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What can be learned from the old social housing asset?
What can be learned from the old social housing asset?
What can be learned from the old social housing asset? The general trend is towards declining municipal involvement and increasing diversity in the range of actors involved in social provision - notably through public-private partnership. Looking at the European examples, which are the funding mechanisms and the governance structures already in place?
Definitions of Social Housing
Social housing is basically a supply side story – adding to the housing stock and accommodating particular groups of households. Traditionally social housing is defined by ownership and tenure in the form of public rented housing owned by government agencies and municipalities.
However, the sector has become very much more diverse and now may be defined by one or more of: -ownership (public or non-profit – not employers although they also built for their employees); sub-market rents (or prices); the payment of subsidy (from government or from other sources - landowners/tenants); and /or administrative allocation procedures. The clearest current definition is probably in terms of non-market allocation.
Social Housing in Europe
The big push toward social housing comes immediately after 1945. Its role was to increase the supply of good quality housing mainly for lower income employed households – excluding the poorest or more vulnerable. The boom of new buildings in this period happened in response to large scale shortages, rural/urban migration and rapid shifts in the location of industrial production. It is also related to the need for slum clearance and replacement by lower density housing.
In the 70's in Northern Europe there were no longer numerical shortages so there was a move away from seeing housing as a social responsibility towards seeing it as a ‘private good’ that households should pay for themselves. Also governments faced an increasing need to reduce public expenditure and to use housing assets more effectively. In particular rapid inflation in the 1970s meant that the value of the social housing stock increased and the value of past debt declined, but there was an increasing role for the private sector to substitute for public spending in financing and providing affordable housing.
Most importantly in almost all Northern European countries there was an increasing emphasis on income related demand side subsidies targeted at those unable to afford housing for themselves.
Also in some countries a move towards housing the poor and vulnerable in social housing – as options for employed households improved. In other countries (notably the Netherlands and Sweden) access for all remained core to the mission of social housing.
Between the 1990 and 2000 in Europe investment and neighborhood policies to address problems associated with concentrations of poverty and exclusion became indispensable. The regeneration of large estates consisted in the demolition of poor quality post war high rise building and the introduction of intermediate tenures and private sector housing. The new buildings included a mix of tenures often involving subsidy from developers and local authorities in the form of land or financial contributions.
In this period there was a decrease in the less use of government supply subsidies but an increase of problems related to affordability.
In many European countries funding traditionally provided through the public sector (so at risk free rate of interest). Major changes over the last twenty years, as financial markets have been deregulated and social housing organizations are able to borrow from global sources.
In countries with independent landlords (e.g. Germany, The Netherlands and the UK) those landlords may borrow from the private sector – sometimes with government or local government guarantee. Using the capital assets and rental streams as security, interest rates can be similar to those for utilities. Borrowing costs may be reduced by either capital grant or subsidized interest rates. But debt finance depends fundamentally on secure rental streams. Southern Europe in particular tends to provide social home ownership rather than rented properties – with government subsidy or planning/land arrangements.
In Northern Europe also a growing role for low cost homeownership – usually shared ownership with non-profit landlord or shred equity mortgage, seen as suitable for lower income employed households/younger households entering the market; if house prices rise this may not involve any formal subsidy.
However it does not usually provide affordable housing into the longer term and also moves towards shallow subsidy intermediate rented housing for those better able to pay.
Social sector direct investment played a necessary part in overcoming shortages but direct provision by social landlords is on the decline across most of Europe – although it still important, with up to 20% living in the sector in many countries. It has also been important as part of stimulus packages in the light of the financial crisis. There are continued problems notable with respect to maintenance and improvement both on estates and in urban areas which mean government intervention is required to ensure good quality housing and neighborhoods.
The role of social housing has changed enormously in many European countries. But as long as the rental base is secured and capital values are stable is then possible to maintain investment in new building and the maintenance of the existing ones. But it still needs large scale additional subsidies for the poorest in many countries.
In emerging economies where there is no social housing asset base there aren’t clear governance structures: where difficulties in rent collection and no effective debt financing regime are in place, more innovative mechanisms are required. So can learn from the old but cannot simply transfer the models. Solutions have to be specific to each country’s legal, financial and social conditions.
Professor of Housing Economics, London School of Economics and Visiting Professor at the University of Glasgow. Her research interests are mainly in housing and urban economics, finance and policy. Over the last few years she has concentrated on questions related to privatisation, deregulation and evaluation.
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