IFHP presents: Voices from the Hague Housing Conference
May investments on social housing sector be an asset in the social well-being of our society? How did Denmark succeed to make social housing part of the social infrastructures bringing along positive socio-economic returns?
The neoliberal idea of demand and supply - that there is enough incentive for the private market to deliver affordable housing for all in need, in a quality and quantity that is needed and responsible, and where people can live instead of merely exist - is only a nice idea when it comes to social housing – at least when we define social housing as “social”. We are social because we are inclusive and believe that inequalities are best kept low by mixing people. This reflects the basic idea of Danish society. As long as we have different definitions of what social housing is, what obligations lie behind social housing, we will and should have different financials models. In Denmark, the financing of social housing is an investment for the society as a whole, which brings along positive socio-economic returns. Danish social housing is part of the social infrastructures that the future welfare society has to build on.
Housing in Denmark
Social housing is not only for the poorest part of society. This creates demand for a broad variety of types and prices. Families, youth, elders, disabled. We want a social mix because we want to reap the positive effects of the contribution and empowerment of the local community that social mix creates.
We deliver solutions to some of the socio-economic challenges Danish society is facing.
We do this through partnership with the local municipality and other actors. In this way, we make sure that our targeted social efforts thus runs parallel to the municipal efforts and strengthens them without duplication. This method optimizes the use of available resources while increasing the socio-economic effects of both efforts.
As a result, the most challenged housing areas often contain an enormous amount of social development and entrepreneurship, where many local resources (tenants, volunteers, schools, job centers, businesses, sports clubs, and different municipal agencies) work together to improve the local community.
However, the social work carried out by the social housing organizations does not only happen in challenged housing areas. It happens in all housing areas in Denmark.
These efforts are therefore a very important part of the Danish social housing sector, and are instrumental in improving the lives of the residents in general. Social housing is much more than just the buildings – it is also the life in between the buildings and the lives lived inside and around them.
The social work prevents individuals from being excluded from society, because we develop solutions to concrete challenges that local society faces. We prevent waste of human resources and the socio-economic costs that follows. Costs that are also some of the biggest threats our future welfare.
In brief, the social housing sector in Denmark stands on three pillars that are all rooted in the Danish welfare society:
- Non-profit. The rent covers operating and maintenance costs, capital expenditure, as well as taxes and duties. This is also known as the rental balance principle and means that income and expenditure must balance out.
- Tenant Democracy. All housing organizations are run on the principle of tenant democracy which derives from the right of self-determination over one´s own housing in accordance with the social housing law. The residents have the majority in the housing organization’s Board and at other levels of the tenant democracy system.
- Financial Model. The State and municipalities supports the construction of social housing, but do not contribute towards the running costs.
The municipality provides 10 percent in the form of a loan, and the residents provide the last 2 percent in the form of a deposit when moving in. The remaining 88 percent of the total construction costs are financed by a normal mortgage loan at market terms.
Renovations and development the existing social housing stock can be supported by The National Building Fund, which works as a saving for the entire social housing sector.
The savings are maid when the mortgage loan is paid off. Instead of decreasing the rent with the amount used to pay off the mortgage, this amount contributes to a saving with two-thirds of the amount going to The National Building Fund and one-third going to a local fund, which all housing organizations have. The local fund can be used to support various initiatives in the housing areas.
The National Building Fund is, in other words, a solidary and rotating fund that acts as a savings account for the whole social housing sector. The system is a closed circuit and ensures that future housing renovation expenses are covered in the start-up phase of financing construction of new social housing.
The Fund’s level of investments as well as the concrete focus areas that can be supported within social development plans is laid down in political agreements made every 4 years by the Danish Parliament.
The National Building Fund is thus regulated by law, but financed by the tenants.
In 2010, the Danish Parliament decided to raise The National Building Fund´s investment limit for renovations planned up until 2014 due to a pressing need for extensive renovations of the existing social housing stock.
This has had a significantly positive knock-on effect in Danish society in the form of increased employment. During the economic and financial crisis, it was actually the social housing sector that kept the Danish construction industry afloat.
In this way, Danish social housing is the oldest PPP in Denmark. There are several well-established returns on investment; the social housing sector in Denmark is completely regulated to ensure, among other things, an uptake of social obligations - this works as a prerequisite for a well-functioning private rental market; social housing in Denmark is part of the welfare society and cannot be viewed as an independent part thereof. Investing in social housing in Denmark is therefore not a subsidy for an isolated sector, but an investment in the social well-being of Danish society.
- Social housing as seismograph of the welfare society
- Inclusive approach
- Focus on life in between buildings
- Part of the solution for ensuring future Danish welfare society - not a problem