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Buying a house or flat is one the biggest financial decisions people make during their lives. But home ownership rates vary substantially across Europe, with households in Germany lagging their Italian and Spanish counterparts in terms of property purchases. This column explores the potential economic, social and cultural conditions that drive these disparities. The authors find that a wide array of factors affect home ownership, including labour market conditions and preferences for independence.
Housing is more than just a place to live. It reflects larger social, economic and cultural trends. Across Europe, home ownership rates vary drastically. Germany, for example, has one of the lowest ownership levels in the euro area, with only 43% of ‘households’ (single people, couples or families) owning their residence. In contrast, 68% of homes are owned by their occupants in Italy. The share is 83% in Spain. These differences are not just quirks of national preferences: they are tightly intertwined with economic conditions and living arrangements. In a study first published in 2023, we investigate this housing ‘puzzle’. We explore how co-residence decisions (i.e., choosing whether to live with parents) can affect inter-country disparities in property ownership. Our research provides insights into how housing policies, cultural attitudes towards independence, and income levels all shape housing markets, particularly in Germany and Italy.
Co-residence: an overlooked factor
The first important factor we highlight is the role of co-residence – where adults live with their parents or grandparents, rather than forming their own households. In countries like Italy, this is fairly common (particularly among younger adults), with 61% of Italians aged 17-40 living with their parents. By contrast, the share is just one-in-four in Germany.
Why does this matter for understanding home ownership rates? Most statistics measure property ownership by household. Crucially, if many young adults are still living at home, then they do not count as separate household units. This can create the illusion of a larger ownership gap between countries. For example, many Italian adults who co-reside with their parents do not yet own homes but could do in the future. Once individual ownership is measured, the home ownership rate differences between Germany and Italy narrow substantially.
Understanding the three-way trade-off
To conduct our study, we build an economic model that takes into account the trade-off between three living arrangements: renting, owning and co-residing. This framework helps explain why young people in some countries are more likely to stay living with their parents. We show that this decision is influenced by factors like income levels, housing policies and cultural preferences for independence.
In countries like Italy, where wages tend to be lower and rise slowly, young people are more likely to co-reside longer because they cannot yet afford to rent or buy their own homes. By contrast, in Germany, where incomes are higher and increase earlier in life, young adults are more likely to move out, rent or buy a home sooner.
The role of housing policies
Housing policies also play a crucial role in these decisions. Germany’s rental market is highly regulated and offers affordable, well-functioning options for tenants. This contrasts with Italy, where owning a home is more culturally and economically desirable due to less favourable rental options. When the cost of renting is high, people are pushed either to co-reside longer or save up for buying sooner.
Our study demonstrates that if Germany had the same income structure as Italy (i.e., the same profile of incomes over a typical life cycle), including relatively lower incomes when young, more Germans would choose to co-reside. This suggests that economic conditions, combined with housing market structure, play a large role in driving ownership differences across Europe.
The cultural factor: independence versus family living
While economic factors explain much of the difference, cultural preferences are important too. Italians tend to have a lower ‘taste for independence’ compared with Germans. This means that young Italian people are more likely to co-reside even when they could afford to move out.
Our study finds that, even when accounting for income and housing policy differences, this cultural preference significantly affects home ownership rates. Leaving the nest is a big step, and a person’s background can help shape how this decision relates to buying or renting a home.
Conclusion
Home ownership is more than an economic choice. It is influenced by a web of factors including cultural values, income structures and housing policies. In our study we show that co-residence decisions – often overlooked – are key to understanding why home ownership varies so widely across Europe.
For policymakers, these findings underscore the need for balanced housing policies that address the needs of both renters and potential homeowners. Such frameworks must also consider the cultural and economic realities of different countries. This is particularly important for the interaction between housing and labour market policies. The harder it is for young workers to afford renting their own place, the less likely they might be able to move out beyond their local labour market. In this sense, housing and labour market decisions are inherently linked. The associated policy strategies should be too.
Author: Alexander Ludwig