Innovative Arrangements between Public and Private Actors in Affordable Housing (February 2019)

  • Innovative Arrangements between Public and Private Actors in Affordable Housing Provision: Examples from Austria, England and Italy

  • By Gerard van Bortel and Vincent Gruis at Department of Management in the Built Environment, Delft University of Technology (Delft) in a special issue Innovations in Affordable Housing at the Nexus of the Market and the State, on 8 May 2020

  • Abstract:

    • Traditionally, social or public housing has been provided through a variety of actors, such as public agencies (state and local authorities), third-sector organizations (housing associations and foundations), and cooperatives or private investors (supported with state grants).

    • Affordable housing is increasingly developed, financed and managed by a mix of state, third-sector, market and community actors. This 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 forces third-sector housing providers to rely more and more on private finance. The consequence of this is the emergence of various hybrid governance and finance arrangements.

    • This paper discusses innovative hybrid arrangements from Austria, England and Italy, in which governments, private and non-profit actors collaborate to increase the supply of affordable housing.

    • Austria: The so-called Wohnbauinitiative (WBI) of Vienna - subsidy scheme by the municipality of Vienna providing medium-term, low-interest loans and/or cheap building land for housing construction - encourages new construction in the mid-price range, granting financial benefits in exchange for limited-term social obligations by the developers concerning rent levels and access criteria. All rental contracts have to be of an unlimited term, and rental rates will only increase during tenancy with the overall inflation rate. Drawbacks and risks: while limited-profit housing companies have to stick to cost-rents throughout the existence of buildings, commercial developers will be allowed to raise the rent level after 10 years (for new tenants only) to a possibly higher market level, which generates insecurity about affordability on a longer-term. Social targeting is not as strong as in other schemes, since there are no formal income limits, and the often-used obligation of using the home as the main residence is not a precondition in this scheme.

    • Italy: Housing for low-income households in Italy was traditionally provided by regional and local government agencies, and supported by subsidies from the national government, but such fundings were abolished by the end of the 1990s. In 2008, the Italian government introduced an Integrated System of Housing Funds (Sistema Integrato dei Fondi (SIF)) to support “social housing.” This initiative aimed to boost social housing provided by partnerships that included a mix of not-for-profit, private, community and government actors. The Integrated System of Housing Funds, in total, comprises an amount of €2.28 billion, €1 billion of which has been invested by the Cassa depositi e prestiti (a bank closely related to the Italian state), including €140 million by the Ministry of Infrastructure and Transport, and €888 million by banks, insurance companies and pension funds. Drawbacks: The projects mostly focus on lower-middle-income households. The capacity to accommodate for the most vulnerable low-income households is limited.

    • England: Council housing has long been a dormant legacy form of social housing, gradually declining in numbers. But that has been changing, since the local authorities across the UK are looking for innovative models facilitating delivering of affordable homes. The national government has begun to loosen regulatory restrictions in order to allow join ventures between local authorities and housing associations (sometimes multiple housing associations).

    • Conclusion: Hybrid forms discussed in this article can have several benefits - they are often less dependent (costly) on state financial support. Another benefit is the spread of financial risks, tenant empowerment and community development. There are risks, too, particularly to the safeguarding of public housing values such as quality, affordability and allocation to specified target groups. Although governance arrangements mitigate risks on the shorter term, it seems difficult to secure the availability and affordability of housing, as well as maintaining an increased, active involvement of community actors, tenants and market actors, in the long run.

    Keywords: affordable housing; governance, co-production, non-for-profit housing, finance models, innovations