The housing crisis is becoming an increasingly ubiquitous political issue, whether in Europe or the United States. The phenomenon affects all advanced economies. In the United States, restrictive planning and zoning regulations have artificially limited the supply of housing. In France, 2026 will be the fourth year of the new housing crisis and a decline in orders. In Germany, there could be a shortfall of 830,000 homes by 2027.
It’s also striking to note that, when it comes to housing, the public authorities have stuck to the solutions of forty or fifty years ago, with rent freezes, regulatory constraints and confiscatory taxation.
Rent control
Many municipalities have introduced rent freezes, including New York, Vienna, Barcelona, Stockholm, Berlin and Paris. There is a political temptation to control rents, as they are currently perceived as a barrier to access to housing for the younger generation. However, in the medium and long term, there is little doubt that rent control is very dangerous, for three main reasons.
Firstly, it discourages the maintenance and improvement of housing. Landlords let their assets depreciate, because they no longer have the means or the incentive to maintain them when rents are frozen.
Then, beyond this quality issue, there’s that of housing turnover. In New York, a large part of the housing stock has long been under rent control. Many tenants in this city don’t pay the market price. As a result, if you’re looking for an available apartment as a newcomer, the rent will be very high. As some of the apartments already occupied are well below the market price, there is little incentive for their occupants to leave them and look for accommodation more suited to their living conditions.
Finally, it hinders professional mobility: people stay in housing far from their work because they have access to these price-controlled units. This is also true for Paris. In France, tenants don’t get out of social housing enough, even when they want to, because they can’t leave the goldmine that is low-cost housing.
New construction and private investment at a standstill
There is a supply problem on two levels: construction and rental supply.
When it comes to construction, there are two main obstacles. The first is the contestation of building permits by local residents who are very reluctant to have more housing close to home. They are less afraid of a drop in the value of their property than of a congestion effect. They’re afraid of finding less parking, that car traffic will increase or that local public services will be saturated. The second brake is the very restrictive building regulations: environmental, architectural or aesthetic, which drive up prices.
Rental supply, meanwhile, is restricted by laws designed to curb the power of landlords or limit rental evictions in order to protect existing tenants. In the long term, this discourages investors.
Taxation, an obstacle to investment
Taxing assets won’t make housing appear where the market is tight. Governments can heavily tax second homes or short-term rentals in major cities, but the effects will be limited.
By reducing yields through heavy taxation, public authorities further reduce incentives to invest or produce new housing. In France, for example, property tax is now disconnected from market values. You pay more if you live in Seine-Saint-Denis than in the 7th arrondissement of Paris. In Paris, property tax is levied at 0.1% of the property’s value, whereas in the provinces, it is between 0.8 and 1%. We therefore need to harmonize property tax values with market values, which would mean lowering them in many places.
What are the solutions for boosting investment?
According to Antoine Levy* (L’Express, 19/2/2026), the first step is to enable capital to flow more freely. To achieve this, we need a European real estate capital market. German money needs to be able to invest in real estate projects in France, or Spanish money in large-scale projects in Romania. Only then will we have sufficient supply.
Secondly, harmonize building regulations. We need a single European model for building permits. If you can build a house or a building in Germany, you need to be able to fill in the same forms in Italy.
Hamburg is a case in point. The municipality reacted to the increasing number of building standards. It has done away with energy, technical, accessibility and non-critical comfort standards to create a new category of property. The new category, named E for einfach (simple), does away with triple glazing, mandatory underfloor heating in corridors, simplified sound insulation standards, and no longer stipulates a minimum number of electrical sockets per room.
For a Citizens’ Rental Pact
The Janus Institute, the French housing think tank, proposes several solutions to the rental investment crisis that can be adapted to all liberal economies:
- Adopt a rational approach to taxation of income, capital and real estate capital gains.
- Reduce transfer taxes,
- Involving tenants in property tax payments
- Abolish capital tax,
- Reducing the holding period for the taxation of real estate capital gains
- Increase inheritance tax allowances.
- For investors in new and existing property, create a system of depreciation on a significant proportion of the purchase price of the property, including transfer duties.
- Abandon rent controls, in contradiction with the principle of price freedom and property rights.
- Enable simplified rent adjustments throughout the life of the lease.
- Waive all rental bans. The rental ban should only apply to objectively indecent housing.
- Encourage rental agreements whereby investments to save energy costs are financed jointly by lessor and lessee.
- Reconcile private rental investment and energy renovation: create a social dividend for lessors who undertake energy renovation work, in the form of amortization of the cost of the work over 15 years and full deduction of the land deficit.
- Take action against illegal occupation of property.
Housing crisis: a widespread phenomenon
The housing crisis is not an isolated phenomenon: on a global scale, it is the result of imbalances between supply and demand, regulatory constraints and social expectations transformed by the contemporary economy. While the causes vary from one region to another – land scarcity and speculation in metropolises, regulatory rigidities and construction costs in others – the observation is shared: access to decent housing is becoming a central issue of social cohesion and economic competitiveness.
The political dimension is decisive: without courageous and coherent decisions – local, national and transnational – responses risk remaining ad hoc and insufficient. Action therefore requires strategic vision, public-private alliances and a long-term commitment to transforming the crisis into an opportunity to reshape housing.
André Perrissel
*Antoine Levy is a professor and researcher at UC Berkeley.