1. Institute for Real Estate, Construction and Housing Eichendorffgasse 4/8 A 1190 Vienna/Austria +43 1 968 6008 office@iibw.at www.iibw.at Wolfgang Amann HFA a Housing Finance Agency for CEE/SEE Preparing for an integrated housing market The Real Estate Forum Bucharest, October 11, 2006

2. The Real Estate Forum, Bucharest, October 11, 2006 Institute for Real Estate, Construction and Housing, Vienna www.iibw.at 2 Contents 1.Present situation 2.The HFA model 3.Its operativeness 4.Its transferability

3. The Real Estate Forum, Bucharest, October 11, 2006 Institute for Real Estate, Construction and Housing, Vienna www.iibw.at 3 Market segments for middle income groups In Western countries middle income households are well accomodated by private market as well as subsidised housing In most countries middle income groups of any tenure benefit from housing promotion schemes, very often as PPP By contrast, countries in transition mostly have insufficient instruments targeted at middle income groups In CEE/SEE housing promotion schemes for low income groups are emerging; there is sufficient supply for top income groups But there are major deficiencies for the “BIG IN-BETWEEN”, almost only upscale supply of condominiums, almost no affordable rental housing Is it market failure? Is it underdeveloped PPP models?

4. The Real Estate Forum, Bucharest, October 11, 2006 Institute for Real Estate, Construction and Housing, Vienna www.iibw.at 4 Housing provision and housing construction (2003/05) Source: Housing Statistics in the EU (2005, 2006); Statistik Austria; UNECE; PRC (2005)

5. The Real Estate Forum, Bucharest, October 11, 2006 Institute for Real Estate, Construction and Housing, Vienna www.iibw.at 5 Significance of rental housing tenure Source: PRC Bouwcentrum (2005), Czischke (2005), CH Bundesamt für Statistik

6. The Real Estate Forum, Bucharest, October 11, 2006 Institute for Real Estate, Construction and Housing, Vienna www.iibw.at 6 Development of housing policy in CEE/SEE Source: Ecorys

7. The Real Estate Forum, Bucharest, October 11, 2006 Institute for Real Estate, Construction and Housing, Vienna www.iibw.at 7 Some definitions Social housing Fundamental criterion: existence of rules allocating housing to specific population groups. Target groups may be defined legally by income limits: This way middle income households may be included. Two types of rental housing markets Dual rental market: Social sector is shielded from competition of the private market, reserved for low income households, functions as a residual safety net. Private market is characterized by high rents and insecure rental contracts. Unitary or integrated rental market: Rent level determined by competition between private and social housing providers. Social housing sector is directed towards larger population groups, preventing a marginalization of its tenants. Kemeny (1995, et al. 2001, et al. 2005)

8. The Real Estate Forum, Bucharest, October 11, 2006 Institute for Real Estate, Construction and Housing, Vienna www.iibw.at 8 Why Public Private Partnerships in housing? Municipal housing targeted at low income groups Affordability problem faced by middle income groups as well Housing market does not provide sufficient housing, taking the given ability to pay Combining the efficiency of the markets with the backing of the state PPP models in housing development = a Third Sector PPP models in housing finance = e.g. HFA

9. The Real Estate Forum, Bucharest, October 11, 2006 Institute for Real Estate, Construction and Housing, Vienna www.iibw.at 9 The HFA Model Junior Loans 50-70% Senior Loans highest risk / first loss / most difficult to finance / often covered by subsidies Typically mortgage loans / L/V-ratio from 85% in Western countries Equity Not only for security, but it influences the refinancing costs for the bank DIGH model – taking the risk of first loss Guarantee- bound model Batch financing model German interest guarantee model

10. The Real Estate Forum, Bucharest, October 11, 2006 Institute for Real Estate, Construction and Housing, Vienna www.iibw.at 10 Mandate a) Procurement of capital and guarantees for affordable housing and refurbishment projects b) Pass-through of capital from International Financing Institutions c) Extensive functions in selection, steering and supervision of housing projects

11. The Real Estate Forum, Bucharest, October 11, 2006 Institute for Real Estate, Construction and Housing, Vienna www.iibw.at 11 Products and services Accreditation of developers to be integrated into the programme Project selection Acquisition of guarantees and capital Recommendation for financing Support of the financing partners in execution of the financing process Supervision: application of a system of steering and control Standardisation of products (financing models) and procedures (assessment of project partners and development projects) No bank services, market research, project development or housing management etc.

12. The Real Estate Forum, Bucharest, October 11, 2006 Institute for Real Estate, Construction and Housing, Vienna www.iibw.at 12 Five-year plan / financing volume

13. The Real Estate Forum, Bucharest, October 11, 2006 Institute for Real Estate, Construction and Housing, Vienna www.iibw.at 13 Principles to cope with national housing policies Subordination to national housing policy targets Integration in the legal framework and the mandate of national housing funds Transparency for supervision and control by the host country Local action with local staff.

14. The Real Estate Forum, Bucharest, October 11, 2006 Institute for Real Estate, Construction and Housing, Vienna www.iibw.at 14 Compliance with EU legislation As HFA works with state subsidies, the EU legislation on Competition and State Aid has to be considered This is possible by introducing a Third Sector But as well with contractual ties with commercial developers a) Clearly defined services of general economic interest in social housing b) Subsidies only for the additional efforts c) Separate accounts for HFA activities d) Public procurement procedure

15. The Real Estate Forum, Bucharest, October 11, 2006 Institute for Real Estate, Construction and Housing, Vienna www.iibw.at 15 Transferability Pilot countries: Slovakia, Romania, Kosovo, Montenegro Applicable for all countries who are willing to commit for social housing for lower and middle income groups by subsidies from national sources to go over its housing legislation to consider the implementation of a Third Sector to trust in a partnership with private players

16. 16 Institute for Real Estate, Construction and Housing Eichendorffgasse 4/8 A 1190 Vienna/Austria +43 1 968 6008 office@iibw.at www.iibw.at