Excerpt
Content
1. Introduction
2. Background
2.1. Analysis of the housing policy context
2.2. Review of the German housing policy
3. Housing Policy Problem
3.1. Identification of the housing policy problem
3.2. Identification of the actors and their interests
4. Monitoring and Evaluation of the housing policy
4.1. Definition of the monitored housing policy and its main indicators
4.2. Definition of the German housing policy model and the logical frame
5. Housing policy alternatives Austria and Denmark
5.1. Definition of Housing policy Alternatives of Austria and Denmark
5.2. Specification of the Austrian and Danish housing policy alternatives
5.3. Evaluation and Comparison of the Austrian and Danish policy alternatives
5.4. Selection of the best alternative housing policy aspect
6. Conclusion and housing policy recommendations
Literature
1. Introduction
Affordable housing is a hot topic in today’s realm of public policy debates. Public unwillingness to accept ever increasing rent burdens is growing, especially in the metropolitan centers, giving rise to new social movements demanding and claiming their ‘right to the city’. The analysis at hand is aimed at comparing the German housing policy with policy alternatives from Austria and Denmark with regards to their effectiveness and efficiency in promoting the goal of affordable housing.
Affordable housing is to be understood as a social right, a right to decent accommodation for every citizen of a respective state, i.e. as a means to subsistence. Below, we will further explore what such a social right might encompass. Affordable housing is decidedly not to be understood as a right to the access to capital, i.e. as a means to wealth. A state’s instrument to achieve the goal of affordable housing is its housing policy as defined by Skifter-Andersen as “public initiatives that affect the supply, price and quality of dwellings, together with how they are distributed between households.”1
German housing policy makes for an interesting topic and starting point for our analysis since it is an actively debated and politically contested issue. To give an illustration, in Berlin there are now movements demanding the expropriation of large real estate companies. The demand of expropriation is resonating even within established political parties - a fact unthinkable for the last decades of neoliberal reforms. Furthermore, in recent years there was not only significant activity of newly forming social movements, there were also accompanying legislative efforts to tackle the growing problems associated with unaffordable housing. We will dwell into the details of German housing policy further below.
We choose to compare the German housing policy to the housing policies of two of its neighbors: Austria and Denmark. For such a comparison to be fruitful, the countries and policies compared have to be both sufficiently similar and sufficiently different. On the one hand, the countries are sufficiently similar in that they are all EU member states, have comparable levels of GDP, belong to a similar culture and have comparable home ownership rates (Germany 51.5,
Denmark 60.5, Austria 55.4).2 On the other hand, the countries are sufficiently different with regards to their policies implemented. This will become clear in the analysis to follow.
We will compare the housing policies of those three countries at the time of writing this policy analysis in spring 2020, but to be able to classify the results correctly it must be clear that several of the presented policy aspects were introduced in the countries over a timeframe of several years. For the study at hand the German Federal Government is to be regarded as the client and sponsor of the policy analysis and the recommended change of the policy.
2. Background
2.1. Analysis of the housing policy context
The issue of affordable housing is inherent to all cities worldwide, as cities were invented to live in, but at the same time space was always limited. The housing problem in cities has risen in scope and importance over the last years. It shows that the increased cost of living above employment income is a key problem for more than a third of the citizens in the European Union and explains how the rise in apartment prices in major European cities directly impacts the lives of the residents. Two major trends are visible. On the one hand, vulnerable citizens but also citizens of the middle class are forced to leave the cities and live on the outskirts. On the other hand, the impact of global capital in major cities makes sustainable housing policy difficult for cities.3
2.2. Review of the German housing policy
The German rental policy consists of different pillars. The basic support for tenants there is a housing benefit, which is conditional on household income, amount of people in the household and the actual rent. The maximum amount for a one person household is 630 €.4 Besides that, a rental price brake was introduced in 2015. It determines that when re-letting existing apartments in areas with a tight housing market, the rent may not exceed the local comparative rent by more than ten percent. Whether the housing market is tight is decided by federal states and there are exceptions for newly constructed dwellings and extensive modernizations.5 Additionally, federal states have the competence of legislation on social housing promotion, which leads to the fact, that each federal state has its own program for social housing subsidies. However the federal government supports the federal states through compensation payments in this policy. Most of the federal state programs support housing companies, cooperatives and individual building owners by loans on preferential terms, grants, guarantees or subsidized building land and in return the recipients of funding commit to renting these apartments only to households which have a certificate of eligibility for subsidized housing. This certificate is government-issued for beneficiaries who are not exceeding relevant income limits. These are for example 12.000 € for a one person household and 18.000 € for a two person household. There is an entitlement to the issuance of the certificate if conditions are met, but there is no entitlement to the provision of a corresponding apartment, as the selection of tenants for the social housing flats is carried out solely by landlords.6
3. Housing Policy Problem
3.1. Identification of the housing policy problem
The major German cities are in a growth mode, as the past few years have brought a significant increase in population for many German cities. These developments meant a strong increase in demand on housing markets. The supply of housing, especially affordable housing, could not keep up with this increase for years. The housing markets responded with rising rents.7 Strong price increases can be observed especially in new lettings. The affordability of housing has decreased significantly in recent years. For low-income households in particular, this development, together with decreases in real wages, has led to a higher housing cost burden.8 The chart below shows an example of the development of average rents for new rentals of apartments in multi-family houses in the major German cities, standardized to the year 2005. Rents in Berlin for example rose most strongly by over 40 percent.
Abbildung in dieser Leseprobe nicht enthalten
Figure 1: Development of average rents for new rentals of apartments in multi-family houses in German cities (2005=100)9
These rent increases lead to the circumstance that low-income earners can hardly afford to live in cities. The situation is particularly tense in the four megacities of Berlin, Hamburg, Munich and Cologne. Even if they live as cheaply as possible, they have to spend an average of at least 37 percent of their salary on housing there. But the burden is also high in smaller cities like Freiburg (41 percent), Lüneburg (37 percent) or Greifswald (32 percent).10
The relevance and severity of the problem is shown also by the discussion of this topic in the federal political arena. In the wake of German federal elections in 2013, the problem of the growing housing shortages has landed on the political agenda with the aim of keeping housing affordable for the general population in the future. In 2015 the housing market instrument of the rent brake was introduced to counteract above-average rent increases. However despite the rent brake, there has been no noticeable relaxation of the housing markets since then, so that the public and media are increasingly questioning the effectiveness of the rent brake.11 Studies show that the current policy has especially effects in the upper price segment, where it is having a slowing effect, although the rise in rents is not being halted. So it doesn’t contribute sufficiently to the aim of ensuring affordable housing, especially for the lower income groups.12
Concerning the participation and inclusion of stakeholders in formulating and governing the current rental policy in Germany it must be said, that through strong lobby influence of economic interests in Germany 13 the policy was more focused on the interests of the Real Estate Industry and Construction Industry. As the Tenants Association has its counterpart with the Lessor and Owner association which had similar influence, it couldn’t prevent the more business than consumer friendly policy. Except the rental price break, all elements of the current German rental policy were introduced before 2010 and thus before the time when the rental situation in German cities worsened significantly. As the citizen movements, which want to achieve affordable rents especially for low-income households, weren’t existent or at least had a low coverage, their interests aren’t absorbed in a huge amount of the current rental policy instruments. For the future conceptualization of the German rental policy it will be important to empower the federal governments, as they have enormous influence and importance for the success through their legislative and executive competences in this policy field guaranteed by the German constitution. In addition to that, it will be useful to collaborate with the City and Municipality Association during the development of the new policy to include their expertise. During all stages there should be in addition a consultation with all the remaining associations to include their knowledge and position. This is especially important for the citizen movements to guarantee an acceptance of the policy in the general urban public.
To sum it up, because of the radical change in the rental market in cities, the ineffectiveness of the newly introduced rental price brake and the non-inclusion of currently important stakeholders during the formation of the present rental policy, possible policy alternatives are needed.
3.2. Identification of the actors and their interests
Out of the strong and institutionalized economic lobbyism sector and in addition a quite well structured, broad and active civil society in Germany 14 follows the interest and influence of many different organizations on the success of a possible change of the rental policy. On the one hand, there are public authorities. The most influential and important ones are the governments of the federal states, which have influence on the federal legislative, as they are represented in the ‘Bundesrat’, the Federal Council of Germany. The aims of the federal states’ governments may vary widely, but in general they are at least interested to keep the current support for the social housing construction. Less important but also influential are the German Associations of cities, towns and municipalities. Their aim is especially the economic development of booming cities. Besides that, they are interested in further subsidies for social housing but also fear a stronger burden of expenditure thereby. The last group of public stakeholders consists of the implementing bureaucratic agencies of the changed policy, which have medium influence but a strong importance for the success of the policy change. Their natural aim is to expand their resources and influence. Private stakeholders with moderate influence are the Real Estate Industry and the German Construction Industry Associations. While the Real Estate Association is more focused on opportunities for investment and profit through favorable regulation, the Construction Association is especially keen on a rise of the amount of building permits and less ecological and environmental building regulations. Only some influence has the German Tenants Association, which aims at achieving the lowest possible rents, good quality housing, a strong tenants protection and a stronger role and influence for the tenants association concerning the federal rental policy. Its counterpart, the German Lessor and Owner Association, in contrast is especially interested in an improved earning outlook for the lessors and lobbies against any restrictions to the right to own property. The civil society is represented with the same amount of influence with its different Citizen Movements as for example ‘Right to the City’ or ‘Deutsche Wohnen & Co enteignen (expropriate the Real Estate Industry)’. Those movements are demanding a stronger social and demographic inclusion and diffusion in the rental sector of cities and affordable housing options for all citizens. Lastly, there are the housing cooperatives, which have only a small influence and importance and are asking for more support and favorable regulations for cooperatives.
4. Monitoring and Evaluation of the housing policy
4.1. Definition of the monitored housing policy and its main indicators
The current policy and the policy alternatives will be analyzed according to the following input, output and outcome indicators. As sole input indicator the public budget for housing policy programs in % of GDP is measured, broken down into the support to housing assistance and investment in social housing. As output indicators, we refer to housing stock per 1000 inhabitants, share of socially committed housing under construction, average direct monetary support for housing per inhabitant and social housing stock in % of total housing stock. For a lack of comparable data, we had to exclude output indicators of housing completions per 1000 inhabitants, distribution of income quartiles in social housing and annual economic displacement rate from cities. As outcome indicators, accommodation cost load, rental inflation-adjusted price increase for new-contract-rents, average apartment size, residential construction in % of GDP, housing cost overburden rate15 and severe housing deprivation rate16 will be used. Again, for a lack of comparable data, duration of apartment search had to be excluded as outcome indicator.15
4.2. Definition of the German housing policy model and the logical frame
Germany uses 1.4 % of its GDP for Housing Policy Programs, of which 0.34 % of GDP are spent for housing assistance and 0.08 % for support of social rental housing. Government uses this funds to distribute housing benefits to households according to the criteria of household income, amount of people in the household and actual rent. In addition, federal government gives compensation payments to support federal states with their social housing policies which are focused on giving housing companies, cooperatives and individual building owner loans on preferential terms, grants, guarantees or subsidized building land in return for the creation of social housing. Lastly, federal government monitors the rental price break which regulates the rents in tight housing areas by the ruling that a rent must not exceed the local comparative rent by more than ten percent. This led to an output of a housing stock of 509 apartments per 1000 inhabitants, a housing completions rate of 3.4 apartments per 1000 inhabitants per 16 year and a share of socially committed housing in new construction of 0.9 %, which contributes to a total social housing stock of 2.9 %. The distribution of income quartiles in social housing is clearly defined, as only inhabitants with income limits of 12.000 € for a one person household or 18.000 € for a two person household are allowed to get a social housing flat. Moreover the average direct monetary support for housing assistance per inhabitant is 14 € and the average annual economic displacement rate from cities 4,2 %. This led to an outcome for the citizens of an accommodation cost load of 29.5 %, while for households with higher incomes it is only 17.2 %, for households on the poverty line it is 39.7 %. The inflation-adjusted rental price increase for new-contract-rents for the last 5 years was 22 %, the average apartment size 91.8 m² and the residential construction 6.6 % of the GDP. In total there was a housing cost overburden rate of 14.2 % and a severe housing deprivation Rate of 4.4 %. 17
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1 Skifter-Andersen 2012, p. 104.
2 See Eurostat 2018.
3 Sisternas Tusell, Maria, 2017, p. 1.
4 Federal Ministry of the Interior, Building and Community, 2020, Wohngeld.
5 Institut der deutschen Wirtschaft Köln, 2017, p. 6 f.
6 Federal Ministry of the Interior, Building and Community, 2020, Soziale Wohnraumförderung.
7 Institut der deutschen Wirtschaft Köln, 2017, p. 3.
8 Deutsches Institut für Wirtschaftsforschung Berlin e.V., 2018, p. 4 f.
9 Institut der deutschen Wirtschaft Köln, 2017, p. 4.
10 Zeit Online, 2019.
11 Institut der deutschen Wirtschaft Köln, 2017, p. 3-5.
12 Deutsches Institut für Wirtschaftsforschung Berlin e.V., 2018, p. 5-8.
13 Compare Transparency International Deutschland e. V., 2014.
14 Compare Transparency International Deutschland e. V., 2014.
15 Percentage of the population living in a household where total housing costs represent more than 40% of the total disposable household income.
16 Percentage of the population living in a dwelling which is considered to be overcrowded, while having at the same time at least one housing deprivation measure.
17 The figures for the German policy indicators are taken from Egner, 2018; Salvi et al., 2016 and Lugger et al., 2006.