Housing Forum. Housing Affordability: Measures and Solutions

Today, the Lithuanian Real Estate Development Association (LNTPA) is organizing the first Housing Forum, which aims to lead the discussion on the topic of “Housing Affordability: Measures and Solutions.”

The forum is prompted by the concerning trend of declining housing affordability in the country, which necessitates the exploration of effective solutions to mitigate the unfavourable situation. The inability of people to purchase housing that meets their needs has resulted in a postponement of starting families, leading to a decrease in the birth rate. Moreover, the necessity to save for a prolonged period to afford housing reduces the time and resources available for retirement savings. The escalating prices of housing necessitate allocating a larger portion of income towards savings, thereby leaving less for consumption. Furthermore, the increase in borrowing amounts makes residents financially vulnerable.

The successful development of housing in Lithuania relies heavily on the private sector, making the conditions for real estate business operations crucial in determining the overall market performance.

Consequently, it is imperative for housing policymakers to make timely decisions and take appropriate actions to prevent housing affordability from becoming a problem. The primary focus of the forum is to identify strategic measures aimed at addressing the issue of housing affordability on a national scale. Recent data from Swedbank indicates that the housing affordability index has declined to levels last seen in 2010.

Mindaugas Statulevičius, Head of LNTPA, Simonas Gentvilas, Minister of Environment, and Jokūbas Markevičius, Director of the Financial Stability Department of the Bank of Lithuania, delivered presentations at the forum. They all acknowledged the issue of housing affordability in Lithuania and shared their perspectives on potential solutions to address the situation.

Mindaugas Statulevičius, Head of LNTPA:

–  updating Lithuania’s housing strategy by appointing a person or group responsible for overseeing housing policy at the government level;
–  developing the municipal housing fund, which involves constructing new buildings and utilizing existing ones that are currently under construction;

“In Europe, approximately 50 percent of rental housing is obtained through specialized housing programs and funds managed by the state or municipalities. This could also serve as a potential solution for us: utilizing public funds to achieve the strategic objective of promoting housing affordability, particularly in major cities.”

– coordinating decisions that impact housing affordability and price growth in advance with housing developers and incorporating transitional periods for the changes to take effect;
– prioritizing the provision of housing for young individuals (under 45) and families. This could be achieved through measures such as preferential loans with state guarantees and a lower value-added tax (VAT) rate. Countries like Poland and Latvia have already started moving in this direction.

“Latvians and Poles have been discussing the possibility of reducing the VAT rate when families purchase their first home. Perhaps we could explore the idea of introducing some form of state guarantee for the loan portion, particularly considering the significant rise in Euribor rates that we are currently experiencing and the ongoing upward trend.”


Simonas Gentvilas, Minister of Environment:

– rethinking the emphasis on property ownership and shifting towards the rental market. Is there the necessity of such a high homeownership rate in Lithuania, which currently reaches almost 90 percent? We should be looking at countries like Switzerland, where only about 20 percent of the population owns a home;

“We should establish a more secure tenant status and enhance the protection associated with it. It is crucial for the state to acknowledge the existence of an informal rental market and ensure that private developers face fewer obstacles in competing within this sector.”

– facilitating easier entry of housing supply into the market. The aim is to reduce the duration of issuing building permits by 6-8 months. Currently, the average time for obtaining building permits is 1-1.5 years;
– exploring the potential of municipal housing as a solution to improve housing availability indicators.


Jokūbas Markevičius, Director of the Financial Stability Department of the Bank of Lithuania:

– in 2020, an individual earning an average salary could afford a home measuring 163.3 square meters with the help of a loan. However, currently, they would be able to afford a home with an area of 117.6 square meters;
– one of the reasons for declining housing affordability is the rise in interest rates, which leads to more expensive borrowing.


Vytas Zabilius, Chairman of the Board of LNTPA and the Board of Regroup:

– in recent years, there has been a predominant focus on the quality of housing by authorities, often overlooking its affordability. The pursuit of housing quality should be accompanied by a consideration of its affordability and construction timelines;

“Extended timelines, excessive bureaucracy, inconsistencies among authorities, and an increasing number of claims all contribute to the rising costs of housing. Numerous real estate companies operate with borrowed capital and have investors seeking returns on their investments. As a result, these costs are passed on to the final price of housing. Consequently, new housing becomes affordable only for residents with medium or high incomes.”


Martynas Šiurkus, Deputy Minister of Social Security and Labour:

– some support and incentive measures for housing purchase implemented by the Ministry have not achieved the desired results. Therefore, alternative solutions need to be explored;

“We aimed to promote housing purchases in the regions to facilitate the establishment of young families there. However, we observed that the majority of individuals are purchasing homes in the districts of Klaipėda, Kaunas, and Vilnius, while fewer investments are made in other cities. Not everyone can afford homeownership, so our focus should be on assisting individuals in finding employment and earning sufficient income to purchase and sustain their own homes, rather than solely relying on housing compensation.”


Ieva Vengrovskaja, Vice President of the Lithuanian Student Union:

– students face an ongoing struggle in finding suitable rental accommodations, and a potential solution would be the development of dedicated student housing. It would attract more foreign students due to higher prices and thus free up the rental market for local students.