Portugal and Spain face severe housing shortages creating an EU-level crisis. Immigration-driven population growth, bureaucracy, and high construction costs combined have led to stark deficits. Portugal built 300,000 fewer properties than needed between 2021-2025 (6.6% of households), while Spain fell short by 750,000 units (3.7%). These figures exceed the Eurozone average of just 0.5%. Public housing stocks are among the lowest in the EU.

Government leaders acknowledge the problem; Bank of Portugal notes progress in 2025 but deficits persist. Prime Minister Luís Montenegro has tightened immigration rules to curb demand, though housing affordability remains critical in Lisbon and Porto. Developers cite high construction costs and bureaucracy as barriers to middle-class housing, pushing builders toward luxury segments.

The Spanish government approved a €7bn housing plan for 2026-30, yet private sector experts attribute shortages primarily to administrative hurdles and rapid worker immigration. Tourism rental usage further reduces available stock, forcing residents into shared accommodations or expensive rents.