Housing is not one of the European Union (EU’s) formal competences, but European integration does affect member states’ housing policies to a significant extent. Without the establishment of EU-level competence, housing cannot become a field of positive integration and the Europeanisation of housing policies will continue to occur through negative integration, i.e. removing housing policy barriers to the establishment of the single European market. This paper analyses a state aid case relating to housing development in the city of Apeldoorn, the Netherlands. The case would suggest that the Commission concludes, on the one hand, that policies which use state funds to provide land for housing distort competition and yet, on the other hand, it views the improvement of the urban environment and quality of life in the neighbourhood as a well-defined EU objective that may make such aid permissible. This case is examined in the context of other state aid decisions on the Joint European Support for Sustainable Investment in City Areas programme and on services of general economic interests, as well as a comparable case in which state aid was not allowed. It concludes that an EU competence has developed on the urban environment and quality of life and that, as such, positive integration on housing issues exists.