The provision of private finance for social housing: An outline of recent developments in funding existing housing associations in England

With successive Housing Acts in 1985 and 1988 the British government declared its intention to create an environment for the integration of social housing and private finance. This paper draws on empirical research to consider the success to date this policy initiative from the perspective of financial institutions. This research concentrated on attitudes to the availability and suitability of financial instruments for social housing funding for existing housing associations in England. After an introduction clarifying the framework in which funds are raised, the first substantive section provides an overview of the characteristics of the potential lenders to social housing in England and of the regulatory environment affecting their lending policies. Section 3 outlines the main uses to which funds are put and the types of financial instrument currently available to housing associations. The paper next examines the scope for increasing the supply of these funds through wholesale markets, particularly via The Housing Finance Corporation. One attempt to expand the supply of finance to existing associations through ‘credit enhanced’ funds is then described. The paper concludes by evaluating progress so far and by questioning the degree to which social housing will have to change if private finance is increasingly to replace public sector funds.     

Developments in the provision of housing finance in the UK

Recommended reading for providers and designers of housing. The results of the housing finance changes in the UK included a wider range of institutions involved, significant developments in the source and delivery of that finance, as well as important changes in government policy opening up social housing to the private finance market, targeting subsidy more directly at particular groups of individuals and introduction of specific supply subsidies to new private rented sector. The considerable unease with certain outcomes is dealt with.     

Social housing programme of Selangor <Emphasis Type="Italic">Zakat</Emphasis> Board of Malaysia and housing satisfaction

Social housing in Malaysia is provided through the public and private sectors. Recently, the Selangor Zakat Board (SZB) has started to provide social housing in the state of Selangor, Malaysia. Up to 2007, a total of 906 units have been delivered under its different programmes. This paper evaluates these programmes by adopting the housing satisfaction model which is currently used as a customer satisfaction tool for public/private housing in many local governments in the UK and USA. The main purpose of this paper is to identify the types of housing programmes adopted by SZB and examine beneficiaries’ housing satisfaction in each programme on a comparative plane. In order to examine housing satisfaction, five objective components of satisfaction—housing unit features, housing unit support services, the social environment, public facilities and neighbourhood facilities—were analysed through beneficiaries’ levels of satisfaction which were measured by applying a Likert scale. The findings of the paper indicate that SZB has been successful in providing a moderate level of satisfaction with the housing unit. However, the existence of variable levels of satisfaction with other components implies that there is still scope to enhance residents’ satisfaction with those components.     

International comparison of social housing management in Western Europe

This article provides an overview of social housing management in seven West-European countries. In order to place the concept of housing management in context and allow comparison, housing management is classified according to technical, social and financial aspects of management. Housing management has become increasingly independent and the financial ties are becoming looser in nearly all of the seven investigated countries. Even though governments still play a major role in Europe with respect to the granting of subsidies, the non-profit institutions have to entirely rely on the capital market in order to obtain the required funds. However, in many cases intermediary organisations are still responsible for attracting loans. Peter Boelhouwer is a senior research at the OTB Research Institute for Housing, Urban and Mobility Studies, Delft University of Technology. His research focus has been on general housing policy, housing finance and comparative housing research. This paper is based on two recent OTB-studies about the social rented sector in Western Europe. The first study was written by Birgitta van de Ven and was published in 1995 in the Dutch series “Volkshuisvestingsbeleid en Bouwmarkt” (26). The title of this report is “Housing systems in Europe: A comparative study of housing management”. The second study (Boelhouwer, 1996) is titled “Financing the social rented sector in Western Europe”, and is published in the series Housing and Urban Policy Studies. This project was carried out by the OTB in cooperation with the School of the Built Environment of the De Montfort University in Leicester (UK). This cooperation forms part of the Centre for Comparative Housing Research.     

Private rented housing in France

This paper reviews the evolution of the French private rented housing sector. It traces post-war policy developments, putting the specific tenure in a wide housing market context. The paper reviews France’s intricate system of personal and property—oriented housing subsidies, and assesses their demand and supply side repercussions. Discussion of the general post-war decline in private rented housing as a means of housing consumption is situated in the evolution of the national housing system, and the paper alludes to some key regional and local differentiations. The paper discusses the market contexts for attempts to revitalise the sector, concluding that broad fiscal measures are likely to have greater impact than rent decontrol. Madhu Satsangi is Lecturer in Housing Studies at the School of Planning and Housing, Edinburgh College of Art/Heriot-Watt University. Madhu has researched housing markets, voluntary and private-sector housing finance and housing management issues.     

Decline and depression: the impact of the global economic crisis on housing markets in two post-socialist states

The goal of this paper is to outline the main factors influencing the diverse consequences of the global economic crisis on housing and mortgage markets in two post-socialist economies—the Czech Republic and Hungary. In the former there was a mild decline of markets while in the latter there has been a depression of markets. The paper also contributes to the convergence and divergence debate on housing policies in Europe. In the last two decades the post-socialist states have moved toward a market-based housing system (a convergence trend), but substantial differences have simultaneously emerged in tenure structure, housing finance institutions and housing policies (divergence trends). The Czech Republic and Hungary have introduced efficient market reforms in their economy but they have followed different paths in reforming their housing systems. This article shows that divergence in housing systems explains some of the differences in the impact of the global economic crisis on the housing and mortgage markets. However, the article concludes that housing policy responses to the impact of the global economic crisis on housing markets may on balance reinforce convergence trends.     

Social housing investment: Housing policy and finance in the UK and the Netherlands, 1970–1992

Levels of social housing investment in the UK and the Netherlands are considered for the period 1970–1992. The changing housing policies and the developing structures of social housing finance are analysed. These factors have contributed to the decline in social housing construction in the UK and the Netherlands. In particular, the desire of governments in both countries to cut public capital expenditure on housing and increase the role of private, capital in new construction reduced the output during the 1980s. In the UK, a tight monetarist policy was adopted with the aim of keeping inflation down. This can be seen as a major cause of declining levels of public expenditure on housing production. In the Netherlands, a more significant role, compared to the UK, seems to have been played by developments on the housing market, especially the real estate crisis in 1978–1982. In both countries, the outlook for investment in social housing is gloomy Hugo Priemus hold the chair in housing at Delft Unviersity of Technology, and he is managing director of OTB Research Institute for Policy and Technology Jacqueline Smith is research assistant at the School of the Built Environment, De Montfort University, Leicester, (UK). Both cooperate in the Centre for Comparative Housing Research, a joint venture between the School of the Built Environment and OTB.     

Economics,politics, and housing finance

Some recent work in housing research seems to downplay the role of politics in forming the content of housing policy. Building on the “power resources” and “state autonomy” approaches developed in welfare state research, this article outlines an explanatory framework including ideological and constituent factors most important to policy choice, as well as such institutional factors which may hamper or help policy choice. Using the Swedish debate over the 1984 housing tax proposal, it is shown that parties on each side of the capital‐labour divide recommend policy alternatives which are (a) in line with their ideological preferences, and (b) conducive to satisfying the perceived demands of the parties’ main constituencies. It is concluded that while economic factors may initiate policy action, ideological, political, and institutional factors are decisive for the content of such action.     

Affordable housing finance companies in India: how do they ‘differently’ serve the underserved?

Abstract

Over the years, the importance of access to affordable finance has inevitably been recognized as a critical component of developing the third world. Against the backdrop of huge under-penetration of the housing finance sector in India, this study reflects on the functioning of Affordable Housing Finance Companies (AHFCs), which are among the important stakeholders providing affordable housing loans to the low-income segment households. However, the process through which these new entrants have been able to down-market housing finance remains a black box till date. In light of this research gap, this study proposes a conceptual model that succinctly captures the business process of AHFCs across three main dimensions: Outreach Approach, Lending and Underwriting Practices and Risk Management Interventions. This model reflects on the kaleidoscope of process innovations that the AHFCs have embraced to cater to the housing finance needs of the low-income customers, while achieving profitability and social impact.     

Strengthening housing finance in emerging markets: the savings and credit cooperative organisation (SACCO) model in Kenya

Abstract

Savings have long been an essential source of funding for credit. Whether in Europe, North America, Africa, Asia or Latin America, community-based financial institutions have relied on deposits to make financial services accessible to moderate-income borrowers. Despite the foundational role savings and loans have had in financial sector development, emerging markets have largely overlooked the important role these institutions can have in providing shelter credit in their own contexts. Savings and Credit Cooperative Organisations (SACCOs) in the Republic of Kenya illustrate the potential model for deposit-based lending to deliver housing finance for many of the country’s underserved prospective borrowers. This study draws upon the experiences of several savings and loan associations in the industrialized world with applications towards improving the Kenyan SACCO model that provides the most extensive credit union loans on the African continent. The article concludes community finance institutions merit strong consideration towards helping overcome the housing finance sector underdevelopment too often experienced in the developing world.     

New Zealand housing policy: Continuities and changes

The article reviews the development of New Zealand's housing policy from the early years of the present century when the foundations were laid for an interventionist social democratic‐style housing policy. This policy has increasingly come under pressure through changes within New Zealand's internal and external economy particularly during the 70s. In this decade and in the early 80s changes took place in the pattern of house building, the costs of construction, land and finance; leading to rapid escalations in prices and a growing problem of affordability. The change of Government in 1984 and the initiation of new policies by the Labour administration have produced a radical restructuring of the housing sector removing many of its protections through the de‐regulation of the financial market. The initial results have been rapidly rising interest rates together with shifts in patterns of building and in investments within financial institutions. These changes have led to a sharpening of divisions between those who are already owner occupiers and other householders and have exacerbated further the problem of housing affordability. The article concludes with some speculation as to the likely social and political consequences of these changes in macro‐economic policy.     

Housing finance for lower income urban households in Zimbabwe

Housing finance systems in developing countries have been the subject of considerable international agency research and lending attention in recent years. The lack of availability of finance for public sector housing programmes and for the purchase of construction of housing by all income groups in urban areas is typically a major constraint on the ability of supply to meet demand. However, national efforts have often not dealt systematically with the housing finance system as a whole. The housing finance system in Zimbabwe is described and critically analysed in this paper, paying particular attention to the provision of funds for local authority housing programmes for low income residents, the place of housing finance institutions in the national finance system, the ability of the building societies to attract savings, and their lending programmes. The results of government measures to transfer responsibility for lending to low‐income households from local authorities to the building societies since the mid‐1980s are evaluated. It is concluded that Zimbabwe has an unusually well‐developed financial sector and housing finance system for a recently independent developing country. Although this evolved to meet the needs of the settler population, the extension of its activities into lending for low‐income aided self‐help housing was successful, within limits. However, events of the early 1990s demonstrate the vulnerability of such a system to the changes accompanying liberalisation. Suggestions are made for further possible reforms and the importance of monitoring the effects of economic liberalisation on the system and its beneficiaries stressed.     

Financing social housing without guarantee: An English case study

The paper examines the way that the market for private finance for social housing has matured over the eight years since its introduction. It reports on two surveys of private lenders in 1993/94 and 1996 respectively which show how the range of lenders has increased, the different approaches that particular categories of lenders have for evaluating financial viability, and the changing terms and conditions on which loans are available. The results of the surveys suggest that the market has become more competitive, with falling margins and greater consistency among lenders' approaches to evaluating the financial strengths of housing associations. There is, however, concern that lenders may be offering such good terms because of the lack of other business in recession but also because the regulatory role of the Housing Corporation is seen as protecting lenders so that fundamental market risks do not have to be fully evaluated.     

Value for money: Quality and price of land for social housing in the Netherlands

The Dutch take pride in their policy on housing and the development of urban land. After the Second World War, the Housing Act—dating from 1901—was elaborated into specific rules for physical planning and a system of subsidizing the production and management of a large number of social rented dwellings. The effectiveness of the Dutch approach was based upon the synergy of state interventions in physical planning, housing and land policy. This article analyses the performance of this system in two respects. Firstly, it looks at how the system affected the influence of prices of virgin land and of land development costs on decisions in physical planning, and what effect it had on prices of serviced land for social housing. This section is based on an analysis of Dutch land policy and the resulting land prices for housing over the entire post-war period. Secondly, this article considers what the Dutch system contributed to social integration in Dutch cities, and whether it gave lower—income groups access to locations with better quality than the free market would have offered. This second part of the study is based on empirical data on the socio-spatial development of The Hague and its region. Regarding the existing English literature on the successes of Dutch policy, the author suggests a more carefully balanced appraisal. This leads to some points for a research agenda for land policy in the Netherlands, given the rapid shift to marketled production in Dutch housing.     

Historicizing housing typologies: beyond welfare state regimes and varieties of residential capitalism

Abstract

Comparative housing scholars have, for many years now, imported typologies from non-housing spheres to explain housing phenomena. Notably, approaches attempting to account for divergent housing tenure patterns and trends have frequently been organized around typologies based on the assumption that a causal relationship exists between homeownership rates and the type of welfare regime or, more recently, the variety of residential capitalism a country exhibits. While these housing-welfare regime approaches have provided important research tools, we argue that the typologies they generate represent cross-sectional snapshots which offer little enduring cogency. Based on long-run data, we show that the postulated associations between homeownership, welfare and mortgage debt are historically contingent. This paper makes the case for employing historicized typologies, proposing a country-based typology linking historical housing finance system trajectories to urban form and tenure, with regional dimensions. We argue the need for typologies which can accommodate longitudinal, path-dependent dimensions, both within and between countries.     

Steering local housing production: evaluating the performance of governance structures

This paper presents an analytical framework that allows us to evaluate the performance of dynamic governance structures. In housing development processes, governance structures—markets, hierarchies and network or relational structures—change as the process proceeds, and so do the goals that are set by all stakeholders, including local authorities. A framework for evaluation is set out that takes account of this temporal component. It is applied empirically to three case studies in the city of Arnhem (The Netherlands). The paper concludes that the effectiveness of steering housing production by local authorities depends on choosing appropriate governance structures, setting realistic goals, and a local authority that acts accordingly. Many of the choices with regard to goals and governance structures are not made autonomously but are structured by the spatial and institutional context in which they operate. A systematic evaluation of the performance of governance structures, within their context, could improve local government’s capacity to steer housing production.

A housing allowance for the UK? Preconditions for an income‐related housing subsidy

This paper complements the policy focus of Kemp (1994) who addresses the options for housing benefit reform in the UK. By using as general a framework as possible to consider the basic choices, it is apparent that a move to an ex ante form of allowance, can, under most circumstances, be considered to be beneficial—provided that complementary policies evolve alongside changes to personal housing subsidies. It is also clear that levels of support, the degree of progressivity and of targeting cannot be fully answered with theorising by economists. There are fundamental issues concerning just at what level adequate social security provision should be in a modern economy. Personal housing subsidies are vital to low‐income housing consumption and are the core of the UK's housing finance system. It is all the more important, therefore, that the vast resources spent on housing allowances are on schemes which are generally considered efficient and fair.     

The UK mortgage market: responding to volatility

The UK housing finance system is still recovering from the credit and financial crisis of 2007–2008. Some features of the system have made it particularly vulnerable to this crisis, notably the extent to which lenders have been reliant on the money markets and securitisation to enable them to lend and the generosity of loan conditions during the boom period, especially after 2005. Other features have helped the system to weather the crisis—notably the relatively low rate of transactions and the prevalence of variable rate and tracker mortgages, which meant that many existing borrowers saw their interest payments fall. At the same time the prime objective of the mortgage market—supporting sustainable owner-occupation—has been undermined as first-time buyers have found it more and more difficult to obtain mortgage funding. The objective of this paper is to assess the robustness of the UK housing finance system not only in the context of the current crisis but also in comparison with earlier crises. We discuss the fundamental issues of volatility and longer-term house price developments both before and after liberalisation. To address these issues the paper first looks at the history of housing market volatility, then at the details of the period since 2007 and finally at future prospects.     

The distribution of housing wealth in 16 European countries: accounting for institutional differences

Housing wealth is the largest source of household wealth, but we know little about the distribution of housing wealth and how institutions have shaped this distribution. Subsidies for homeownership, privatisation of social housing and mortgage finance liberalisation are likely to have influenced the distribution of housing wealth in recent decades. To examine their impact, we describe housing wealth inequalities across occupational classes for two birth cohorts aged fifty and older. The analysis is conducted across 16 European countries with divergent welfare states and housing systems using the fourth wave of the survey of health, ageing and retirement in Europe (SHARE; 2011/2012). Our results indicate that the expansion of homeownership in a market-based housing system is associated with a more unequal distribution of housing wealth across occupational classes, as an increasing number of ‘marginal’ owners are drawn into precarious homeownership. Such a pattern is not found in housing wealth accumulation regimes with a less market-based provision of housing. When the state or the family drive homeownership expansion, a de-coupling of labour market income and housing consumption results in a more equal distribution of housing wealth.     

Meeting housing needs through the market: An assessment of housing policies and the supply/demand balance in France and Great Britain

In both Britain and France, for the last 15 years or so, housing policy has become more market‐orientated. This paper examines what this has meant for the balance between supply and demand and for progress in meeting housing needs. Current projections for how housing needs and the demand/supply balance will develop in the 1990s are also analysed. For each country, the determinants of housing demand, both demographic and economic, and the supply position in both the private and public sectors, are examined. Several common issues are identified: the existence of unmet housing needs, problems of indebtedness, the limits to the expansion of owner occupation, problems of social housing finance, and concerns about the decline of the private rented sector. There are also important differences between the two countries: housing output remains at a higher level in France than in Britain; deregulation of housing finance has gone further in Britain than in France; and in France there remains a greater recognition by government that housing is a national responsibility. But in both countries, the ‘marketisation’ of housing policy has meant that housing outcomes have become more dependent on factors external to the housing system.