1 housing systems in western europe: theory and practice 7-4-2010 housing systems in western europe:...

1Housing systems in Western Europe: theory and practice

7-4-2010

Housing systems in Western Europe: Theory and practice

MoscowMoscow

Peter BoelhouwerPeter Boelhouwer

OTB Research Institute for the Built OTB Research Institute for the Built EnvironmentEnvironment


7-4-2010

Content

• Reasons for government intervention Reasons for government intervention • Housing: wobbly pillar between state and marketHousing: wobbly pillar between state and market• Housing and the welfare stateHousing and the welfare state• Developments in the owner-occupied and rented Developments in the owner-occupied and rented

sectorsector• Emerging trends on the housing market before the Emerging trends on the housing market before the

economic crisiseconomic crisis• Housing markets and the economic crisisHousing markets and the economic crisis• Housing market crisis: what to do?Housing market crisis: what to do?• ConclusionsConclusions


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Reasons for government intervention

• The right of decent housing is a fundamental right The right of decent housing is a fundamental right (constitutional law and universal declaration of the (constitutional law and universal declaration of the rights of human beings)rights of human beings)

• Government is responsible for sufficient affordable, Government is responsible for sufficient affordable, qualitative descent housing on the right placequalitative descent housing on the right place

• Minimum quality levelMinimum quality level• Content: place, production, affordability, Content: place, production, affordability,

distribution, qualitydistribution, quality


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Housing as the wobbly pillar of the welfare state: Harloe/Thorgersen

• Absence of standard Absence of standard • Definition of housing needDefinition of housing need• Changes in achievementsChanges in achievements• Broad government goals/ connection with other Broad government goals/ connection with other

policy areas policy areas


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Main Characteristics of the welfare state

• De-commodificationDe-commodification• Influence of central governmentInfluence of central government• Degree of political corporatismDegree of political corporatism• Fragmentation in the provision welfare servicesFragmentation in the provision welfare services• Treatment of the traditional family in welfare Treatment of the traditional family in welfare

politicspolitics• Role of the state, market and family in the provision Role of the state, market and family in the provision

of welfare servicesof welfare services


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Development welfare states (2)

• Criticism on welfare statesCriticism on welfare states• Budgetary problemsBudgetary problems• More emphasis on the market and freedom of More emphasis on the market and freedom of

choicechoice• Enabling stateEnabling state• Empowerment, privatization, responsibilityEmpowerment, privatization, responsibility


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The three criteria of Esping-Andersen applied to housing


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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


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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)


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A proposed new conceptual model for the welfare state


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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

relatively high

low

Influence of central government

high and direct

quite high and often indirect

quite high and often indirect

low

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

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


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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 According to need According to needRent 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 Available Available

Tax concessions Available; depends on legal status landlord

Available Available

Housing allowances

Available Implicit via income-related rents

Available

Socio-economic profiles of tenants compared to market renting

Lower incomes Lower incomes and weaker social profile

Relative concentration of low-income households


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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 According to need According to needRent 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


Contract between subsidy provider and landlord

Adjustments in line with household income

Regulated sector: annual maximum rent increase set by government


Depends on organisation type

By central government

Social Housing Management Decree for housing associations. External supervision by Minister


Available Available Available

Tax concessions Available Available; variations between local authority and housing associations

Not available as of 2008

Housing allowances

Available Not available 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


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Policy for market renting (1)

England Flanders France

Allocation system Free market Free market Free market (except for the intermediate sector)

Rent regulation for new contracts

Free market Mainly free market Free; based on old rent or on reference dwellings in case of renewal of a contract for a sitting tenant


Based on market conditions

Based on index of costs, a corrected consumer price index

Based on index of costs


Selective; by local authorities




Not available Not available Available for intermediate sector

Tax concessions Tax treatment similar to other investors

Not available Available

Housing allowances

Available Explicit subsidy for movers to higher quality or more suitable dwellings

Available

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


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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

Free market Regulated sector: based on quality points


Based on reference rents

Annual reviews; based on market conditions

Regulated sector: annual maximum increase set by government



By local authorities; and through statutory registration with PRTB*



Not available Not available Not available

Tax concessions Available Selective fiscal incentives

Exemption from corporate tax for institutional investors

Housing allowances

Available Tax concessions for rental payments

Available

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


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Key housing policy statements (Norris and Shiels) (1)

• Netherlands: accelerate restructuring neighbourhoods Netherlands: accelerate restructuring neighbourhoods and housing production, sustainable living climate, and housing production, sustainable living climate, promotion of home-ownership, ensure affordabilitypromotion of home-ownership, ensure affordability

• Belgium: promoting home ownership and provision of Belgium: promoting home ownership and provision of sufficient social housingsufficient social housing

• Germany: promote home ownership and devise the Germany: promote home ownership and devise the range of housing policies necessary to address the range of housing policies necessary to address the increased regional differentiation of housing markets increased regional differentiation of housing markets


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• France: to house every person according to her/his France: to house every person according to her/his wishes, action must be taken on each link in the wishes, action must be taken on each link in the housing chain. This includes: facilitating home housing chain. This includes: facilitating home ownership and stimulating private rental and social ownership and stimulating private rental and social housing outputhousing output

• England: increase the provision of high quality and England: increase the provision of high quality and affordable housing in areas of high demand and tackle affordable housing in areas of high demand and tackle the housing shortage in London and the South Eastthe housing shortage in London and the South East

• Sweden: housing policy aims at the supply of high-Sweden: housing policy aims at the supply of high-standard, affordable housingstandard, affordable housing


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• Denmark: good and healthy housing for all.Denmark: good and healthy housing for all.• Austria: housing as a basic human need should not be Austria: housing as a basic human need should not be

subject to free market mechanismsubject to free market mechanism• Spain: increasing the proportion on rented dwellings in Spain: increasing the proportion on rented dwellings in

the Spanish housing stockthe Spanish housing stock• Slovakia: differentiated state support for construction Slovakia: differentiated state support for construction

intended for the various income groups within the intended for the various income groups within the populationpopulation

• Slovenia: construction of 10.000 new dwellings Slovenia: construction of 10.000 new dwellings annually, to meet all housing needsannually, to meet all housing needs


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Cross-cutting housing challenges (Lawson & Milligan)

• Rising housing costs and declining housing affordabiltyRising housing costs and declining housing affordabilty• Housing supply shortages and issues of housing Housing supply shortages and issues of housing

qualityquality• Social exclusion and segregation related to housing Social exclusion and segregation related to housing

location, tenure and quality and race and ethnicitylocation, tenure and quality and race and ethnicity• Special housing needs of excluded groups, indigenous Special housing needs of excluded groups, indigenous

communities and those with support needs.communities and those with support needs.


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National policy responses (Lawson and Milligan)

• Facilitating home ownership for new entrants and Facilitating home ownership for new entrants and lower-income householdslower-income households

• Promoting private investment in affordable housingPromoting private investment in affordable housing• Using the existing private rental marketUsing the existing private rental market• Reinventing social housingReinventing social housing• Promoting housing and neighbourhood sustainabilityPromoting housing and neighbourhood sustainability


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Developments in governance and delivery in housing systems (Lawson and Milligan)

• The complexity, volatility and greater differentiation of The complexity, volatility and greater differentiation of housing markets within regions and countrieshousing markets within regions and countries

• Neo-liberal agenda’s such as public sector reform and Neo-liberal agenda’s such as public sector reform and privatisationprivatisation

• Growing acknowledgement that conditions of Growing acknowledgement that conditions of privatisation need to change, as simple formulations privatisation need to change, as simple formulations of less government and more market are not workingof less government and more market are not working

• The influence of international agencies (EU directives The influence of international agencies (EU directives on competition issues and overcoming regional on competition issues and overcoming regional disadvantages)disadvantages)


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Most successful international responses to emerging housing issues (Lawson and Milligan) (1)

• Housing as an integral part of social, economic and Housing as an integral part of social, economic and environmental policyenvironmental policy

• Sufficient housing expertise (good institutions)Sufficient housing expertise (good institutions)• A long-term commitment to achieving desired housing A long-term commitment to achieving desired housing

outcomesoutcomes• A well designed mix of market and non-market A well designed mix of market and non-market

mechanismsmechanisms• A climate where diversity, flexibility and local A climate where diversity, flexibility and local

innovation can flourishinnovation can flourish


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Most successful international responses to emerging housing issues (Lawson and Milligan) (2)

• Comprehensive and up-to-date market analysis and Comprehensive and up-to-date market analysis and policy-orientated evaluation strategiespolicy-orientated evaluation strategies

• The adoption of balanced multi-tenure policies with a The adoption of balanced multi-tenure policies with a common focus on increasing affordability and common focus on increasing affordability and sustainable housing options, improving tenure choice sustainable housing options, improving tenure choice and pathways and supporting socially mixes and pathways and supporting socially mixes communities.communities.


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Emerging trends (1): General improvement in housing conditions (Whitehead)

• No numerical shortageNo numerical shortage• Average standards of housing rising in most European Average standards of housing rising in most European

countries (except transition economies?)countries (except transition economies?)• Lower inflation and nominal interest ratesLower inflation and nominal interest rates• Average financial housing costs stable or falling in Average financial housing costs stable or falling in

most countriesmost countries• But growing problems of access and affordabilityBut growing problems of access and affordability• Increasing regional and urban differentiationIncreasing regional and urban differentiation


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Emerging trends (2): House prices (Whitehead)

• House prices have been rising sharply in real terms House prices have been rising sharply in real terms across Europe over most of the last decade (starting to across Europe over most of the last decade (starting to slow down)slow down)

• Rises out of line with incomesRises out of line with incomes- impact of structural changes in inflation and interest - impact of structural changes in inflation and interest ratesrates

- speculative bubbles or underlying economic - speculative bubbles or underlying economic growth/constraints?growth/constraints?- housing as a asset class- housing as a asset class

• Major exceptions, Germany, Austria en SwitzerlandMajor exceptions, Germany, Austria en Switzerland


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Emerging trends (3): Role of private sector finance (Whitehead)

• Particularly in northern Europe where housing finance Particularly in northern Europe where housing finance instruments highly developedinstruments highly developed

• Development of mortgages backed securities/ bond Development of mortgages backed securities/ bond issues (Denmark in forefront)issues (Denmark in forefront)

• Use of private funding to support social sector housingUse of private funding to support social sector housing• Use of housing to support other borrowing, growth of Use of housing to support other borrowing, growth of

re-mortgaging, interest only loans etc. re-mortgaging, interest only loans etc.


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Conclusions: perspectives (Whitehead)

• Average households already in owner-occupation are Average households already in owner-occupation are benefiting from greater choice, flexibility and stabilitybenefiting from greater choice, flexibility and stability

• Marginal purchasers and new entrants face major Marginal purchasers and new entrants face major access and affordability problemsaccess and affordability problems

• Impact of inheritance and issues of intergenerational Impact of inheritance and issues of intergenerational equityequity

• Concerns about systemic risks in the housing system Concerns about systemic risks in the housing system - US current experiences- US current experiences- Impact of broader economic downturn- Impact of broader economic downturn

• Longer term issues relating to the use of housing Longer term issues relating to the use of housing assetsassets

• Inflexibility of owner-occupation as dominant housing Inflexibility of owner-occupation as dominant housing tenure for labour market, urban regenerating as well as tenure for labour market, urban regenerating as well as the housing market itselfthe housing market itself


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Economic and housing market indicators by country

Bel Ger IRL ES F NL AT SW UK

General economic indicatorsGrowth GDP 2009 -

2.9

-5.0 -7.5 -3.6 -2.2 -4.5 -3.7 -4.9 -5.0

Growth GDP 2010 0.6 1.2 -1.4 -0.8 1.2 0.3 1.1 1.4 0.9

Unemployment average 2007 – 2009

7.5 7.7 7.5 12.5 8.5 3.2 4.4 6.9 5.5

Unemployment latest (jan 2010)

8.0 7.5 13.8 18.8 10.1 4.2 5.3 9.1 7.8

Housing market indicatorsHouse price change Mid 2007 – mid 2009*

0% -12% -23% -7% -6% -7% 1% 6% -18%

Latest house price trend

up stable

Down (rapidly

)

Down (rapidly)

up up stable

stable

up

Transactions 2007-2008

-4%

-2% -36% -33% nav -10% nav -11% -46%

Building permits 2007-2008

-3%

-6% -20% -60% -17% -1% nav -16% Construc-ting new

series

Source: GDP and Unemployment = Eurostat; House price change = national statistical bureaus and Hypostat 2008; Transactions 2007-2008 = Hypostat 2008; Transactions latest is national sources.

*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


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Measures taken

• Protection of home owners: avoiding payment Protection of home owners: avoiding payment problems and evictionproblems and eviction

• Stimulating demand for a new existing owner Stimulating demand for a new existing owner occupied homes by householdsoccupied homes by households

• Stimulating social/public housing associations to Stimulating social/public housing associations to take on unsold completed new dwellings initially take on unsold completed new dwellings initially targeted for owner occupationtargeted for owner occupation

• Stimulating production of social/public rental Stimulating production of social/public rental dwellings as an anti-cyclical measure for the dwellings as an anti-cyclical measure for the construction sectorconstruction sector


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Crisis measures what to do and what not to do?

• Number of countries have taken only limited actionNumber of countries have taken only limited action• Extra protection for home owners to avoid repossessionsExtra protection for home owners to avoid repossessions• Attempts to get rid of the overhang/unsold dwellingsAttempts to get rid of the overhang/unsold dwellings• Stimulating demand for newly constructed dwellingsStimulating demand for newly constructed dwellings• Building of new social housingBuilding of new social housing• Buying unsold new dwellings by social landlordsBuying unsold new dwellings by social landlords• Unlimited speculative building and a laissez faire attitude Unlimited speculative building and a laissez faire attitude

on planningon planning• Differences in the structure of the housing market are Differences in the structure of the housing market are

quite important to explain the crisis and measuresquite important to explain the crisis and measures


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Sensitivity of housing markets to the economic climate

• Dynamic markets or more sensitive than static Dynamic markets or more sensitive than static marketsmarkets

• Effects of crisis are strongest in England and Effects of crisis are strongest in England and Ireland: limited stabilizing factors through Ireland: limited stabilizing factors through government policy or via financial industry, government policy or via financial industry, buildings are built speculatively and in Ireland few buildings are built speculatively and in Ireland few planning restrictionsplanning restrictions

• Dutch market for new houses has been hit hard Dutch market for new houses has been hit hard • Germany prices of existing dwellings show a strong Germany prices of existing dwellings show a strong

declinedecline• Belgium least trouble form the economic crisis Belgium least trouble form the economic crisis


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Conclusions

• Countries that are severely affected by the crisis Countries that are severely affected by the crisis are also confronted with the largest problems on are also confronted with the largest problems on the housing marketthe housing market

• Difficult to establish the effects of the economic Difficult to establish the effects of the economic crisis and the effect of the structure of the housing crisis and the effect of the structure of the housing market and stabilizing factorsmarket and stabilizing factors

• Possible relation to the general economic structure Possible relation to the general economic structure and the housing market structure: a nation that is and the housing market structure: a nation that is highly sensitive to the general economic climate highly sensitive to the general economic climate also has a housing market structure that is also has a housing market structure that is sensitive to the economic climate sensitive to the economic climate


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EndEnd

1 housing systems in western europe: theory and practice 7-4-2010 housing systems in western europe:...

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