Ever wondered why finding affordable housing feels like a mission impossible? The European Union is stepping in with a potential game-changer: lowering risk weights on construction loans to spur housing development.
What’s Changing?
Post-2008 crisis, banks had to set aside €150 for every €100 loaned to developers (as a safety net). Now, the EU proposes slashing this to 100% if conditions like these are met:
- Pre-sale contracts: Buyers must commit upfront.
- Equity investment: Developers use their own funds, not just loans.
Significant down payments: Initial deposits to secure projects.
Why It Matters
Post-crisis rules stifled construction financing. The update lets banks lend more with less red tape, speeding up housing projects.This makes loans "more risk-sensitive," adapting to each project’s phase.
What’s Next?
- The proposal is in public consultation until July.
- If approved, it could take effect by 2025.
Conclusion:
The EU aims to break the vicious cycle: fewer hurdles → more loans → more homes → lower prices. While not a magic fix, it’s a crucial step to ease the housing crunch.