1. Institute of Urban Economics, Moscow 14 May 2009
Non-profit Housing Associations: outcomes and lessons from Europe Christine Whitehead London School of Economics
Institute of Urban Economics,
Moscow
14 May 2009

2. Social Housing in Europe
The definition of social housing varies enormously across Europe
Social ownership: municipalities; new towns; and housing associations (not-for-profit social landlords); co-operatives
Social provision: below market rents; directed at particular groups; role in neighbourhood management and provision of additional services;
Subsidised provision: including social rental; cost rental; and low cost home ownership

3. Table 1: Housing tenure/size of social sector in Europe
Owner
occupation
Private
rental
Social
Number of
social units
Netherlands 54 11 35
2,400,000
Austria 55 20 25
800,000
Denmark 52 17 21
530,000
Sweden
59*
780,000
England 70 18
3,983,000
France** 56
4,230,000
Ireland 80 8
124,000
Germany
46*** 49 6
1,800,000
Hungary 92 4
167,000
*Sweden: owner occupation includes cooperatives
**France: Does not include 6.1% ‘other’
***Germany: owner occupation includes shared ownership/equity ‘Genossenschaften’.
Sources:
France: from
Hungary: from Housing Statistics in the European Union 2004
Germany: from Scanlon & Whitehead (2001), Intl trends in hsg tenure & mortgage finance
Netherlands:
Not otherwise stated: from experts’ country reports

4. What are Housing Associations?
Independent organisations that develop, own and/or manage housing for particular groups of households
As such they are independent social landlords, although often with close ties to local and national government
Set up under national legislation which determines purpose and therefore rights, responsibilities and fiscal position of housing associations
Distinguish housing associations from co-operatives where owners also normally live in the dwellings provided

5. The Development of Housing Associations
Nineteenth century initiatives: employers; charitable organisations; groups with particular interests
Usually set up under general non-profit (charitable) legal framework – with Boards of Directors (unpaid) and articles of association defining their purpose
Provided their own funds and charged rents to cover costs
Some had strong links with municipalities and received land, funding, guarantees

6. Housing Associations and Social Housing
Post 1945 most large scale social housing development by municipalities rather than HAs
In some countries with a history of independent social landlords, HAs were part of the post war construction boom and received subsidy and sometimes guarantees in a similar fashion to municipalities
Post 1980 in many countries there was a large shift away from municipal ownership and development to Has – often because of constraints on public borrowing

7. Figure 1: Ownership of social housing

8. Example 1: France
Earliest social housing built by philanthropists and entrepreneurs in nineteenth century
Post 1945 social landlords (HLMs) were owned by municipality; social housing companies or HAs – all treated similarly for subsidy purposes
Complex relationship between government, local authorities, local partners, finance organisations and social landlords to provide housing services
Social housing for middle class as well as low income employed – not mainly for poorest
Political consensus that society has responsibility for housing supply

9. Example 2: The Netherlands
Long history of social housing but major growth post 1945
Provided by HAs and municipalities (acting as separate management organisations) with municipal and central government financial guarantees and subsidy – often in the form of land
Almost all social housing now owned by about 500 HAs
Central government introduced “Brutering” in 1995 by which they gave a capital grant but no more subsidy thereafter so HAs became financially independent
HAs must cross subsidise between regions where necessary
HAs play a major role in regeneration and urban investment and management

10. Example 3: England
HAs from 19th century (though almshouses from twelfth century – as in much of Europe)
Pre 1974, worked sometimes with local government. Central government subsidy only available from 1974
HAs became major providers of new social housing from 1988
Financed by a mix of capital subsidy, own equity and private finance
Also Large scale voluntary transfers (LSVT) of municipal stock to HAs; Arms Length Management Organisations (ALMOs)

11. The Role of HAs: Consistent Patterns across Europe?
Starting point: independent local organisations which then often worked with local government to mobilise resources
Central government subsidy and regulation increasingly important since 1945 as HAs became large providers of social housing
Growing capital base, increased access to private finance to enable borrowing for new development and regeneration
Increasing role in local area management and redevelopment
Increasing concentration on helping poorer and more vulnerable households
Supported by the availability of income related subsidies

12. Who do Housing Associations House?
Traditional much for lower income employed households but now in many European countries fully integrated into the social housing system
Different emphasis on whether accept nominations from local authorities or allocate directly
Some evidence of ‘upmarketing’ where addressing general needs: but also concentration on vulnerable groups

13. Table 2: Demographics of social housing
Age/household type
Income
Austria
Young families (on new estates) older people/singles (on older estates
Municipalities: working class/ disadvantaged.
HA: middle class
Denmark
Children and young people, households with one adult
Low-income and households receiving transfers
England
Young and old; single parents, single persons
Low incomes - <half owner-occupier income
France
Single-parent families and couples with children
Average household income 74% of national average
Germany
Older people
Lower income
Hungary
Low income and social status
Ireland
Single parent families and couples with children
62% have incomes <60% of median (vs 22% overall)
Netherlands
Older/smaller than average
Lower than average and falling
Sweden
Single parents, elderly single
Lower than average

14. Table 3: Broader roles of social housing Special needs housing
Neighbourhood management services
(e.g. heating)
Regeneration
Affecting market rents
Social cohesion
Austria
H C H
Denmark C
England
France
Only since 2000 in some areas (ZUS)
Germany
Hungary
Ireland
Nether-lands
H C, but limited
No heating
Sweden
H = historically C = current

15. HAs and Social Housing in England
England has used almost every type of approach to providing social housing
Financing and subsidy processes in the social sector have tended to be very different from those used in other tenures
At the maximum - in social rented housing provided for one in three households – now under 20% of all households and heavily concentrated on poorer and disadvantaged households. Has own about half of the total

16. The Housing Act 1988
Cash limited capital grants covering 75% of projected costs (expected to decline to 50%)
Development risks to lie with HAs
Private finance for residual
Lenders to have first charge
Rents to be set by HA at below market rents but in order to at least break even
Lifetime security of tenure
Housing benefit to continue to be available on rents up to market levels
Government regulation and allocation of subsidy through the Housing Corporation

17. How HAs in England Operate
May not distribute profit – but may build reserves to enable borrowing
May cross subsidise within the stock – but must set rents with reference to the dwelling not the occupier
Must let to identified groups of households – often nominated by municipality
May provide other services within their legal remit
If receive subsidy must be registered with the regulator – now the Tenants Services Authority - and be regularly inspected
May have profit oriented subsidiaries eg for low cost home ownership

18. The Structure of the HA sector
Now some two million dwellings (partly ex- municipality units) – increasing by some 25,000 a year (excluding transfers from LAs)
Some large HAs own over 20,000 units and work across the country but also many small local/specialist organisations
Many HAs have large scale housing and land assets; other simply manage stock for others
Around two thirds of tenants are dependent on housing benefit – so financed from up front grants but also from income related benefits

19. Rent Determination
Rents are now set by a formula based on capital values and local incomes
Result is rents which are affordable to lower income employed households
Rent rises are constrained to RPI+1/2% pa
Rents in London are around 50% of market rents; in some other parts of the country rents may be 70% or 80% of market rents
Must break even year by year given this rental income

20. Sources of Funds for Development
To receive supply subsidies they must bid for capital grant based on costs of development, rents and their own contribution from rental income
May receive cross subsidy from landowners through Section 106 – so cheap or free land
May also act in partnership with municipalities building on public land when property transferred to their ownership on completion
May act as partners with public and private sectors in regeneration projects

21. Private Finance for HAs
Private finance from major lenders at interest rates 30 – 50 pts above LIBOR (similar to Netherlands);
Growing capital base although borrowing limited by constraints on rental income
Continued dependence on subsidy for new investment (around 50%) and investment in Decent Homes in the existing stock
Development of intermediate rental and shared ownership market for those who need less subsidy
Funding depends on quality of regulation and risk management

22. HAs: the Credit Crunch, Recession and Revival?
Closure of wholesale and mortgage markets;
Private finance institutions see themselves as overcommitted so wish to renegotiate interest rates and other terms and conditions for Has;
Total development levels less than 50% of 2007 and social housing (including shared ownership) now the majority of output;
Grant levels increased; S106 contributions reduced; shift back to social renting
First signs of revival now appearing – led by heavily subsidised Housing Associations

23. Conclusions
HAs are one point on a spectrum from public to private provision;
They do not require special legislation to operate – that simply defines legal status; purpose; and tax position
Once they are social housing providers and receive subsidy they generally become subject to a strong regulatory framework affecting development, rents, standards; and allocations

24. Conclusions (cont)
In countries where there is a long history of HAs they often have the capacity to cross subsidise new development from rents on existing stock ;
More generally they are dependent on subsidies; grants; cheap land and possibly cheap borrowing to provide affordable housing;
In many European countries these subsidies are available to a great or lesser extent;
They are also dependent on rent allowances to enable them to accommodate lower income households;
They benefit from independence in managing he stock and the asset – but cannot expand without subsidy.