The Role of Social Housing in Europe

Christine WhiteheadEmeritus Professor in Housing Economics

London School of Economics

Institute for Housing and Urban Research, Uppsala University October 13th 2015

Definitions of Social Housing • No single definition: depends on history, national legal and financing frameworks,

interest of the person defining etc;

• Legal: mainly based on ownership and control;• Ownership: social objectives; non profit distributing;• Tenure: rented; co-operatives; home ownership?• Pricing: below market rents and prices;• Subsidised: direct from government; indirect – past tenants, landowners,

employers etc;• Allocations: non-market allocations; constraints on re-sale;

• If it looks like a duck, swims like a duck and quacks like a duck it probably is a duck?

• But statistics difficult to interpret and make consistent - always exceptions – Sweden, Germany, Spain - or are all countries now exceptions?

Always supply? Always rental?

• In Europe traditionally supply side subsidies and rental tenure.• Partly simply history: nineteenth century housing standards

raised; lack of affordability; no data on which to base demand side subsidies.

• Result government support to supply side enabling pricing and allocation rules and to (try to) ensure financial responsibility.

• Nowadays demand side subsidies and many different tenure forms available.

• Compare Europe with the rest of the world – mainly owner-occupation; financial innovations and capital subsidies to consumers?

Very different approaches over time – and between countries

Historically a charity or employer provided rental housing sector;

State supply subsidies from late nineteenth century associated with the introduction of higher standards – sometimes tenure neutral;

Post-1945 mass, state provided, rental housing development across Northern and Eastern Europe to meet numerical shortfalls and sometimes for ideological reasons;

Aimed at lower income working households rather than the poorest;

In Eastern Europe state owned; employer/state supplied;

In Southern Europe a different model, involving family funding and self build owner-occupation.

Related to different objectives?• Ensuring housing for particular groups of households who were

inadequately accommodated in the market – charities;• Achieving physical and occupancy standards – local authorities; • Addressing rural/ urban mobility and industrialisation – employers/non

profits/local authorities;• Post war – need for any type of housing – most Northern and Western

European countries• Political commitment – Eastern Europe and much of Northern Europe;• Alleviation of poverty – not really until numerical shortages addressed –

growing role of usually local (legal) responsibilities but often non-profit provision;

• Additional services – social housing as part of welfare and substitute for government – increasing role as more vulnerable located in social housing – but financial viability issues.

Resulting in changing terminology

Public housing – most traditional social housing usually identified as: Housing owned by a government authority, whether central or local; Sometimes defined as housing subsidised by government; Almost always rented or co-operative.

Social housing - a much broader term: A range of owners, usually but not always non –profit; Subsidies from a range of sources; Can include other tenures; Objective to provide for those who cannot afford market .

Affordable housing - even broader: All types of provider; Often regulated; Usually financing and subsidies in kind as well as direct financial

subsidies; All types of tenure; But distinct from market affordability.

Changing models of provision and allocation

In (North) Western Europe housing seen as the wobbly pillar of the welfare state. Two main models evolved:

the universalist model: (social) housing for all in eg Sweden, Denmark, the Netherlands;

the targeted model: social housing concentrated on helping poorer households in eg UK, Ireland, W Germany;

Implications for financing, rents and allocations;

Over time the two models have become more similar as all move towards housing more vulnerable households;

Increasing interest in providing low cost/partial homeownership for those on low to middle incomes;

Also sales of social housing to tenants;

In Eastern Europe after the fall of communism moved, in one step, from state housing to owner-occupation.

Changing financing approaches Post war model mainly state finance and subsidy usually through interest

rate reductions. Often some local contribution and often on state owned land;

By 1970s and 1980s numerical shortfalls mainly overcome and macro economic problems (including rapid inflation and EU pressure) led to increasing emphasis on reducing public expenditure;

Introduction of income related subsidies and financial market deregulation, from 1970s in some countries;

Changing role of rental income;

Pressures to reduce government involvement in many countries;

Increasingly valuable unencumbered capital assets, opened up opportunities for new methods of financing social housing through the private sector;

Scandinavia, the Netherlands and the UK major innovators.

Introduction of private finance

Growth in private finance for social housing from 1980s;

Private finance initially came mainly from retail banks. Conditions necessary included strong asset base; a predictable rental stream; and powers to raise rents/sell assets to cover unexpected costs;

Usually involved continued subsidy (often in the form of an upfront capital grant) to maintain rents at affordable levels – but also capacity to adjust rents in the face of changing circumstances;

Implication: some form of continuing guarantee of income stream to lenders – (eg direct financial guarantees; certainty of continued income related housing allowances; regulation to address problems);

As a result HAs sometimes seen as stronger than many countries by credit rating agencies.

Structural changes

Reductions in supply side subsidies. Also shifts towards other sources of subsidy, e.g. public land and guarantees;

Higher rents, wider range of products (including low cost home ownership) and more targeted income related subsidies;

Regeneration including densification/mixed use redevelopments to cross subsidise social housing;

Strong capital base allows borrowing at relatively low interest rates;

Use of bonds, complex financial instruments, sales to tenants, other suppliers and private equity;

Especially post GFC, lower levels of social housing investment.

Current Role of the Social Sector

Size of the social rented sector declining in some European countries – but not as fast as had been predicted;

Changing attributes of social tenants – more vulnerable, more ethnic minorities, more migrants;

Increasing emphasis on regeneration of post-war estates which are now of poor quality and expensive to maintain and improve;

Continuing shift from supply side to income related subsidies

Who are the providers?

Most countries

• Vast majority of social housing is rented from municipalities or non profit organisations – notably housing associations

• Varying percentages:

Netherlands: 100% housing associations

Czech Republic: 100% municipalities

Exceptions

• Spain: mostly social owner-occupation

• Germany: time-limited subsidies to private landlords

• Sweden: profit oriented LA housing corporations

Scale of Provision

CountrySocial rented housing as % of housing stock

Change in last decade

Netherlands 32 -4

Scotland 24 -6

Austria 24 +1

Denmark 19 +1

Sweden LA corporations (not seen as social) 18

-3

England 18 -2

France 16 -1

Ireland 9 +1

Czech Republic 8 -0

Germany 5 -3

Hungary 3 -1

Spain 2 +1

Access to social housing

Country % of population eligible

Formal income limits

Austria 80-90

Spain Over 80

France 33 (non-owners only)

Hungary 15-40

Germany 20

Ireland Very few

No formal income limits

Denmark 100

Sweden 100

England 100

Scotland 100

Netherlands 40

Varies Czech Varies by municipality

Rents: social and privateSocial v private rents Country How social rents are set

Social rents close to market

Austria Cost-based

Denmark Cost-based at estate level

Germany Varies with building period and funding

Sweden Set by negotiation in same way as prs

Social rents 50-66% of market rents

France Central government sets—cost-related

Netherlands Points system—’utility value’ prs regulated in same way

Scotland Historic cost-based

England Were based on local incomes and dwelling price; for new lets now up to 80% of market

Social rents less than 50% of market rents

Czech Republic

Cost-based

Hungary Set by municipalities; very low

Ireland A percentage of tenant incomes

Spain Cost-based

Demographics

‘Hollowing-out’ but also ‘generation rent’

The young and the old (pensioners)

Single parents - and large families?

The unemployed or non participant

Low incomes—median incomes of social tenants 50-70% of national median incomes.

Migrants and ethnic minorities often overrepresented

But

Growing need for shallow subsidy housing for those somewhat further up the scale

Intermediate rent and low cost/equity share homeownership

Private renting as social housing

Are models converging? – name the countries

• Country A: single parents; elderly single people• Country B: young and old; singles and single

parents;• Country C: single parents; single people; childless

couples;• Country D: single people; young people and

families;• Country E: single parents; older and one person

households.

Are models converging? Proportions of minorities: Guess the countries

• Country 1: 25%• Country 2: 16%• Country 3: 31%• Country 4: over 30% in metropolitan areas• Country 5: twice the share in population

Are Models Converging? Again which countries?

• Country I: 50% 0f average income• Country II: 68% of average income• Country III: increasing concentrations of low

incomes• Country IV: 60% with incomes 60% below average• Country V: increasing concentrations of low

income households• So does it look like a duck? – but not the same

duck as in twentieth century?

European Social Housing: the Challenges

Declining population in some regions/countries

Worsening income distribution in most countries

Increasing problems of residualisation – tenure and /or spatial

Increasing need for regeneration investment in post war housing

Increasing pressure to cut public budgets

Increasing issues of affordability among lower income employed households

Increasing role in welfare support

Increasing emphasis on private renting

A Continuing Role? Accommodating those who have few options or as one of many

providers?

Capital base available - outside Eastern Europe

Increasing range of other sources of income and subsidy to providers

Diversifying into other activities- market and intermediate housing, welfare services

Surprisingly resilient in terms of changing proportion of the stock

Why not – someone has to do it

Overall evaluation Social rented housing appears quite robust and remains a good and

sustainable model in many countries

But probably NOT directly provided by the public sector except in partnership with specialist providers