Affordable Housing Governance and Finance

Innovations, partnerships and comparative perspectives

Gerard Van Bortel, Vincent Gruis, Joost Nieuwenhuijzen, Ben Pluijmers, Gerard Van Bortel, Vincent Gruis, Joost Nieuwenhuijzen, Ben Pluijmers

• Publisher: Routledge
• Year: 2018
• ISBN:
  9781351621779
• Edition: 1
• Topic: Business
• Subtopic: Finance
• Index: Business

There is a large shortage of affordable housing across Europe. In high?demand urban areas housing shortages lead to unaffordable prices for many target groups. This book explores innovations to support a sufficient supply of affordable and sustainable rental housing.

Affordable housing is increasingly developed, financed and managed by a mix of market, state, third sector and community actors. Recent decades in large parts of the Western world have consecutively shown state-dominated, non-profit housing sectors, an increased role for market forces and the private sector, and the rise of initiatives by citizens and local communities. The variety of hybrid governance and finance arrangements is predicted to increase further, leading to new affordable housing delivery and management models. This book explores these innovations, with a focus on developments across Europe, and comparative chapters from the USA and Australia. The book presents new thinking in collaborative housing, co-production and accompanying finance mechanisms in order to support the quantity and the quality of affordable rental housing.

Combining academic robustness with practical relevance, chapters are written by renowned housing researchers in collaboration with practitioners from the housing sector. The book not only presents, compares and contrasts affordable housing solutions, but also explores the transferability of innovations to other countries. The book is essential reading for researchers and professionals in housing, social policy, urban planning and finance.

1 Introduction

Gerard van Bortel, Vincent Gruis, Joost Nieuwenhuijzen and Ben Pluijmers

Introduction

Affordable housing is increasingly developed, financed and managed by a mix of state, third sector, market and community actors, leading to a variety of hybrid governance and finance arrangements. If seen as a logical response to a more or less general long-term neoliberal trend in policies, sociocultural changes and more recent economic developments, it is likely that the hybridity and variety of governance and finance of affordable housing will continue to grow.

Taking into account the already diverse models for provision of affordable housing across Europe, there will be many opportunities for international exchange of experiences in this domain. Therefore, a group of researchers and practitioners started a collaborative project to explore, collate and compare innovations in affordable housing governance and finance across Europe and beyond. This book is the result of that endeavour.

This chapter describes the aims, contexts and concepts applied in the project. Building on a short overview of international developments in affordable housing governance and finance, we subsequently define and discuss the key concepts that are pivotal to the project, such as affordable housing, governance, finance and hybridity. The chapter continues with a short introduction of the three core themes of the book, namely collaborative housing, co-production, and housing finance models. The themes are further developed in subsequent chapters. We employ these concepts in a discussion of trends in, and the potential for, innovations in affordable housing, distinguishing increased market and community involvement in affordable housing, focusing on initiatives, often in collaboration with, or channelled through, traditional state and third sector providers. These concepts are then applied to analyse some of the examples that are included in the project.

Hybridity in housing provision: impact on housing governance and finance

Social or public housing has always been provided through a variety of actors, such as public agencies (state and local authorities), third sector organisations (housing associations and foundations) and cooperatives or private investors (supported with state grants). The dominant type of provider and tenure (rent, ownership, cooperative) varies from country to country, but, traditionally, there has been a more or less singular relationship between the providing entity and the tenant. In recent decades, however, more hybrid shapes of provision have emerged, in which housing is provided through cooperation between different types of actors, including a growing collaboration between tenants and professional housing providers, as well as an increasing mix of public and private finance.

The trend towards more hybrid forms of housing provision can be explained by various developments. In general, it can be seen as a response to, or part of, a long-term neoliberal trend and an associated retrenchment of the state in direct support and provision of social housing. This, for example, forces third sector housing providers to rely more and more on private finance (Haffner, Hoekstra, Oxley, & Van der Heijden, 2009). In the UK, this is visible in housing associations’ interest in attracting finance through bonds from institutional investors (Haffner, Hoekstra, Tang, & Oxley, 2015). In France, tax incentives have led to increased activity of private developers in affordable housing (Hoekstra, 2013). The abolishment of the public status of social housing providers in the 1980s and the subsequent acquisitions of social housing portfolios by institutional investors in Germany can be seen as a ‘radical’ front-runner in this respect. Thus, reduced state support, combined with the recent stagnating economy and often long waiting lists for the existing social housing stock has also stimulated citizens’ interest in becoming more active in providing their own housing, often in collaborative arrangements of groups of citizens supported by public, third sector and/or private actors (Czischke, 2017). The latter can also be seen as part of a wider trend of citizens wanting to organise collective services by themselves for various reasons, which does not only take place in the housing sector, but in various other services, such as energy, child-care, and education (e.g. Krokfors, 2012; Tummers, 2015). In the rental sector, this hybrid form of housing provision is mainly found in the segment between low-rent social housing and free market housing, because of the higher financial resources needed and fewer legal and regulatory restraints.

The increased involvement of citizens taking matters into their own hands is also embraced in state policies, with the Big Society agenda in the UK and the Participation Society in the Netherlands as notable examples (Verhoeven & Tonkens, 2013). Additionally, the social housing challenge has also been broadened to ‘affordable’ housing in the policy discourse. Fuelled by the financial crisis and increasing shortage of housing that is affordable not only to low-income households but also middle-income groups, ‘affordable housing’ is increasingly used as a concept to indicate the housing challenge instead of social or public housing. Combined with the currently substantial available finance among institutional investors, this has also increased interest among private investors to gear more of their investments to affordable housing. In the Netherlands, for example, institutional investments in affordable housing have increased for the first time in decades, mainly by acquisition of stock from housing associations and, to a lesser extent, by investing in newly built housing.

The abovementioned recent developments have led to a number of questions related to the governance and finance of affordable housing. To mention a few:

• How are the rights and responsibilities divided between the actors in these hybrid shapes of housing provision?

• How do these new arrangements fit into existing institutional frameworks? Are they stimulated, enabled or hampered by current legislative and administrative arrangements?

• Which of these hybrid arrangements is more likely to grow and which will remain a marginal phenomenon?

• What impact can be expected on the currently dominant providers of affordable housing? Will they lose a significant part of their market share? (How) can or should they adapt to these trends to remain future proof and keep, or increase, their added value to and associated legitimacy in society?

• What can be expected from the long-term effects of these new arrangements? Will they prove to be sustainable in terms of availability, quality and affordability? What is the impact of increased private finance on long-term performance according to these universal criteria of social housing?

To contribute to answering these questions, a group of researchers and practitioners started a collaborative project to describe innovations in the governance and finance of affordable housing in Europe and beyond. Researchers from the European Network of Housing Researchers (ENHR) linked up with practitioners from the European Federation for Living (EFL) to describe thematic developments in various (mainly North-Western European) countries, illustrated with examples from contemporary practice. In this introductory chapter, we describe the aims and context of the project. Further, we discuss and define the key concepts that will be used in the project, such as affordable housing, governance, finance and hybridity. We employ these concepts in a discussion of trends, potential for (mass) innovation in affordable housing provision and possible concerns, focusing on the increased involvement of community and market actors. The chapter ends with an explanation of the structure of the book and an overview of the contributions by the various authors.

Defining the key concepts

In this section, we define the key concepts that will be used to frame the various thematic contributions in the collaborative research project, building on definitions of affordable housing, governance, finance and hybridity derived from literature on housing studies.

Affordable housing

The lack of affordable rental housing is mainly an urban issue and is increasingly recognised as one of the major challenges facing European cities (European Union, 2011). Many cities lack an adequate supply of affordable rental housing for low- and middle-income households, including key urban professionals. This may lead to soaring rents, high levels of commuting, congestion, poor tenure mobility and, ultimately, to cities where people work, play and shop, but do not live. In the current context of reduced job security and tougher lending conditions, the need for affordable housing is growing. The economic significance of well-developed affordable housing sectors is paramount. Only with sufficient and affordable housing supply may urban areas attract a qualified workforce at competitive personnel costs. Guaranteeing affordable housing is therefore one of the basic requirements for the development of opportunities and talent (Large European Cities, 2013).

Before we can define affordable housing, we first need to provide a description of ‘social housing’. Social housing in Europe is characterised by a wide variety of national situations, conceptions and policies across different countries. There is no common definition of ‘social housing’ at the European level. Overall, the terms ‘social’, ‘housing’ and other related concepts are used in varying combinations in different Member States to refer to housing that is provided at below-market price for selected categories of the population. The latter are defined nationally, regionally or even locally, based on specific (housing) needs and eligibility criteria set by the competent authority.¹

‘Affordable housing’ is often seen as a form of tenure that is complementary to social housing; however, for this concept, a clear cross-national definition is lacking (Czischke &Van Bortel, 2018; EU Urban Agenda Housing Partnership, 2017). Housing markets are nationally and locally specific. While definitions of affordability vary, it may be understood as housing that is adequate in standard and location for low- to middle-income households at fees that enable them to meet other basic needs on a sustainable basis (see, for example, Haffner & Boumeester, 2010). Thus, the concept of affordable housing refers to housing for a broader range of household incomes than social housing. The affordable segment includes the gap between the traditional social and public housing segments and the level of expenditure that is still affordable for moderate-income households (based on housing expenses/income ratios or residual income) or that are not able to buy a home and cannot afford to pay full market rents (see Figure 1.1). The size of the affordable housing segment can vary as a result of local market conditions. Rents in social (provided by not-for-profit organisations) and public housing (delivered by government entities) are mostly determined related to costs, and allocated based on needs. Affordable housing rents are derived from, but lower than, market fees. This segment borders the full market housing segment and can be provided by various actors, profit, non-profit and public actors. In Figure 1.1 we have included two definitions of affordable housing, the first (narrow) definition refers to housing for low- to moderate-income households not eligible for social housing, but also not able to pay full market prices. The wider definition of affordable housing is often used as a concept to indicate the housing challenge in general rather than specific rental housing segments.

Figure 1.1 Rental housing segments.

Source: Czischke and Van Bortel (2018), adapted by authors.

Governance

Governance refers to the processes of governing, whether undertaken by a government, market or network, whether over a family, tribe, formal or informal organisation or territory and whether through laws, norms, power or language (Bevir, 2013). For the purpose of this chapter, we focus on governing processes between public, private and not-for-profit organisations. These processes take place within the context of national policies, economies and welfare regimes. Recent developments across Europe suggest a move towards more modern-corporatist welfare regimes with an indirect style of governance (Hoekstra, 2010). These new policy frameworks allow local authorities and non-state providers of welfare services, such as profit and not-for-profit actors, to operate with a certain degree of freedom in the delivery of public services.

There is a broad consensus that decision-making between actors has become more interdependent. There is, however, very little common ground among scholars and practitioners about the distribution of power and influence. These shifts in governance do not necessarily lead to a reduction of state power, but could indicate a shift from formal to informal techniques of government steering (De Bruijn & Ten Heuvelhof, 1991), such as steering in the ‘shadow of hierarchy’ (Scharpf, 1993, pp. 145–147; Koffijberg, 2005; Van Bortel & Elsinga, 2007). Rhodes (1997) claims that interdependent networks of state and non-state actors weaken the hierarchical powers of the state. Davies, on the other hand, insists that the state is still dominant and power relations are asymmetrical and still favour the state (2002, 2011). Similarly, Jones and Evans contend that many fail to see the state-centredness in many network arrangements (2006). In several European countries there is a clear movement of governments strengthening their influence on (social) h...