Housing in the European Semester

Country Specific Recommendations 2014

Brussels, 6 June 2014 | Published in Economy, Social

The European Commission has just released its annual Country Specific Recommendations (CSRs) based on the national reform programmes proposed by member states in the Spring 2014.

This is the third time CSRs are produced at EU level, and like in the two previous rounds, this year some countries received recommendations on how to structurally reform their housing markets, while others were suggested to implement some measures which may impact the work of housing providers.

The fact that UK, Sweden and the Netherlands were addressed recommendations calling for significant reform to their housing markets did not come as a surprise, as they already received similar recommendations in 2013. Here’s an abstract of the main housing-focussed recommendations for the 3 countries:

Netherlands: ‘Step up efforts to reform the housing market by accelerating the reduction in mortgage interest tax deductibility, by providing for a more market-oriented pricing mechanism in the rental market, and by further relating rents to household income in the social housing sector. Monitor the effects of the social housing reforms in terms of accessibility and affordability for low-income households. Continue efforts to refocus social housing policies to support households most in need.’

Sweden: ‘[..] allow more market-oriented rent levels by moving away from the utility value system and further liberalising certain segments of the rental market, and greater freedom of contract between individual tenants and landlords. Decrease the length and complexity of the planning and appeal processes, by reducing and merging administrative requirements, harmonising building requirements and standards across municipalities and increasing transparency for land allotment procedures. Encourage municipalities to make their own land available for new housing developments.

UK: ‘Increase the transparency of the use and impact of macro-prudential regulation in respect of the housing sector by the Bank of England's Financial Policy Committee.

Deploy appropriate measures to respond to the rapid increases in property prices in areas that account for a substantial share of economic growth in the United Kingdom, particularly London, for example by adjusting the Help to Buy 2 scheme and mitigate risks related to high mortgage indebtedness. Remove distortions in property taxation by regularly updating the valuation of property and reduce the regressivity of the band and rates within the council tax system. Continue efforts to increase the supply of housing.

Furthermore, according to the Commission, five countries (Belgium, Estonia, Hungary, Latvia, Lithuania) should enhance the energy efficiency of buildings, so as to reach EU objectives for energy and climate change. Others (Austria, Czech Republic, Germany, Italy, Latvia, Slovakia) should shift taxation from labor to property (and environmental) taxes which are considered to be less detrimental to growth. Two countries (Denmark, Finland) were asked to increase efforts to remove barriers to entry and reduce regulatory burden with a view to increasing competition in the construction sector.

The Commission also suggests France should ‘streamline’ family benefits and housing allowances (in the framework of reforms of social security spending with a view to decrease public deficit).

Finally, Portugal should evaluate the impact of reforms implemented in regulation on rental housing which increased contract flexibility and are meant to encourage renovation work.

SABO reacts to recommendations from the European Commission

The European Commission recommended that Sweden should, among other things, moderate household indebtedness and further improve the efficiency of the housing market. The Commission states that Sweden should continue to reform the rent setting system and allow more market oriented rent levels.

“We do not share the analysis of the Commission. The Swedish system is unique and has functioned well over different economic cycles. There is no need to do away with the system; instead it should be improved further. The Swedish Association of Public Housing Companies (SABO), the Swedish Property Federation and the Swedish Union of Tenants have produced a local tripartite cooperation guide for rent setting. More local landlords and associations need to use this guide. We must carry out further work on systematic rent setting in each municipality, particularly in Stockholm, so that rents reflect the values and preferences of tenants,” explains Kurt Eliasson (CEO of SABO and President of CECODHAS Housing Europe).

The Commission also recommends decreasing the length and complexity of the planning and appeal processes and points out that there is limited competition within the Swedish construction sector. SABO agrees on this issue and points out that the federation has been working on reducing construction prices for several years, for instance through framework procurements for the deliveryat low price of ready to let apartment blocks (SABO’s KOMBOHUS and KOMBOHUS Plus).