in residential development. In Greece, the interaction between VAT, rising construction costs, and financing expenses can materially affect the feasibility of delivering housing at attainable price points.