Global Housing Shortage
Since Russia’s invasion of Ukraine, seven million refugees have fled to other countries. A continued challenge facing host locations accepting refugees is finding them safe, secure, and affordable housing as they settle in and find work or until they can return home.
This influx exacerbated Europe’s already insufficient housing availability and rising costs. Rents rose 14.5 percent across the continent for all home types in the first three months of 2022 alone. Countries had to adapt and scale up their housing capacity, which is especially evident in:
- Germany: Demand may grow by some 200,000-400,000 apartments in the country due to accepting one million Ukrainian refugees, most settling in larger cities.
- Poland: With over 1.3 million refugees from Ukraine, rental prices are already about 20 percent higher than the beginning of 2022 in the country’s largest cities.
- Czech Republic: The Czech government estimates more than 400,000 Ukrainian refugees have entered the nation of 10.7 million people and real estate agents report soaring rental demand.
Yet, housing issues are not limited only to countries accepting refugees or even to Europe.
Housing shortages in other regions can be related to backlogs from COVID-related shut-downs – construction times to plan and build new homes are significant – as well as the shortages/ increased costs for both skilled construction labor and building materials (lumber, cement, copper, etc.). Further, post-COVID available financing for home builders has also slowed construction, as has restrictive local zoning laws in areas that don't allow for new or affordable housing to be developed.
Such shortages, higher rents, and rising home prices for those looking to purchase have added to the financial worries of many countries’ populations. For instance:
- U.S. & Canada: Home prices are up more than 30 percent the past few years and rents are continuing to rise. The U.S. has less housing for sale or rent than at any time in the past 30 years. Moody's Analytics estimates the shortfall is close to 1.6 million homes. In Canada, 3.5 million more homes need to be built by 2030 to reach affordability per The Canada Mortgage and Housing Corporation.
- Asia and Australia: Asia is home to some of the world’s costliest, fastest growing housing markets. Renters often spend more than half their income on housing costs, according to The Cost of Rent Index. Singapore's construction sector has experienced major disruptions amid the pandemic with tight materials supplies, causing delays and new rental unit shortages. Housing shortages and high prices also persist in Australia: Sydney is the world’s second least affordable housing market; Melbourne is fifth and Perth ranks 19th.
- The Middle East: Turkey is on the verge of an affordable-housing crisis as home prices have increased 60 percent since 2021 – six times the European average – and surged 106 percent in Istanbul. Many citizens are moving out of city centers for lack of availability and costs as immigrants have bought up many properties.
- Mexico, Latin America & the Caribbean: In areas of Mexico City, many renters are losing their homes as apartments are converted into more profitable day-rate Airbnb rentals. Housing demand is greater than the supply of decent housing. Santiago, Montevideo and Buenos Aires are the regional cities with the most expensive property prices today.
- Africa: Chronic housing deficits are common throughout the region: Kenya has a housing gap of approximately two million homes and South Africa’s shortfall is 3.7 million homes.
Given the situation with a global housing shortage NEI is cautioning clients to help manage transferee and assignee expectations. These types of shortfalls make it very difficult for Destination Services Providers (DSPs) to source adequate accommodations in a timely manner. As one DSP stated, “Even money doesn’t talk to remedy this situation”.
Employees today may not be able to be as "choosy" as they were in the past in some locations and budgets may need to be higher than initially thought. For example, if an employee going on assignment gets two or three out of five criteria met in some global locations, they are doing well in their international destination home search today.
Global DSP Shortage
Qualified Destination Service Providers (DSP) are also in shorter supply today than before Covid. Many joined the “great resignation” or did not return to their roles following the pandemic. DSP companies have invested much unexpected time and resources hiring, onboarding, and training qualified consultant professionals to meet post-Covid demands as quickly as possible.
However, as with so many companies, the business demand is there…but the people may not be. Some DSPs in key locations, just as with household goods during peak season, are booked out several weeks in advance. While virtual support is still offered as during COVID, it is understandable that people are wanting to return to in-person support.
NEI works with vetted DSPs as we guide the employee throughout the process, but we are told by our DSP partners that it can take up to three times longer to find adequate resources to meet client needs and budgets. Additionally, lease negotiations and reasonable security deposits are more difficult than we have seen in years.
Following a normal needs analysis, NEI schedules a call with the DSP to address realistic expectations prior to a customized area orientation tour. A three-way call with the employee, DSP, and NEI’s Account Executive gives the employee confidence that everyone is doing the best they can, given the extraordinary circumstances.
“I have been very impressed by the professionalism and responsiveness of the NEI staff I have dealt with. My NEI Account Executive has been flexible and creative in troubleshooting in way that made my transition from London to Frankfurt easier. Additionally, all local collaborators to NEI such as my DSP, were equally competent, efficient, and great in their dealings.” ~ NEI Client Assignee, UK to Germany
NEI feels the local, on-the-ground DSPs are best able to manage employee housing expectations with up-to-the-minute knowledge of a destination city.
Clients are encouraged to reach out to NEI for any unique situations to examine what alternative options might be available.
NEI will continue to provide updated information on this topic as the situation continues to evolve and to assist with managing relocating employee expectations accordingly. It is also important to share these trends with business units and relocating employees/families, as needed.
If you would like to discuss this situation further, please reach out to your NEI representative or Mollie Ivancic, NEI’s VP, International Services.