How do regional disparities in housing costs vary across Europe?

Housing and living crises have gripped Europe in recent years, with inflation in 2022 reaching its highest levels in more than four decades in the EU. People living in capitals and larger cities may have been more affected, as the housing cost gap within countries is significantly greater in these regions compared to smaller cities. 

The Organisation for Economic Co-operation and Development’s (OECD) recent “Regions and Cities at a Glance 2024” report reveals the regional cost differences in housing within the same country, offering several examples from across Europe. 

This indicator is particularly useful as it reflects housing costs as a percentage of disposable income. Household expenditures on housing include: Rents (actual and imputed) and mortgages, and maintenance of the house, including water, electricity, gas and other fuels, as well as furnishings, household equipment and routine maintenance of the house. 

Housing costs place a substantial burden on household budgets. On average, households in OECD regions allocate nearly one-fifth of their disposable income to housing. In 2022, the gap in housing expenses between the most and least expensive regions within the same country averaged approximately ten percentage points (pp) according to the report. 

In 2022, among the 11 European countries included in the report (9 EU member states, the UK, and Switzerland), this gap is even larger in certain countries, such as the UK (16 pp) and Italy (14 pp).

London housing costs 50% higher than the UK average

In the UK, households spent an average of 16.1% of their disposable income on housing costs. In Greater London, this figure rose to 24.4%, which is 51% higher than the UK average. Conversely, the North recorded the lowest proportion at 8.7%, followed by Scotland at 11.3%. This results in an average difference of 15.7 pp between the most and least expensive regions, a disparity of 181%. 

Greater London stands out as an outlier, with the second-highest proportion being 17.9% in South East England—still 6.4 percentage points lower.

Although the UK recorded the highest regional disparity, it also hosts the seven least expensive regions among the 11 countries included, as shown in the chart below. This highlights that disparity does not necessarily mean housing costs are the highest

Italy also faces significant housing cost disparity

In Italy, housing costs accounted for an average of 25% of disposable income. The highest proportion was recorded in the Campania region, centred around Naples, at 31.2%, while the lowest share was in Marche at 17.1%. This represents a difference of 14.1 pp, or 82% more.

Looking at the proportions in other regions, the differences were not as significant as in the case of Greater London. For example, the second-highest share was 31.1% in the Province of Bolzano-Bozen and the Province of Trento, followed by Abruzzo at 29.1%. 

Balearic Islands: Spain’s most expensive region

In Spain, the expenditure on housing costs as a share of disposable income was 26.3%. The most expensive region was the Balearic Islands, with Mallorca as its largest city, where housing costs accounted for 30.4% of disposable income. In contrast, the least expensive region was Galicia, at 20.3%. The gap is 10.1 pp, with the proportion in the Balearic Islands being 50% higher.

Murcia (30.2%) and Madrid (30%) are closely followed the Balearic Islands, while Catalonia recorded a slightly lower share at 27.1%.

In Austria, the housing cost gap was 7.8 pp, with Vienna at 29.9% and Upper Austria at 22.1%. The national average stood at 24.9%.

“The data provides new insights on the impact on households, highlighting for example the disproportionate impacts that rising housing costs have on urban residents,” OECD reported. 

In Lithuania, regional disparity in housing costs was 7.6 pp between Klaipeda (21%) and Alytus (13.4%). In the capital Kaunas this was 15.5%.

Lake Geneva: the most expensive region among 11 countries

In Switzerland, Lake Geneva emerged as the most expensive region for housing costs, with households spending 36.3% of their disposable income. This figure was 30.7% in the Northwestern region. 

Among the 11 European countries included in the report, Lake Geneva ranked as the most expensive region. Switzerland’s Ticino (34.9%) ranked as the second most expensive, reinforcing Switzerland’s position as the most expensive country based on national averages.

Bratislava: The third most expensive region

Slovakia’s Bratislava recorded the third-highest housing costs as a share of household disposable income, at 33.2%. The gap between Bratislava and the region with the lowest share was just 3.8 pp.

In Ireland (4.8 pp), Estonia (4.4 pp), and Sweden (3 pp), the gap between the most and least expensive regions was less than 5 percentage points. However, the share of disposable income spent on housing costs varied significantly, at 29.4%, 17%, and 29.7%, respectively.

In some countries, the data reflects the latest available year instead of 2022.

Housing costs: Urban versus non-urban areas

OECD report points out that housing costs and their weight in consumption baskets are typically higher in cities. “This means that relative price falls in housing costs translate, in theory, into smaller price changes in urban versus non-urban areas,” the report said. 

Homeownership is lower in high-cost regions

The OECD report also reveals that the share of people owning their homes outright or with a mortgage is lowest in regions where housing costs account for the highest proportion of disposable income in eight out of nine countries. The exception is Lithuania.

For example, Vienna stands out as an extreme outlier, with a homeownership rate of just 19%, compared with 74% in Burgenland. 

Homeownership rate is 31% in Lake Geneva and 54% in Greater London.