In 2025, cities and regions accounted for 51% of public investment in the European Union. However, the funding gap between the local and regional levels exceeded EUR 78 billion. These figures highlight the main contradiction addressed in the European Committee of the Regions’ report “The state of regions and cities – 2026”: local authorities play a significant role in regional development, but their resources are not keeping pace with the scale of the challenges they face.

The report was presented on 12 October in Brussels, during the inauguration of the European Week of Regions and Cities. It covers competitiveness, security and sustainability, housing, local democracy, finance, and demographics.

Ukrainian communities should pay attention to this report, as a debate is already taking shape within the EU on cohesion policy after 2027 and the role of regions and cities in it. The European Committee of the Regions calls for continued support for all regions and for the consolidation of partnerships with local authorities. This does not determine future funding conditions for Ukraine, but it does illustrate the principles upheld by EU regions and cities.

From local investment to the capacity to act

According to the report, local and regional authorities account, on average, for a third of public expenditure in the EU and implement more than half of public investment. This includes investment in transport, housing, energy efficiency, digital infrastructure, access to services, and the development of the local economy.

Needs are growing, yet revenues and transfers do not provide sufficient resources. The report estimates the financial shortfall for sub-national authorities in 2025 at more than EUR 78 billion. The reasons include the needs of the green and digital transitions, an ageing population, the housing crisis, and a reduction in inter-budgetary transfers. More than three-quarters of the local and regional authorities surveyed also described securing grants and subsidies for investment as a challenging task.

This conclusion is also significant for the Ukrainian debate on local finances: the responsibility of local authorities for regional development has to be underpinned by sufficient and predictable resources. The Committee of the Regions raises precisely the issue of the role of local authorities and the territorial approach in its proposals for the next long-term EU budget.

Cohesion is part of competitiveness

One of the report’s key findings is that economic growth should not be concentrated solely in the most successful centres. According to the authors’ assessment, supporting strong, innovative regions can yield greater returns in terms of gross domestic product. Moreover, a territory-specific approach creates more jobs and is more effective at reducing regional disparities.

The report therefore views cohesion and competitiveness as interlinked objectives. In its recommendations, the Committee of the Regions calls for cohesion policy to be maintained for all regions, for partnerships with local and regional authorities to be strengthened, for the territorial impact of decisions to be taken into account, and for local development instruments to be supported.

For Ukraine, this discussion is important in the context of European integration: it concerns how the EU plans to support the development of different territories and involve local authorities in shaping and implementing policies. The report does not set out the conditions for Ukraine’s participation in future programmes, but outlines the position that the Committee of the Regions is promoting in the debate on the EU budget after 2027.

Demographics, housing, and rural territories

According to the report’s forecast, the population could decline in three out of four EU regions by 2050. 135 million Europeans live in regions that are experiencing prolonged economic stagnation or decline. Rural and peripheral areas are particularly vulnerable, where the exodus of young people and a lack of services reinforce one another.

The report links the ability to remain in one’s community to access to work, education and healthcare, transport and digital connectivity, and the availability of affordable housing. The housing crisis has both social and economic dimensions: the affordability of housing affects whether communities can attract workers, retain young people and develop the local economy. According to the report, the issue of housing affordability affects one in ten EU residents; 1.3 million people in the European Union are homeless, while 75% of the housing stock is energy-inefficient or inadequately adapted to summer heat.

A separate challenge is generational renewal in agriculture. The report estimates that up to 6.4 million farms could be at risk by 2040, while people under 40 account for only one in ten farmers. The authors identify support for young farmers as one of the key priorities of the EU future common agricultural policy.

Climate resilience requires local solutions and resources

According to the report’s estimates, Europe’s total losses from climate risks in 2031–2050 could reach EUR 2.4 trillion. To prevent the aftermath of natural disasters and mitigate their impact, estimates suggest an annual investment of EUR 69 billion is required.

Local authorities play a key role in crisis preparedness: from risk assessment, early warning, and response plans to protecting infrastructure and keeping people informed. This section is important for communities that are planning their recovery: the risks posed by natural disasters and heatwaves have to be taken into account when making decisions on housing, water, energy, and infrastructure.

Local democracy and security

A separate section of the report is devoted to pressure on local elected representatives. According to a survey by the European Committee of the Regions, conducted in June–July 2026, eight out of ten respondents reported an increase in pressure on local democracy. Examples of this include verbal abuse, online harassment, disinformation campaigns, and threats of physical violence.

At the same time, local and regional authorities remain the level of government in which EU citizens place the greatest trust: 63% of respondents in the data presented in the report expressed trust in them. The authors emphasise the need to protect local representatives, monitor threats, and foster citizen participation.

The section on security has a direct link to Ukraine. The report states that russia’s full-scale invasion has altered Europe’s security environment and exposed vulnerabilities at local and regional levels. This concerns the protection of critical infrastructure, crisis preparedness, and countering hybrid threats. The Committee of the Regions also calls for the development of cooperation with candidate countries, in particular with Ukraine.

The examples given include the Polish Podkarpackie Voivodeship near the border with Ukraine, where a significant part of Poland’s aerospace industry is concentrated, and where cooperation between the authorities, business, and research institutions supports the development of unmanned technologies. Another example is DELAIR, a company from the French region of Occitania. It began by developing drones for civilian use, and now, as noted in the report, its products are strengthening Ukraine’s defence.

What this means for communities

The report by the European Committee of the Regions is not a study of Ukrainian local self-government. Its statistics relate primarily to EU countries. Ukraine is mentioned in the context of security, with individual examples illustrating cooperation between European regions in relation to Ukraine.

For Ukrainian communities, the report is important in that it brings to the fore issues that will determine the capacity of territories to develop: whether local authorities will have sufficient resources, whether they will be involved in decision-making, and how communities will be able to respond to demographic, housing, climate, and security challenges. And in the context of European integration, the place these issues will occupy in future EU budgetary and investment instruments is also worth monitoring.

In the foreword to the report, Kata Tüttő, President of the European Committee of the Regions, and Juanma Moreno, First Vice-President, remark: “Decisions may become faster when they are centralised, but they do not automatically become better”. For local authorities, this serves as a reminder of the practical side of decentralisation: decisions should be based on an understanding of local needs, and responsibility should be accompanied by resources and real partnership.