Supply of adequate and affordable homes

More public support needed

Brussels, 30 April 2014 | Published in Economy, Social

Not all EU countries have adequate structures in place to finance the construction or refurbishment of adequate and affordable housing. How to change that? We invite you to join our open discussion on Twitter using #HousingEP14

The situation in brief:

Not all EU countries have adequate structures in place to finance the construction or refurbishment of adequate and affordable housing. Despite different policy frameworks, where these mechanisms do exist they all seek to reduce the cost of capital for investment in housing (and in particular affordable housing). In some countries, it is currently proving difficult to access bank loans or capital markets under reasonable conditions, especially for long term investment which is needed to provide affordable housing.

Our solution:

At the same time, the EIB has for many years been expanding its lending to social housing. The EIB lends either to the public authorities (municipalities, regions, provinces) or to aggregating funders of social housing. A European instrument specifically dedicated to housing issues would give greater leverage to the capital supplied by the EIB by raising funds from other financial institutions, as done by the Council of Europe Development Bank, and from capital markets. It would also enable the establishment of criteria for the selection of projects best suited to the housing sector (in terms of the volume, duration and measurement of the social return on investment).

Furthermore, in countries where social housing is defined as a Service of General Economic Interest (SGEI), the EIB should broaden the pre-condition of 50 per cent public financing. The criteria excludes social housing providers as eligible applicant for EIB programmes like ELENA as although they are subject to public supervision and their activities (to provide adequate housing) are financed partly publicly, the public finance does not amount to 50 per cent.

More generally market finance can be an ally to raise more stable long term resources. For instance, with the Welsh Housing Bond, the UK government commit to put £10 billion in a fund as a guarantee to reduce the cost of issuing a club bond through the Housing Finance Corporation. This would be the cheapest way to raise funds, but the terms and conditions would require landlords to commit a high level of properties as security. There are 19 Welsh housing associations involved. They plan to borrow £140 million to build 1,100 homes. The Welsh Government’s 2016 house building target is 7,500.