Ramon Rask: Estonia Has Not Yet Understood the True Extent of the Housing Crisis

Europe has been talking about a housing crisis for more than a decade. In Estonia, however, the real extent of this problem has not yet reached the awareness of decision-makers, despite clear signs, noted Ramon Rask, partner and attorney-at-law at the law firm RASK, who spoke at a real estate development conference.

"We have a crisis that Estonia does not yet fully recognize. Buying and renting residential real estate has become so expensive that acquiring one's own home seems increasingly unrealistic for a growing portion of Estonia's population," emphasized Rask.

Evidence of the crisis deepening

The crisis is indicated by several clear indicators. According to Eurostat data, over the last 13 years, residential prices in Estonia have increased by 217% and rental prices by 208%. By comparison, in the European Union over the same period, the respective increases have been 48% and 22%.

"While in 2023, 4.2% of Estonia's population spent over 40% of their income on housing – the European average was 8.8% – in just a few years, we have moved in large steps in a direction where housing costs are becoming unaffordable for an increasing number of people," explained Rask.

Changes are also visible in the distribution of property. In Europe, approximately 70% of people live in their own homes and 30% in rental housing. In Estonia, this ratio has been even more strongly in favor of ownership, but the trend is clearly moving toward growth in the rental market.

Consequences of the housing crisis

Evidence of the crisis deepening is provided by young people moving out of their parents' homes later in life, and as an extreme example, the growth in the number of homeless people. "In Europe, the number of homeless people has increased by 70% over the last decade – in total, there are over 1.3 million, which is equivalent to the entire population of Estonia," Rask highlighted.

The systemic problems amplifying the crisis are multifaceted: construction volumes are decreasing, construction material prices and interest rates are rising, buildable land in city centers is scarce, regulations are complex, and there are no apparent government solutions.

"The number of home buyers has clearly decreased and residential real estate has become a limited resource. At the same time, residential real estate has become increasingly attractive as an investment object, which makes the situation even more complex. Institutional capital has also found its way into Estonia's rental apartment market," noted Rask.

Europe responds – can Estonia catch up?

The European Union has already responded to the crisis in several ways. For example, a special committee on housing accessibility is active in the European Parliament, and for the first time, a commissioner dedicated to addressing the crisis is in office. A directive will also come into force in spring 2026, which requires short-term rental platforms to share more necessary information.

"It is reasonable to assume that member states will begin to adapt their domestic regulations to direct and tax short-term rental markets. This is one of the first areas that will be regulated to alleviate the crisis," said Rask. However, excessive regulation should be avoided when fighting the consequences. "Looking at the energy crisis – we have had to amend the electricity market law 17 times over the last two years. The same risk exists with the housing crisis: if we do not intervene preventively, we are left with only reacting and restricting later," he added.

Vienna and Amsterdam models: there is much to learn, but not everything can be copied

The housing models of Vienna and Amsterdam are often looked to as examples, which are based on cooperation between the public sector and developers. "In Vienna, half of the housing is social apartments, and these are accessible to approximately 75% of the population. About half of the apartments are developed by the city itself, the rest are created through cooperation between the private and public sectors," described Rask. The Amsterdam model is centered on cooperatives, which are guaranteed access to affordable land and loan capital.

"These models work because they are built systematically and for the long term. In Estonia, the first solution must be to open up the market – ease requirements, simplify planning, and create conditions for the market to function. Along with this, local governments where housing shortages are pressing must begin to work hand-in-hand with the private sector to value publicly owned land."

A message to decision-makers: do not wait

Ramon Rask acknowledges that the crisis is not far off. "It is here and now and requires finding solutions. This is not just a real estate market issue, but a matter of society's opportunities and social cohesion," he emphasized in conclusion.