Housing systems in Western Europe: Theory and practice Moscow Peter Boelhouwer OTB Research Institute for the Built Environment

Content Reasons for government intervention Housing: wobbly pillar between state and market Housing and the welfare state Developments in the owner-occupied and rented sector Emerging trends on the housing market before the economic crisis Housing markets and the economic crisis Housing market crisis: what to do? Conclusions

Reasons for government intervention The right of decent housing is a fundamental right (constitutional law and universal declaration of the rights of human beings) Government is responsible for sufficient affordable, qualitative descent housing on the right place Minimum quality level Content: place, production, affordability, distribution, quality

Housing as the wobbly pillar of the welfare state: Harloe/Thorgersen Absence of standard Definition of housing need Changes in achievements Broad government goals/ connection with other policy areas

Main Characteristics of the welfare state De-commodification Influence of central government Degree of political corporatism Fragmentation in the provision welfare services Treatment of the traditional family in welfare politics Role of the state, market and family in the provision of welfare services

Development welfare states (2) Criticism on welfare states Budgetary problems More emphasis on the market and freedom of choice Enabling state Empowerment, privatization, responsibility

The three criteria of Esping-Andersen applied to housing

Differences between the housing systems of the three welfare state regimes (1) Criterion Social-democratic Corporatist Liberal De-commodification large quite large low Stratification relatively low high, mainly based on social status high, mainly based on income Mix of State, market and family dominant position of the State important position for the family considerable influence for private non-profit organizations dominant position of market parties State regulation strong central government influence functional decentralisation, incremental, problem-solving policies relatively little State regulation (at both central and local levels) General housing policy objectives guaranteed universal high level of housing quality preservation of the social stratification in society preferential treatment of the traditional family stimulation of households and other private actors to take initiatives on the housing market dominant position for the market State only supports marginal groups

Differences between the housing systems of the three welfare state regimes (2) Criterion Social-democratic Corporatist Liberal Subsidization large–scale production subsidies subject subsidies for large target groups segmented subsidies; specific arrangements for specific groups means-tested subject subsidies few production subsidies Price setting and price regulation strong State influence on price setting and price regulation moderate State influence State regulation of prices to correct negative effects of the market market determination of house prices Housing allocation allocation on the basis of need State intervention to correct the market certain groups may be favoured in the allocation process market determination of housing allocation in a large part of the housing stock regulated allocation in a small part of the housing stock. (reserved for low-income groups)

A proposed new conceptual model for the welfare state

Main characteristics of the four welfare state regimes according to the modified theoretical framework Labour-led corporatist Conservative- corporatist Modern corporatist Liberal De-commodification high relatively high low Influence of central government high and direct quite high and often indirect Degree of political corporatism many corporatist structures and processes few corporatist structures and processes Fragmentation in the provision of welfare services fragmentation on the basis of measurable criteria fragmentation on the basis of occupation and/or social status fragmentation on the basis of measurable criteria. Treatment of the traditional family in welfare policies no preferential treatment for the traditional family preferential treatment for the traditional family Role of State, market, and family in the provision of welfare services dominant position of the State important (if not dominant) position of the family welfare services are provided by both market and State dominant position of the market

Policy for social renting (1) England Flanders France Principal purpose of social renting Safety net for low-income households To build and provide social rental dwellings and to revalue the housing stock (right to decent housing) To provide affordable housing to households on low incomes Allocation system According to need Rent regulation for new contracts According to policy prescription Rents based on tenants’ income and market rent (Flemish policy formula) Rent setting depends on contract between government and social landlord Rent regulation for rent adjustment Policy to link rents to quality and local incomes in the longer term Adjustments in line with household income Influenced by the government Regulation and supervision of landlords By Office of Tenants and Social Landlords Flemish government: supervision and registration. Sector organisation, VMSW: finance and guidance Supervised by central government organisation: MIILOS, financial supervision by Caisse des Dépôts Bricks-and-mortar subsidies Available Tax concessions Available; depends on legal status landlord Housing allowances Implicit via income-related rents Socio-economic profiles of tenants compared to market renting Lower incomes Lower incomes and weaker social profile Relative concentration of low-income households

Policy for social renting (2) Germany Ireland Netherlands Principal purpose of social renting To rent the households up to certain income limits House those unable to afford market sector housing To house people who are unable to find an appropriate dwelling for themselves Allocation system According to need Rent regulation for new contracts Contract between subsidy provider (municipality) and landlord Income-related rents; each council has its own scheme Regulated sector: based on quality points. Unregulated sector: market rents Rent regulation for rent adjustment Contract between subsidy provider and landlord Adjustments in line with household income Regulated sector: annual maximum rent increase set by government Regulation and supervision of landlords Depends on organisation type By central government Social Housing Management Decree for housing associations. External supervision by Minister Bricks-and-mortar subsidies Available Tax concessions Available; variations between local authority and housing associations Not available as of 2008 Housing allowances Not available Socio-economic profiles of tenants compared to market renting Probably relatively more lower incomes presently than in the past Low incomes Relatively strong in lower and middle-income deciles

Policy for market renting (1) England Flanders France Allocation system Free market Free market (except for the intermediate sector) Rent regulation for new contracts Mainly free market Free; based on old rent or on reference dwellings in case of renewal of a contract for a sitting tenant Rent regulation for rent adjustment Based on market conditions Based on index of costs, a corrected consumer price index Based on index of costs Regulation and supervision of landlords Selective; by local authorities Depends on organisation type Bricks-and-mortar subsidies Not available Available for intermediate sector Tax concessions Tax treatment similar to other investors Available Housing allowances Explicit subsidy for movers to higher quality or more suitable dwellings Socio-economic profiles of tenants compared to social renting Higher incomes Higher incomes and stronger social profile On average higher incomes than in social renting but also greater spread

Policy for market renting (2) Germany Ireland Netherlands Allocation system Free market, waiting list for each landlord Free market Allocation of cheap stock regulated in case of housing shortages Rent regulation for new contracts Free market, unless usury rents Regulated sector: based on quality points Rent regulation for rent adjustment Based on reference rents Annual reviews; based on market conditions Regulated sector: annual maximum increase set by government Regulation and supervision of landlords Depends on organisation type By local authorities; and through statutory registration with PRTB* Bricks-and-mortar subsidies Not available Tax concessions Available Selective fiscal incentives Exemption from corporate tax for institutional investors Housing allowances Tax concessions for rental payments Socio-economic profiles of tenants compared to social renting No recent information found Mean incomes nearly twice social sector levels Relatively strong in the lowest and highest income deciles * PRTB = Private Residential Tenancies Board

Key housing policy statements (Norris and Shiels) (1) Netherlands: accelerate restructuring neighbourhoods and housing production, sustainable living climate, promotion of home-ownership, ensure affordability Belgium: promoting home ownership and provision of sufficient social housing Germany: promote home ownership and devise the range of housing policies necessary to address the increased regional differentiation of housing markets

Key housing policy statements (Norris and Shiels) (2) France: to house every person according to her/his wishes, action must be taken on each link in the housing chain. This includes: facilitating home ownership and stimulating private rental and social housing output England: increase the provision of high quality and affordable housing in areas of high demand and tackle the housing shortage in London and the South East Sweden: housing policy aims at the supply of high-standard, affordable housing

Key housing policy statements (Norris and Shiels) (3) Denmark: good and healthy housing for all. Austria: housing as a basic human need should not be subject to free market mechanism Spain: increasing the proportion on rented dwellings in the Spanish housing stock Slovakia: differentiated state support for construction intended for the various income groups within the population Slovenia: construction of 10.000 new dwellings annually, to meet all housing needs

Cross-cutting housing challenges (Lawson & Milligan) Rising housing costs and declining housing affordabilty Housing supply shortages and issues of housing quality Social exclusion and segregation related to housing location, tenure and quality and race and ethnicity Special housing needs of excluded groups, indigenous communities and those with support needs.

National policy responses (Lawson and Milligan) Facilitating home ownership for new entrants and lower-income households Promoting private investment in affordable housing Using the existing private rental market Reinventing social housing Promoting housing and neighbourhood sustainability

Developments in governance and delivery in housing systems (Lawson and Milligan) The complexity, volatility and greater differentiation of housing markets within regions and countries Neo-liberal agenda’s such as public sector reform and privatisation Growing acknowledgement that conditions of privatisation need to change, as simple formulations of less government and more market are not working The influence of international agencies (EU directives on competition issues and overcoming regional disadvantages)

Most successful international responses to emerging housing issues (Lawson and Milligan) (1) Housing as an integral part of social, economic and environmental policy Sufficient housing expertise (good institutions) A long-term commitment to achieving desired housing outcomes A well designed mix of market and non-market mechanisms A climate where diversity, flexibility and local innovation can flourish

Most successful international responses to emerging housing issues (Lawson and Milligan) (2) Comprehensive and up-to-date market analysis and policy-orientated evaluation strategies The adoption of balanced multi-tenure policies with a common focus on increasing affordability and sustainable housing options, improving tenure choice and pathways and supporting socially mixes communities.

Emerging trends (1): General improvement in housing conditions (Whitehead) No numerical shortage Average standards of housing rising in most European countries (except transition economies?) Lower inflation and nominal interest rates Average financial housing costs stable or falling in most countries But growing problems of access and affordability Increasing regional and urban differentiation

Emerging trends (2): House prices (Whitehead) House prices have been rising sharply in real terms across Europe over most of the last decade (starting to slow down) Rises out of line with incomes - impact of structural changes in inflation and interest rates - speculative bubbles or underlying economic growth/constraints? - housing as a asset class Major exceptions, Germany, Austria en Switzerland

Emerging trends (3): Role of private sector finance (Whitehead) Particularly in northern Europe where housing finance instruments highly developed Development of mortgages backed securities/ bond issues (Denmark in forefront) Use of private funding to support social sector housing Use of housing to support other borrowing, growth of re-mortgaging, interest only loans etc.

Conclusions: perspectives (Whitehead) Average households already in owner-occupation are benefiting from greater choice, flexibility and stability Marginal purchasers and new entrants face major access and affordability problems Impact of inheritance and issues of intergenerational equity Concerns about systemic risks in the housing system - US current experiences - Impact of broader economic downturn Longer term issues relating to the use of housing assets Inflexibility of owner-occupation as dominant housing tenure for labour market, urban regenerating as well as the housing market itself

Economic and housing market indicators by country Bel Ger IRL ES F NL AT SW UK General economic indicators Growth GDP 2009 -2.9 -5.0 -7.5 -3.6 -2.2 -4.5 -3.7 -4.9 Growth GDP 2010 0.6 1.2 -1.4 -0.8 0.3 1.1 1.4 0.9 Unemployment average 2007 – 2009 7.5 7.7 12.5 8.5 3.2 4.4 6.9 5.5 Unemployment latest (jan 2010) 8.0 13.8 18.8 10.1 4.2 5.3 9.1 7.8 Housing market indicators House price change Mid 2007 – mid 2009* 0% -12% -23% -7% -6% 1% 6% -18% Latest house price trend up stable Down (rapidly) Transactions 2007-2008 -4% -2% -36% -33% nav -10% -11% -46% Building permits 2007-2008 -3% -20% -60% -17% -1% -16% Construc-ting new series *Mid 2007 the house prices in most countries reached their highest levels; mid 2009 is the year where most nations have data available. Note: Germany and Belgium = single family dwellings Source: GDP and Unemployment = Eurostat; House price change = national statistical bureaus and Hypostat 2008; Transactions 2007-2008 = Hypostat 2008; Transactions latest is national sources.

Measures taken Protection of home owners: avoiding payment problems and eviction Stimulating demand for a new existing owner occupied homes by households Stimulating social/public housing associations to take on unsold completed new dwellings initially targeted for owner occupation Stimulating production of social/public rental dwellings as an anti-cyclical measure for the construction sector

Crisis measures what to do and what not to do? Number of countries have taken only limited action Extra protection for home owners to avoid repossessions Attempts to get rid of the overhang/unsold dwellings Stimulating demand for newly constructed dwellings Building of new social housing Buying unsold new dwellings by social landlords Unlimited speculative building and a laissez faire attitude on planning Differences in the structure of the housing market are quite important to explain the crisis and measures

Sensitivity of housing markets to the economic climate Dynamic markets or more sensitive than static markets Effects of crisis are strongest in England and Ireland: limited stabilizing factors through government policy or via financial industry, buildings are built speculatively and in Ireland few planning restrictions Dutch market for new houses has been hit hard Germany prices of existing dwellings show a strong decline Belgium least trouble form the economic crisis

Conclusions Countries that are severely affected by the crisis are also confronted with the largest problems on the housing market Difficult to establish the effects of the economic crisis and the effect of the structure of the housing market and stabilizing factors Possible relation to the general economic structure and the housing market structure: a nation that is highly sensitive to the general economic climate also has a housing market structure that is sensitive to the economic climate

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