June 8, 2017
A Basic Necessity
By Marja Elsinga
Professor, Delft University of Technology

Why governments ought to accommodate community-driven solutions to affordable housing.

Societies are urbanizing, cities are growing and land and house prices keep soaring.

These rising prices are an important source of income for owners of residential real estate, tax revenue for local governments and an engine of economic growth for cities. Yet, these inflated prices have also become a brake for the economic, and sustainable, growth of many cities around the world.

Lack of affordable housing often hinders businesses since it is hard to attract employees if they cannot find a decent place to live. Key workers, such as teachers, nurses and emergency responders, are increasingly being priced out of a dwelling in the proximity of their work. Vulnerable people searching for work in cities are at risk of being excluded by soaring housing markets.

Columbia University professor Elliott Sclar once stated: “Cities exist for one reason: they create easy access.” He emphasized the need for transportation: I believe that housing is another such basic need.

Following World War II, policies were developed to make housing affordable for lower and middle income groups. In Europe and the United States, policies were meant to help protect low income households from poverty through such initiatives as public housing, housing subsidies and rent regulation.

However, that’s since changed.

Since the 1990s, financial or “marketized” thinking has hijacked the conversation on housing across most continents. Policies to support affordable housing were considerably reduced. Public housing was considered inefficient and privatization was emphasized. The “right to buy” scheme in Britain is an early example where tenants of public rental dwellings were offered the right to buy their house at a sharply reduced price. The transition of former communist societies, such as China and the countries of Eastern Europe, often included large country-wide sales of public rental houses at reduced prices.

Government support for housing shifted from public provision and regulation toward income dependent housing subsidies that could be spent in the open market.

In the Netherlands, social housing models providing housing to low and middle-income families were considered “false competition” by the European Commission and were shrunk in size and scope. In countries such as Finland and Spain, rent regulation policies were considerably loosened in order to free up local rental markets and increase capital in-flows into the local economy. Top-down affordable housing policies were increasingly considered as a “disturbance of residential real estate markets” by international bodies, such as the Organization for Economic Cooperation and Development, and national governments.

The deregulation of financial markets also emerged as a new way to make mortgages more accessible and affordable. Innovation in mortgage products, such as subprime loans and interest-only mortgages, enabled low-income households to buy a house in the United States and Europe. However, the 2008 global financial crisis demonstrated that “innovations” for low-income households, when coupled with laissez-faire housing markets, do not provide sustainable solutions for affordable housing.

As prices soar and it becomes harder to get a mortgage, it becomes more necessary, and at the same time more expensive, to provide housing subsidies. High pressure on government budgets therefore become hot topics of political debate!

Since the early 2000s, the idea of a “big society” is often brought up as an alternative solution to solving governance issues in Europe. Initially a libertarian idea, it has been embraced by progressive parties as a way to take power away from politicians and hand it to the citizenry. It includes less top-down government policies in solving problems and more institutional and informal room for citizens to find local, community-driven solutions to issues such as affordable housing.

When market and government solutions fail, people are forced to find their own solutions outside of the market. Community-driven solutions for affordable housing are emerging all over the world – including housing co-operatives occupying vacant dwellings in Spain, informal “gecekondus” communities in Turkey and “small property housing” in China. While such solutions are often considered illegal and undesirable in a strict market sense, in practice they are often accepted because, for many people, they provide the only roof over their head.

A second strand of solutions comes from innovations in technology and design – think “micro” or tiny housing. New technology for small and affordable zero-energy housing is a novel way to ensure that a home is more affordable by reducing energy costs. However, these solutions will require adjustment of building codes.

Thirdly, finding creative ways to use dwellings as a source of income is another way to make housing more “affordable.” People can create additional income by letting rooms in their homes to students and tourists, and thus reducing housing expenses. Airbnb is a typical and worldwide example; however, it became too successful and harms the liveability in particular of tourist cities. Citizens complain about the unrelenting tide of tourists clogging their once-quiet neighbourhoods. Moreover, when investors buy dwellings with the implicit intention of renting them on Airbnb, it reduces the amount of available dwelling space for local residents.

Innovative housing solutions will require creativity from both people and companies, but even more so from our governments. It is the challenge to find a balance between removing regulations that hinder innovation and introducing regulations that address negative market side-effects. Governments should be more responsive to change and accommodate localized, community-driven solutions to affordable housing by proper regulations and, if necessary, financial support. The basic right to housing must come before everything else.

Marja ElsingaMarja Elsinga is Professor of Housing Institutions & Governance at Delft University of Technology. She is an expert in comparative housing research and has years of experience in leading international and interdisciplinary teams. She is also lectures on housing issues for the School for Architecture and the Built Environment in Delft University of Technology as well as in the College of Architecture and Urban Planning at Tongji University in Shanghai.