Policy uncertainty hinders European residential investment

A new study by INREV reveals that a lack of predictable government policies is hindering large institutional investors, like pension funds, from investing more capital into Europe's residential property market, despite a strong desire to do so.

Iryna Pylypchuk

The report, "Institutional Investment in European PRS: Strategies, barriers and pathways to supply," based on interviews with experts managing around €770 bn in global real estate assets are eager to help solve the current housing crisis. 
Residential property has been their top choice for investment in Europe for three years running, and the INREV Living Fund Index shows returns of 7.03% for 2025, outperforming the wider INREV Fund Index by 260 basis points over 2025.
However, these investors are concerned that unexpected policy changes, even well-intentioned ones like rent caps or land restrictions, can jeopardise their ability to deliver consistent returns for their beneficiaries (e.g., future pension payments). This uncertainty creates a significant barrier, especially for developing affordable housing.
The research identifies policy uncertainty as the biggest risk for investors, emphasising the need for better alignment between investment capital and government policy. The report also highlights that inconsistent building and planning regulations across different European countries complicate matters, increase costs, and prevent scalable solutions, hindering the adoption of modern, cost-effective construction methods.
The report also stresses that private institutional capital is essential to overcome Europe's housing shortage. To unlock this "patient" capital and accelerate the delivery of affordable housing, policymakers must adopt a long-term perspective and explicitly consider the implications of policy revisions on institutional investment and its capacity to contribute to housing solutions.
Commenting on the report, Iryna Pylypchuk, INREV’s director of Research and Market Information, said: “The current misalignment between policy and investor needs has created a stagnant or two-tier housing market in many parts of Europe as natural rates of churn evaporate, resulting in a misallocation of housing. This is having a wider economic impact on the European economy and society, such as declining labour mobility, overcrowding and a delay in life stage decisions. 
Guido Verhoef, head of Private Real Estate, PGGM Investments, stated: “Institutional capital plays a pivotal role in addressing Europe’s housing crisis; however, its effectiveness depends heavily on the presence of stable and reliable policy frameworks. In addition, non-institutional capital and innovative approaches, like industrial housing, are equally important to overcome the complex challenges facing the European housing sector.”
Nigel Allsopp, managing director, Investment Strategy, Greystar, commented:” Europe's housing crisis generates a great deal of noise, but this research cuts through to the core issues. The recommendations are clear: stabilise regulatory frameworks, streamline planning processes, support modern methods of construction — and institutional capital will follow."
Dennis Lopez, CEO, QuadReal Property Group, added: “Government and Institutional Investors are natural partners to address Europe’s housing crisis. The foundation for this partnership is consistent policy and stable, predictable regulatory frameworks.”