| 1 Housing policies in Europe Dave Treanor 2 | About the author Dave Treanor began his housing career with privately funded housing cooperatives in the seventies and early eighties. He was a founding member of a consultancy advising housing cooperatives and representing tenants in negotiations over the transfer of their council housing to newly formed housing associations. He worked at the National Housing Federation on the risks and opportunities arising from the 1988 Housing Act and was involved in developing a consensus on afford- able rents, and defining the terms for large scale voluntary transfers of council housing. He studied the way social hous- ing was managed and maintained around Europe as part of a review of the way repairs and maintenance was funded in England. In the early nineties he set up a software company producing financial appraisal software widely used to manage the devel- opment of social housing. This became M3 Housing. He also led the National Housing Maintenance Forum (NHMF) that set standards for cost and quality in the delivery of repairs and maintenance by housing associations and councils, and All rights reserved. No part of this publication commissioned a wide range of best practice guides on asset may be reproduced, stored in a retrieval system, management and maintenance published by the National or transmitted, in any form or by any means, elec- Housing Federation. He ran benchmarking clubs to help tronic, mechanical, photocopying, recording or housing associations compare their costs of maintenance and otherwise, without the prior permission of Treanor development and identify opportunities to improve their ser- Books. vices. He also served as a housing association board member. © Treanor Books Dave recently retired as managing director of M3 Housing and secretary of the NHMF. Published by M3 Housing Ltd (www.m3h.co.uk) His publications include: in March 2015 ‘Legal frameworks for communes and collectives’; Laurieston Hall, 1974 ISBN 978-1-908409-66-9 ‘Collective Housing Handbook’; with Sarah Eno, Laurieston Hall, 1982 ‘Buying your home with other people’; Shelter, 1987 ‘Maintenance planning in Holland and Denmark’; NFHA, 1989 ‘Housing Association Rents’; NFHA, 1990 ‘Housing Investment Appraisal’; 1st Edition with John Walker, NHF, 2006 ‘Housing investment Appraisal’; 2nd Edition, NHF, 2009 Four articles published on www.landlordzone.co.uk/: ‘Economics of home-ownership’ published in 2013 ‘Investment in buy-to-let’ published in 2014 Designed by Dave Treanor ‘Taking the heat out of the housing market’ published 2014 Printed by Berforts ‘Pensions: a reality check’ published in 2014 Front cover photo by Daniel Ryan | 3 Contents Housing in Europe The Netherlands What might we learn? 5 Dutch housing market 62 Main findings 7 Home ownership 63 Housing Markets Rents and security 63 Market pressures 9 Housing Associations 65 Land use planning 10 Financial independence 66 Property taxes 13 Allocation of social housing 68 Taxing home-ownership 13 Ireland Taxes on buying and selling 15 Rise and fall of social housing 69 Taxing rental income 15 Home Ownership 71 Mortgage finance 17 Rental sector 74 Home ownership 19 France Conclusions 22 Culture and economy 76 Renting Social housing 77 History of social housing 26 Private rented sector 80 Housing subsidies 27 Home ownership 82 Reforming the social sector 30 Belgium Private rental sector 34 Political background 84 Reform of private renting 35 Home ownership 85 Impact on house prices 38 Social housing in Flanders 88 United Kingdom Private Rental 91 Economy and culture 41 Spain Devolution and Subsidiarity 43 Background 93 Denmark Housing crisis 94 Danish culture 46 Home ownership 94 Private rental sector 47 Subsidised home-ownership 97 Danish housing associations 48 Social housing for rent 98 Social housing rents 49 Private renting 99 Funding of social housing 50 Eastern Europe Social housing repairs 50 Socialist housing model 103 Allocation of social housing 50 Hungary Home ownership 51 Socialist Housing in Hungary 106 Germany East & West Years of transition 108 A property renting democracy 54 Social housing 110 Origins of social housing 55 Private Rental Sector 111 German Democratic Republic 55 Owner occupation 111 West German housing subsidies 56 Bulgaria Private renting 58 Economy 114 Recent trends 59 Housing stock 116 Home ownership 60 Roma 117 Private rental sector 118 Social housing 119 Home Ownership 120 4 | Acknowledgements Many old colleagues read early drafts of the book and made constructive comments, and encouraged us to get it published. I am particularly grateful to Tony Trott for his most careful and detailed examination of every chapter. James Tickell pointed me to some of the interesting new initiatives coming out of Ireland, and also to some of the history behind the privatising of social housing in Germany. He was the first of many to suggest each country’s chapter begin with a comparable set of essen- tial statistics. Keith Jenkins made several good sugges- tions, particularly on the persuasive power of well pre- sented statistics. Others who took the trouble to read it and provided useful feedback include Bob Williams, Keith Cowling, Janis Morton, my wife Pam, and Simon Erskine who made useful comments on taxation. My family also contributed through a number of heated arguments around the dinner table, which only goes to show the value of children not believing everything their parents have to tell them. I am enormously grateful to them all. The book has been substantially re-written in response to their comments. The views expressed and any remain- ing errors or omissions are entirely my responsibility. Dave Treanor March 2015 A spread sheet showing data sources and how all the graphs were derived from the data is available from http://www.m3h. co.uk/publications/housingpoliciesineuropedatatables.xls | 5 Chapter 1 Housing in Europe rather meaningless. What might we learn? Social housing can fill gaps where the market fails to meet This book examines housing policies in a sample housing need at a price households can afford. So the of countries within the European Union, based on role of social housing in each country has to be under- observations from visits, a review of the literature and stood in relation to the total housing market, including analysis of national statistics. It looks at the interplay the private rented sector and home-ownership. of taxation on different tenures, the regulation of rents In the fifties and sixties house prices in the UK were and tenancies, planning rules, housing subsidies and relatively stable. Most households rented. As mortgages the funding of social housing, the extent to which became widely available the first of a series of housing responsibility for housing is devolved from central booms occurred in the early seventies, starting a cycle to local government, and a variety of economic and that has followed a similar pattern ever since. The longer cultural factors. the period of sustained growth the deeper the fall when It puts UK housing policy into perspective, show- the bubble bursts, as it did most dramatically in the late ing where it differs from elsewhere, and how that has eighties and again in 2008 (see Fig 1 below). shaped our rental and home-ownership markets. Why do house prices shoot up, and then tumble down? The mechanisms by which social housing has been Is this an inevitable consequence of the way hous- delivered are shaped by local cultural and political ing markets work? Or could something be done about forces in each country, making simple comparisons it? If it is inevitable, how come it does not happen in Fig 1: Annual change in house prices in the UK since 1952 1 6 | Housing in Europe Rising house prices produce a ‘feel good factor’. Home- owners feel financially stronger, and spend more on the things that fill their homes, giving a boost to the econ- omy. Falling prices can trap those that most recently purchased a home in negative equity. They undermine consumer confidence, leading to recession. So as well as disrupting the housing market, these wild fluctuations impact on the wider economy. In the years following the war rent control made fur- ther investment in private renting uneconomic: the gap between the vacant value and tenanted value was too wide. The government funded the construction of council housing, which by 1980 housed more than thirty percent of the population (31.5%). Since then the number of council and housing association homes has Fig 2: Index of house prices net of inflation in steadily declined (Fig 3). Britain, Germany and Switzerland 2 Public spending on housing dropped from 185,000 units a year at the end of the sixties to between 30,000 and Switzerland or Germany (see Fig 2)? 40,000 a year since the nineties, which was less than was needed to replace annual losses through the right-to- Young families are finding it increasingly difficult to buy. The decline in new housing construction since the afford a home of their own. Without financial help sixties more or less matches the drop in publicly funded from their parents it can take many years to save for the housing (see Fig 7 on page 10). It is now well below deposit or to earn enough to afford the mortgage loan the rate of growth in new households, which according needed to buy a home in most of the UK. to the government’s own estimates is around 221,000 Rising house prices mean they are stuck in private rented units a year. Since 2008 less than half that number have housing, which in Britain provides almost no security of been built. The shortage of housing fuels the growth in tenure, and no control over the condition of their home. house prices, particularly in areas of economic growth.