Towards a Housing Solutions Platform

by Ken Gibb

This week I had my first trip to Brussels and participated in a roundtable established by the Friends of Europe to discuss pan-European steps to deliver more affordable housing supply and in particular discuss examples of genuine financing innovative housing solutions found in different member states. This is happening not long after Housing Europe published their 2017 State of Housing in the EU.

This may not sound exactly riveting but it was actually a fascinating day on many levels – how the EU and its different cogs and gears work; how such meetings are organised and conducted; who says what; and, what can one derive from the substance of the discussion. The roundtable was set up as a large square table in classic style with more than 40 folk assembled around it. No break-out sessions or smaller conversations but instead a series of short and some even briefer contributions marshalled by the chair for the best part of 4 hours.

I was one of the first speakers talking about evidence influenced housing policy, what works and the potential value and risks of housing policy transfer or mobility given national institutional differences, contexts and the like. After my bit was over I was able to just sit and listen. There were several very interesting themes running through the day:

  • Housing First was a recurring cross-national motif. There was an excellent presentation by Finland’s Y-Foundation and also by Tom Bennett who runs the Housing First Transition Fund in Glasgow. The Finnish contribution, by Juha Kaakinen, included the nice point that rough sleeping was tackled so effectively in Finland for two reasons – Housing First but also additional affordable/social supply.
  • From the chair in particular, but also around the table, there was much made of the need and potential utility from rigorous economic evaluation of the wider net benefits of preventative housing interventions regarding homelessness and affordable housing supply – critical to making the social, economic, public finance and infrastructure arguments for the wider benefits attached to more and better housing. I thought this also spoke to evaluability assessments which brings stakeholders together before an intervention begins, work through a shared theory of change and decide collectively an agreed evaluation process.
  • Many cities face problems with short term ‘touristic’ letting most notably through Air BnB. There are clearly lessons to learn and share from the experiences of cities like Barcelona and Paris.
  • The growing importance of partnership by public and private sectors with foundations, endowments and philanthropy especially with regard to filling gaps, providing patient capital and supporting the gathering of rigorous evidence.
  • The difference in size, scale and opportunity is of course very important across EU members but this led to an interesting line of discussion that smaller countries like Finland and Scotland were better placed in some respects to experiment and innovate with new and interesting delivery models. The focus on smallness also raises the question of spread and scale of successful projects – this is a challenge colleagues wrestled with in What Works Scotland.

My own wider reflections on the day were threefold: first, finance and subsidy are part of an irreconcilable, irreducible conundrum for low cost housing (its cost can only be reduced via different more or less novel ways of providing and subsidising – equity, land, construction and finance). My Canadian colleague Derek Ballantyne argues that in reality there are few genuine innovations, merely different ways of assembling and packaging these elements but they all involve different ways of subsidising, taxing and profiting from elements of the delivery of new housing and how it is subsequently operated. Ballantyne also concludes that it all comes down in large to political commitment to resource the subsidy, in whatever form it comes.

Second, and related, there are really two choices – first, the size of the macro resource commitment by governments to housing (made up of capital and other finding subsidy, tax breaks, guarantees and personal housing subsidy). Cut the programme and less is possible:  it may force states to divvy up what is left in different ways – spreading shallower subsidy further or focusing on fewer units but with deeper subsidy. Alongside the macro challenge are, second,  the myriad micro housing delivery models which are more or less efficient, cost-effective and/or prone to perversities, unintended consequences and other problems. There was much talk about using public finance devices to lever in private equity participation, though we must watch out for possible moral hazard.

Finally, I was struck listening to the discussion of public funding and subsidy how much of our housing subsidy is actually lost through home owner tax breaks and also inefficient taxation such as transaction taxes rather than, for instance, more efficient recurring taxes on land. I was reminded of Hernando De Soto’s phrase ‘dead capital’ concept that he applied to unused property-based collateral. I wondered if there might be mileage in a new phrase, ‘dead subsidy’ referring to wasted, and often capitalised, housing tax breaks (and of course ‘dead tax’ might also apply to those transaction taxes and their own micro-allocative inefficiencies)?

A little unexpectedly, I found the platform format and discussion rewarding and thought-provoking. This was in no small part down to the efforts of the chair (Dharmedra Kanani) and also the choice of discussants put before us.  I have only mentioned a few of the big ideas circulating yesterday. I am sure we will hear much more from this group in the months and years to come.

 

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