The British Government is this week floating a new policy initiative to create affordable housing, with, for the first time for a Conservative government, an emphasis on renting rather than buying.
But all governments wishing to meet the demand for affordable homes could look to Germany and Vienna for inspiration, where developer competitions are delivering unprecedented results at scale by building communities, not just houses – and addressing social problems at the same time.
The scale of the problem
According to pollsters Ipsos Mori, voters now consider housing to be one of the six most important issues facing Britain today, just behind poverty and inequality. But without urgent and dramatic action, the government will not achieve its target to build one million new homes by 2020.
That would mean building 174,000 homes each year, but even this target is considered inadequate. The House of Lords’ Select Committee on Economic Affairs said last July that at least 300,000 new homes a year are needed.
The situation is reminiscent of that in parts of Australia, where, development lobby groups argue that the supply of housing be addressed as a priority. Real Estate Institute of Australia president Malcolm Gunning has also urged the federal government to “show leadership in addressing housing affordability by taking a co-ordinated and holistic approach of all levels of government in objectively addressing all property taxes”, especially stamp duty, which it calls one of the “most inefficient taxes levied in Australia”.
In both the UK and Australia, the government is facing criticism from the opposition on this topic. In Labour leader Jeremy Corbyn’s words, the rental market is “incapable of giving people the security they need”.
“The private rented market is so expensive that it means many poorer, middle-income, working-class families are getting moved out.”
The new British policy, described in a white paper called Help to Buy, aims to encourage developers to build more affordable homes for rent. “Affordable” is defined by housing minister Gavin Barwell as at least 20 per cent below the market rate. Local governments will be expected to play a part.
Rico Wojtulewicz, policy advisor at the House Builders Association, which represents small and medium-sized house builders, commented that small and medium sized building companies are better able to build these kind of homes, not volume house builders.
“Concentrating too much on volume house-building, as we’ve seen in the last decade, is problematic – not just for supply, but the type of supply,” he said.
Germany versus England – Germany wins
According to another think tank, IPPR, England can learn from Germany in areas of tenancy security, controls on cost and tenant representation.
German tenants enjoy strong security of tenure. Most tenancies are indefinite and only in very limited circumstances can landlords evict tenants. But in England, the assured shorthold tenancy is 6–12 months as standard, and landlords can evict tenants at the end of the initial contract period without justification.
There’s an extra benefit for longer-term tenancies for everyone: they act as a natural brake on rising housing costs. That’s because they give landlords and letting agents fewer opportunities to increase tenant rents.
In Germany only 23 per cent of renting households pay over 40 per cent of their income towards housing – much lower than in the UK where one third of tenants face this burden.
Perhaps voting power matters in the battle to win affordable housing: tenants in the German private rented sector comprise 40 per cent of households compared to just 19 per cent (4.3 million) of English households.
Baugruppen – working co-operatively
Germany’s baugruppen community housing model has seen much success. In Berlin, for example, 5000 homes – 15 per cent of the city’s new housing provision – is now being built every year in this revolution led by local communities with help from supportive local councils.
The R50 Baugruppen cohousing project in Berlin, for example, was designed to respond to complex issues in the city’s housing market and to demonstrate how people can act as developers of their own homes.
At The Fifth Estate we have described baugruppen as “the next step to the growing Nightingale Model, which involves architects and impact investors as developers, with a 15 per cent cap on profit”, and how a scheme is developing in Perth.
1000 examples in community-led housing
But this architect-tenant-led approach isn’t the only one possible. In its report 1001 co-operative and community-led homes, the British Confederation of Cooperative Housing lists numerous case studies of housing co-ops and mutual housing schemes, illustrating the variety of schemes that are possible: some provide housing to rent, some for lease, some for sale and some in between.
While some have been initiated by grassroots communities, others have been developed by local councils, housing associations or other bodies such as social enterprises. Most, but not all, involve partnerships, and some are developed by people intending to live in the homes and others by communities to house people already living in their community. Not all receive grant funding.
As in many cities around the world, one of the biggest challenges for social housing in Vienna, Austria, is population increase. With around 20,000 or more people a year requiring homes, it needs to build about 5000 new ones every year.
To address this it deploys a particular type of baugruppen, where a system of competitive bidding on specific development sites delivers very interesting results.
Bids from developers are scored on criteria of social sustainability. These criteria include architectural quality, economic aspects, ecological quality, community building and tenant participation.
According to Dr Richard Lang of the Housing and Communities Research Group at the University of Birmingham, the benefits from this approach are better design of communal facilities, a culture of cooperation among residents and stakeholders, and greater professionalism in community development.
These developer competitions leverage the potential of co-operative principles for affordable housing, Lang argues. He says that local authorities can support individual baugruppen projects by offering access to cheap land, and this model can be applied anywhere, regardless of financial scope of a local authority.
“My research has identified that a key factor in success is to develop a strategic partnership between the local authority and larger (non-profit) housing providers,” he says.
Imagine this: a Participation Statute for Tenants
Vienna is able to design its own housing laws, including its own subsidy system. The story goes back to 1989 when it set up a Participation Statute for Tenants, and followed this in 1995 when the social housing department began a new kind of competition for developers of housing in order to raise planning and ecological quality in large volume housing construction without incurring higher production costs and rents.
In 2005, a fourth pillar was added, that of “social sustainability”.
The city of Vienna buys and redevelops sites and sells them to non-profit housing developers via this competitive tendering process.
The scheme “so.vie.so”, located in the Sonnwendviertel neighbourhood close to the new Hauptbahnhof, is an entirely new neighbourhood, mainly consisting of subsidised housing schemes (5000 homes for about 13,000 residents between 2012 and 2019) but also including commercial and shopping areas as well as schools and nurseries.
It consists of 111 subsidised rented apartments, communal facilities of different size, shared greenspace with neighbouring housing schemes and spaces for small businesses.
There is community coaching to sharpen awareness for residents engaged in planning and management
A large housing co-op provides opportunities for residents in the planning process and in the on-going management. Well before the actual completion of the scheme the future tenants engage in externally facilitated “community coaching” to sharpen their awareness. They get to know their neighbours’ needs and interests and become involved in working groups on particular topics, such as (rooftop) gardening or fitness classes.
Residents collaborate on planning their communal spaces such as gym, workshop, bicycle and buggy storage and library, roof garden and communal meeting room.
As the participatory consultants gradually move away, the group takes over tasks such as maintaining the communication processes, organising and holding regular meetings to decide on the allocation and use of funds or continuous activities.
To join a scheme there is an initial, one-off deposit which goes towards the land and construction costs, usually between 15,000 and 30,000 Euros for a medium sized to large flat. (The higher the initial contribution, the lower the monthly rent). At the end of the tenancy, this deposit is paid back.
Some co-op schemes offer buy-out options to tenants.
High earners are discouraged with a ceiling for tenant salaries of around 44,000 Euros after tax – which does include most working people living in Vienna.
The “So.Vie.So” scheme is in contrast to smaller scale, resident-led baugruppen projects whose residents play a greater role in design and management. Dr Lang says that the “So.Vie.So” model has a better chance of being mainstreamed.
An analysis of 18 projects that have been developed using this competition’s has concluded that the “Social Sustainability” criterion does not significantly drive up costs.
Financing mainly comes from direct housing subsidies, which are secured by the large housing co-operative in the developer competition.
In return for the grant, the provider guarantees affordable rents below market level and high design quality.
The rents are fixed for 10 years and existing rent contracts can be extended beyond then.
Planning changes – those that meet the criteria can be waved through
The projects described by BCCH and Dr Lang have already happened, but some believe that this type of project cannot mainstream without a modification of the planning system.
The Centre for Policy Studies think tank has just issued its own policy paper, Housing: Now Is The Time To Seize The Opportunity, which urges planning changes in order to speed up the development process to make it easier for developers to get their proposals through the planning system.
It proposes a system that works a bit like building regulations: as long as developers’ plans meet certain criteria they can be waved through.
This, says the CPS, should be complemented by a replacement of the current planning charges by a single, national development charge, say, 20 per cent of the sale value of the development, again to speed up the process by removing the need for protracted negotiation.
The current charges include the Community Infrastructure Levy (which goes towards paying for infrastructure to support the development) and section 106 requirements (which are things developers are supposed to do that are stipulated on a case-by-case basis by local governments to make a development proposal acceptable).
It is hard to see how implementing charges can incentivise developers. The Viennese system is supported by the local government.
The inescapable conclusion from reading all these reports and case studies is that if local governments want to solve their housing crises they must take a more proactive, participatory role and engage not just in house building, but community building.
David Thorpe is the author of a number of books on energy and sustainability. See his website here.