European Affordable Housing Plan

On December 16, 2025, the European Commission presented the first European Affordable Housing Plan. The presentation included a review of state aid rules for general interest services, a European Strategy for Housing Construction, and a proposal for a Council recommendation on the New European Bauhaus.

The four pillars of the plan

The plan is based on four key pillars:

To support the construction sector, the Commission has proposed the following:

• Promote innovation in construction and rehabilitation materials and methods by encouraging the use of circular and digitalized methods through the new European Strategy for Housing Construction (COM(2025) 991).
• Facilitate the crossborder provision of construction services while ensuring compliance with social and labor standards. This effort will be supported by a Construction Services Act, with adoption scheduled for the fourth quarter of 2026. The public consultation for this legislative act, set to close on April 20, 2026, is open to all citizens and organizations, including Member State authorities, construction companies (including SMEs), project developers, architects, engineers, social partners, consumer organizations, and those interested in border regions.
• Address the skills shortage through large-scale training programs such as the Pact for Skills, the New European Bauhaus academy, and Erasmus+.
• Collaborate with the European Competition Network to monitor and prevent anticompetitive practices in the construction sector.

To reduce bureaucracy and promote the supply of sustainable, affordable housing, the Commission plans to introduce a housing simplification package in 2027. This package will include:

• a survey of European Union (“EU”) laws affecting housing supply and affordability, identifying ways to minimize administrative burdens, expedite permits and enhance cost efficiency; and
• support for Member States in applying EU rules, including permit simplification and sharing of best practices as part of the European Housing Alliance.

The Commission will encourage Member States to simplify planning rules, permits and building codes; increase administrative capacity; and use the flexibilities of public procurement directives effectively to increase housing supply.

To improve energy efficiency, the Commission will assist Member States with preparing national building renovation plans, as prescribed for this year by Directive (EU) 2024/1275). In Portugal, public consultation on the National Building Renovation Plan (PNRE) will run until February 20, 2026.

The Commission also aims to rehabilitate neighborhoods and improve access to funding for community-based affordable housing under the New European Bauhaus (COM(2025) 1026 and COM(2025) 1027).

The Commission plans to establish a new Pan-European Investment Platform in collaboration with the European Investment Bank, national and regional development banks, and other international financial institutions.

The Commission estimates that €10 billion will be raised through the InvestEU Programme in 2026 and 2027, with an additional €1.5 billion sourced from cohesion fund reprogramming. Also, the revised state aid regulations will enable Member States to fund affordable housing projects without first seeking the Commission’s approval.

This pillar addresses issues related to short-term rentals. Specifically, a new legislative initiative will enable authorities to take measures in housing pressure areas. Also, it tackles market speculation by promoting greater transparency and analyzing price dynamics. These measures will be reinforced by the Short-term Rentals Regulation, applicable from May 2026, which will require mandatory registration and data sharing between digital platforms and national authorities.

The Commission also aims to:

• support reforms for social and affordable housing by enhancing monitoring efforts and issuing tailored recommendations within the context of the European Semester;
• assist Member States with developing fiscal policies that encourage housing affordability by evaluating the effects of housing-related taxes, offering practical guidance, and promoting the exchange of best practices; and
• provide technical and financial assistance to Member States, regions and municipalities in implementing reforms through the European Housing Alliance, the Technical Support Instrument[1] and the upcoming Multiannual Financial Framework.

This pillar focuses on protecting vulnerable groups, including young people, students and homeless individuals. The Commission plans to mobilize investments for student accommodation and launch a pilot scheme under Erasmus+ to support mobile students from disadvantaged backgrounds.

The timeline for the main actions is as follows:

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[1] Within the context of the call for proposals for the 2027 Technical Support Instrument.

Recommendations of the European Parliament’s Housing Committee

On February 9, 2026, the European Parliament’s Housing Committee adopted its final recommendations on the housing crisis in the EU. The proposals include solutions for decent, sustainable and affordable housing. The final report was approved with 23 votes in favor, 6 against, and 4 abstentions.

Main recommendations

The European Parliament’s report addresses several aspects of the housing crisis, including the following:

• Short-term rentals

Members of the European Parliament (“MEPs”) advocate for legislation on short-term rentals that balances tourism with housing affordability. They emphasize ensuring that the growth of short-term rentals does not compromise housing affordability in urban areas.

• Investments and tax support

MEPs urge Member States to implement incentive-based tax systems to support low- and middle-income families, remove tax barriers for first-time buyers, and make long-term rentals more affordable. The Addendum to the Report establishes a reduced VAT rate of no more than 4% for affordable, social or energy-efficient housing projects. It also proposes an amendment to the VAT Directive (2006/112/EC) to enable this super-reduced VAT rate.

In Portugal, Law Proposal 47/XVII/1, which authorizes the government to introduce tax relief measures to increase housing supply, was approved at the general stage on January 9, 2026. The proposal includes the temporary application of a reduced VAT rate of 6% for contracts involving the construction or rehabilitation of housing for the following purposes: (i) sale for the purchaser’s own permanent residence (priced up to €660,982); or (ii) residential rentals (with the rent capped at €2,300). For additional information, see our Legal Flash Tax relief measures to promote housing.

This proposal remains subject to medication based on contributions received during the public consultation phase, as voting at the specialty stage is still pending.

• Simplification of permits

MEPs call on the Commission to propose a housing simplification package aimed at reducing red tape. This package should include digital permit procedures and establish a maximum period of 60 days for processing permits related to sustainable and affordable housing proposals.

• Industrial sovereignty in the construction and renovation sector

The report emphasizes the need to strengthen the EU’s industrial sovereignty in this sector. Specifically, it urges the Commission to expand the production of innovative and sustainable construction materials, enhance the single market for raw materials, and introduce minimum “Made in EU” origin requirements for EU-cofinanced projects.

MEPs also call for the future EU strategy for housing construction to improve working conditions for skilled workers by providing training opportunities and ensuring fair salaries.

Next steps

The European Parliament will vote on this report during the March plenary session in Strasbourg.