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HOUSING – or how we pretend to solve a problem without doing it

HOUSING – or how we pretend to solve a problem without doing it

Markus Appenzeller

It does not matter where you go these days. Everywhere, the lack of housing and the un-affordability are high up on the agenda. Platforms, workgroups, task forces, communities, societies, dialogues – about any form of bringing people together is being used to ‘deal with it’. These initiatives write policy advises, white papers, guidelines, rule books, visions, manifestos, master plans or whatever else sounds high level and important. In these papers, they refer to best practice examples: Vienna and Singapore. That’s it, you might think? The answer is yes – almost – unfortunately.

Vienna and Singapore both have models that fundamentally differ from elsewhere. Unlike the liberal approaches present in other cities, they define the rules of play quite differently. This does not mean that there is no market at all, and it’s all socialism or free housing provided by the state, but it means that provision of sufficient housing and its affordability are the key parameters and not profit maximization. On the other hand, if there are no profits that can be made, nobody will invest. So – how do they achieve what others don’t?

In Vienna, the city as one of the main landowners requires every new project to be decided upon in a competitive process. The city defines the brief and developing parties are invited to submit design proposals combined with an economic offer. These briefs typically ask for a very high level of socially rented housing – typically 50% – and the rest being mid-market rents. A jury of experts – both economic and aesthetic – decides which party gets the rights to develop the project. In turn – for the cap in rents that can be realized, the developer gets subsidized loans that significantly reduce the project financing costs. The managed supply and demand also ensures, that the developer does not run big risks when having to find suitable renters.

In Singapore the model is similar, but instead of targeting a rental market, here tenants typically buy their homes – where needed, with subsidized loans. To keep prices affordable, the Singapore government regularly intervenes with restrictions and levies when prices grow too fast.

As these two examples show, it needs a profound regulatory framework and a redefinition of what the housing market is. As long as there is no willingness on a political level, this problem cannot be solved at scale. Instead, we keep ourselves busy with promoting all kinds of models that want to achieve what the two cities do but without changing the market workings: cooperative housing – cutting out the developer, shared ownership – trying to keep things affordable that are not anymore, micro housing – creating affordability by radically downsizing, modular housing – making construction cheaper… But all of them are not structural solutions. They are patches to cover a problem – pretending to solve it. But they don’t. With the next price hike, the next interest rate increase, or the next financial crisis, all these models are in trouble.

Singapore and Vienna show, that it can be done differently if there is a political will. It shows that there is no need to be afraid that nobody will want to invest anymore in developing in cities – if the system offers profits at lower risks. Both cities regularly are on the highest ranks in livability indices and have seen economic prosperity over decades – partially because of the very reason that housing is available and affordable.

Therefore, we better invest our time outside these well-meant platforms, workgroups, task forces, communities, societies, dialogues and put our political leaders under pressure to step out of their market liberal thinking and into a social market model for housing.

by Markus Appenzeller
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