As England tries to wrestle public housing finance into shape, Kathleen Scanlon asks what lessons the reformers can learn from around the globe
Council housing debt is a hot topic at the moment in England thanks to the ongoing review of the housing revenue account. In most other countries, however, it’s not an issue as such — either local authorities don’t directly own much social housing (Denmark, the Netherlands), and/or their debt levels aren’t subject to central government control (the USA, Germany). So how do they do it? Read on for a snapshot of how five countries handle social housing finance and lessons they might hold for their English counterparts.
Do you take vouchers?
The proportion of so-called ‘public housing’ in the US is small by British standards — about 3 per cent of the housing stock, or 3.5 million homes. It is not owned by municipalities directly, but by about 3,000 state or local public housing agencies, which can cover several local authority areas. Most of it was built in the 1960s and 1970s with federal housing subsidies — in fact, the federal department of Housing and Urban Development basically paid the full cost of building them.
US housing policy has now turned away from building new public housing in favour of renovation and rent vouchers. What new provision there is for low-income families comes from private or non-profit developers using federal tax subsidies.
Some public housing authorities have become more entrepreneurial, working with private developers and not-for-profit organisations, and recently the Obama administration announced a new programme to allow them to issue bonds to finance new construction. The treasury will purchase up to 60 per cent of the debt but the rest must be sold to private investors.
Where ‘tout le monde’ chips in
French social housing is provided by legal entities known as HLMs (rent-controlled housing). Many are controlled by local authorities (singly or in groups) - they own about 60 per cent of the country’s 4.2 million social homes, the rest belonging to housing associations and co-operatives.
France is one of the few countries in Europe still building significant amounts of new social housing: construction is running at about 50,000 units a year. New homes are partly financed by subsidised loans from a state-owned bank. Three loan types fund housing for different income groups.
The bank’s funding in turn comes from a special tax-free savings account, Livret. Most French households have one. Social housing developers aren’t obliged to use one of these loans and can take out commercial loans if they prefer. Loans don’t cover the whole cost of construction: there are central government grants, and local authorities also contribute — often by providing cheap or even free land.
Where homes are paved with gold
As in Denmark, housing associations in the Netherlands own almost all social housing, which makes up more than a third of the country’s 6.7 million households. In 1995, Dutch housing associations became financially independent of the state. In the stuff of English authorities’ dreams, the government wrote off all outstanding loans, and eliminated all subsidies.
The terms of the arrangement were so generous that the housing associations are now financially very strong, and have become major actors
in the property market. Dutch local authorities thus benefit from the housing associations’ activities but do not have to contribute financially to construction.
Where the market decides
Social housing in Germany reflects the country’s history. In the east, under the German Democratic Republic, more than two-thirds of all new dwellings were built and owned by the state and managed as rentals by local authorities. After the reunification of Germany in 1990, local authorities assumed ownership. Despite being council-owned, these homes are not legally classed as social housing. Several municipalities, such as Dresden, have sold all their stock to foreign investors to cover budget deficits (Inside Housing, 28 August 2008).
In West Germany before 1990, social housing was market-based, and this is now true for the whole country. The government gives grants or tax relief to private firms or not-for-profit companies - some owned by local authorities - to develop new social housing or rehabilitate existing units. In return, the units must be ‘social’ (with household income limits and rent ceilings, for example) for between 12 and 20 years. After this, the owners can rent or sell the dwellings at market prices. Generally local authority-owned companies choose not to.
Kathleen Scanlon is a researcher at the London School of Economics