Across Europe, home prices keep climbing, and finding housing has become costly and complicated — especially for young people and families.

With the trend also limiting labor mobility and weakening EU competitiveness, the European Commission hopes to ease the strain with a new plan now under public consultation.

The Ministry of Climate prepared Estonia's position, which Minister of Infrastructure Kuldar Leis (Reform) presented Thursday.

He said Estonia supports keeping affordable housing high on the EU agenda and wants "cheap European money — mainly through the European Investment Bank (EIB) — to flow into Estonia" to help develop private-sector rental homes and boost home  ownership outside major cities.

A study commissioned from the Estonian Academy of Arts (EKA) and the University of Tartu (TÜ) found that in Tallinn, Tartu and Pärnu, housing costs are rising far faster than incomes, while smaller towns have affordable prices but limited quality housing.

Continued migration to the capital, the report said, widens inequality and hits low earners and young people hardest.

Estonia's draft calls for simpler state aid rules, a clearer definition of what counts as "affordable," stronger private investment and better-targeted EU funding and support schemes.

Focus on renovation

With 70 percent of the Estonian population living in apartment buildings — the majority of which are more than a decade old — the draft argues that thorough renovation of existing buildings is a more rational solution and should receive extra EU funding, particularly in areas where the housing market struggles.

Estonia is also calling for easier financing for rental housing — such as long-term, low-interest loans or support for the private sector — to spur development beyond major cities.

It wants affordable housing distinguished from social housing and defined as homes that don't cost more than 40 percent of household income, and says EU investment should favor regional centers to strengthen regional development and improve housing access outside of major cities.

The ministry also proposes loosening state aid rules so mixed-use apartment buildings with commercial or municipal units could qualify for support. Raising state guarantees for housing loans above 80 percent could also help households in low-value property regions secure financing.

Economy Ministry wary of red tape

The Ministry of Economic Affairs and Communications (MKM) warned against giving the EU authority over short-term rental policy, saying rental markets differ too much between countries for one-size-fits-all rules.

It also cautioned that the EU is creating too many new regulations before older ones have even taken effect. "It isn't sensible to introduce new rules before the existing ones have been implemented and their effects evaluated," the ministry said.

The Climate Ministry promised to incorporate that feedback, as well as a suggestion by the Ministry of Education and Research to address Europe's construction labor shortage. The Education Ministry recommended expanding vocational training, improving working conditions — especially for women — and supporting retraining programs.

The Ministry of Finance opposed tax breaks or grants for renovating unused buildings and rejected an extra tax on vacant properties, noting Estonia already taxes land, not the structures on it.

The European Commission plans to publish its European Affordable Housing Plan early next year.

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