A study commissioned by the European Parliament has warned against the assumption that greater pension fund investment will provide a solution to the housing crisis and has highlighted the role institutional capital plays in driving up prices.
The report, prepared for the Special Committee on the Housing Crisis in the EU, concludes that much of investment from institutional investors and funds is being channelled into existing properties with a view to maximising sale prices, rather than improving conditions for sitting tenants.
It focuses on listed and unlisted real estate funds and large institutional investors, name-checking Dutch pension fund asset managers APG and PGGM, and French insurer AXA.
“The institutional investors and listed funds operating in EU residential real estate overwhelmingly acquire existing housing rather than build new homes,” the report says. “Their returns derive primarily from the appreciation of housing assets already held… rather than from rents or the construction of new stock.”
It continues: “Providing finance to these actors on more favourable terms – whether through prudential relief, securitisation, de-risking or investment platforms – therefore enlarges the pool of capital competing for existing housing. Under conditions of elastic finance and an inelastic housing stock, the result is higher prices rather than more homes.”
The report’s conclusions are in contrast to narratives put forward by the institutional real estate industry, which is increasingly pushing for more stable regulations and greater alignment between policy and investor requirements to help encourage greater investment in European housing.
Writing in IPE Real Assets, Iryna Pylypchuk, director of research and market Information at European real estate investor and fund association INREV, has argued that addressing the “misalignment between institutional investors and policymakers” is crucial to fixing Europe’s housing crisis.
The report also comes several months after EU launched the European Affordable Housing Plan, which includes measures to help mobilise more private investment in housing construction, and which real estate fund managers expect will create investment opportunities.
The European Parliament study’s authors, including academics Manuel Aalbers and Rodrigo Fernandez who have written previously about “housing financialisation”, note that the affordable housing plan “explicitly recognises the existence of financialisation and speculation” but raise concerns that it “largely confines its response to monitoring, transparency, and further analysis”.
The Commission is in the process of analysing price dynamics, speculation patterns, data gaps and economic consequences, and will present its findings – along with proposals to address them – in the fourth quarter.
This week’s report endorses that plan and makes its own recommendations. For example, it suggests that member states should give investments into existing housing as an appreciating asset “less favourable treatment” than financing aimed at growing the supply of new affordable homes.
The Commission, European Investment Bank and national funds should “attach binding conditions” to public money linked to affordable housing, the study also proposes.
“Where public money mainly de-risks private capital, it can inflate prices through valuation gains and build pan-European landlords that extract wealth from tenants without adding supply,” wrote the authors. “These bodies should instead condition support on capped returns, no speculative exit, and locked-in long-term for 30-plus years affordability, following the cost-rental model.”
The study also noted how the growth of listed funds that invest exclusively in residential real estate has grown over the past two decades. “Global market capitalisation of residential-only listed funds grew from €13bn in 2004 to €176bn in 2024,” the study noted. “Crucially, the EU-27 share of this global market increased substantially, from 8.5% in 2004 to 33.1% in 2024, indicating that the growth of listed residential landlords has been disproportionately located in the EU.”
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