Housing affordability: society misses a more targeted housing policy in Lithuania

At the Lithuanian Housing Forum, a comprehensive study on housing affordability, accessibility, and the true direction of the country’s housing policy was presented for the first time. The study was initiated and commissioned by the Lithuanian Real Estate Development Association (LNTPA), prepared by the company “Ober-Haus Real Estate Advisors,” and the public survey was conducted by “Spinter Research.”

56% of respondents agree that there is a lack of affordable housing in Lithuania. Moreover, 71% of respondents feel that more effective government measures are needed to improve the situation.

“A lot is said about housing affordability in Lithuania. Analysts, economists, politicians, public sector specialists, and real estate market participants share their insights. Meanwhile, our goal was to ask the public, the residents who are the main players in the housing affordability process, how they perceive the situation of housing accessibility and affordability and how it affects their housing choices.

The study also analyzed the factors influencing housing affordability indicators in Lithuania, their significance and consequences, as well as the directions of the country’s housing policy: what they are and what they inevitably need to be if we want the situation to change,” says Mindaugas Statulevičius, the Head of LNTPA, about the latest housing affordability study.

Survey: Housing is Unaffordable, Housing Policy is Ineffective

A survey conducted in March-April 2024 reveals that 56% of respondents agree that there is a shortage of affordable housing in their city or region. Only 10% of residents believe there is enough affordable housing, while a quarter have no opinion on the availability of affordable housing. The survey included 1,019 residents.

Concerns about housing affordability, rent, and mortgages are most significant among residents aged 18-35. For respondents aged 46 and older, the primary concerns are the threat of war and living expenses, while those aged 56 and above are most worried about the healthcare system. Among respondents, a larger proportion of men emphasize the importance of economic problems.

Currently, two-thirds of surveyed renters are renting because they have no other option. 16% live with others to afford rent, and the same percentage choose to rent for the flexibility of relocating.

Regarding the attractiveness of rental properties from business versus private entities, 44% of surveyed renters prefer renting from private individuals, while 46% state that the source of rental offerings is not significant to them.

85% of respondents indicated they live in a home they own. According to the Organization for Economic Co-operation and Development (OECD), the homeownership rate in Lithuania is about 90%, the highest among member countries. In Vilnius and Kaunas, women aged 18-25 are more likely to live in rented housing.

55% of respondents living in rented housing plan to purchase their own home within the next two years. Conversely, 45% do not plan to buy a home within that period.

Two-thirds of Lithuanian respondents, regardless of city, gender, or age, unanimously agree that the government’s housing policy is ineffective and does not ensure an adequate supply of affordable housing.

Out of 70 surveyed renters, 48 do not plan to buy their own home in the next two years because they cannot save the necessary down payment. 62% of renters in Vilnius cite the down payment requirement as the main obstacle to homeownership.

46% of respondents believe the government should encourage developers to build more municipal housing at affordable prices for essential workers such as nurses, police officers, and teachers, allowing them to live near their workplaces. A larger proportion of those favoring municipal housing are men.

Housing policy in Lithuania—do we have such?

Housing policy is broadly understood not only in the context of housing construction, distribution, and management but also as a state activity aimed at regulating the housing sector and market.

Currently, the majority of the country’s housing stock consists of houses built before 1990, while most Lithuanian residents (66%) live in apartment buildings built between 1961 and 1990. Despite housing being a basic necessity, it does not receive sufficient attention in Lithuania, and there is no comprehensive housing policy covering not only support for housing acquisition but also construction and a coherent housing management system.

“Last year, the Organization for Economic Co-operation and Development (OECD), while presenting the situation regarding housing affordability and accessibility, recommended that Lithuania address housing issues at a strategic level and formulate policy focused on supply. The same position is held by the Bank of Lithuania. Unfortunately, we observe inaction or even counterproductive actions by responsible institutions and especially by some municipalities to improve housing affordability,” says Mindaugas Statulevičius, the President of the Lithuanian Real Estate Development Association, adding that the significant decrease in issued building permits in recent years will have a decisive impact on the future reduction of new housing supply.

Housing affordability in the housing market is closely related to the interaction of supply and demand. When housing demand exceeds available supply, prices usually rise, making it more difficult to acquire housing. Conversely, when supply exceeds demand, theoretically, prices should stabilize or even decline, and affordability should improve.

“The fundamental factor in affordability is the housing policy implemented by the state. A clear and purposeful housing policy, comprehensively examining and evaluating all factors shaping housing affordability, is crucial in creating sustainable and accessible housing opportunities for all groups of people. Considering the interaction of these factors and seeking rational solutions, housing policymakers should create conditions for a more affordable and attractive housing market. So far, we don’t have that,” says M. Statulevičius, the President of the Lithuanian Real Estate Development Association.

In the development of real estate projects, bureaucracy plays a significant role: in ideological terms, officials establish requirements and procedures that should fundamentally simplify the process, but in many cases, the situation is the opposite, and the impact of prolonged procedures directly affects the finances of both the developer and the buyer.

When implementing projects, developers also face more serious challenges alongside prolonged bureaucratic procedures—significant changes in legislation affecting housing development. It is evident that changes in legislation related to housing development in Lithuania are frequent and complex, not directly analyzing their impact on housing accessibility and constituting a significant portion of project costs.

Translated by ChatGPT

Some photos from the event: