America faces a major shortage of affordable housing. Nearly half of all renters are paying 30% of their income on rent—or more. And the number of households who are renting is near postwar highs. Meanwhile, private market-focused policies have proven completely inadequate for ameliorating this problem. In this paper, we shall argue that large-scale municipal housing, built and owned by the state, is by far the best option for solving the affordability crisis. In Part I, we will examine the history and policy failures that created the crisis. In Part II, we will make the case for municipal housing.
There is a pressing need for policymakers to consider new approaches for delivering affordable housing. An overreliance on the for-profit private sector has lead to underinvestment in communities which produce less profit—and to state subsidies to developers and landlords, simply to maintain some sense of a social fabric. Today, our housing policy bears a marked resemblance to our healthcare policy: an expensive band-aid over a gaping hole, left by the absence of a public sector alternative.
The international community has increasingly recognized that private-only housing models adopted in the 1970s and 1980s have failed. The recently-elected government in New Zealand has committed to restart the construction of state housing,43 the Scottish Government resumed construction of state housing after 2011,44 and the Labour Party under Jeremy Corbyn has promised to build 100,000 social houses every year if it wins the next election.45 The centre-right Irish government faces mounting criticism from progressive opposition parties for not going further in spending on direct construction of municipal housing.46
The United States is almost alone in the fierce resistance of the overwhelming majority of both its major parties to the involvement of federal and local government in the direct provision of affordable housing. We present below a review of several models from developed countries which may prove informative and helpful to campaigners and policymakers wishing to challenge the political consensus— one built on false premises—and to advocate for the development of sustainable, affordable, high-quality housing for all Americans.
We have broadly sought to examine models which address the flaws and issues with existing housing policy in the United States. To that end, we have selected three jurisdictions whose municipal housing policies have been designed to cater to people of various income levels, rather than just serving the “deserving poor”: Vienna, Finland and Sweden.
The purpose of this section is to establish that municipal housing does not need to be plagued by inefficiency, deterioration, segregation or poor planning. Throughout the world there are examples of all these things evident in both the public and private sectors. It is of course incumbent upon politicians to learn lessons not just from the United States’ own past, but from challenges and failures of other nations too; thus, the section on Sweden will discuss some problems which should be kept in mind while developing a 21st century housing policy.
To this date, the United States has failed to learn from the successes that many countries have experienced in providing affordable, integrated, and well-maintained municipal housing. It is time that changed.
The success of municipal housing when pursued as a policy goal with the necessary political will can be clearly seen in Austria’s capital city, where 3 in 5 residents live in houses owned, built or managed by the municipal government.
Austria is a federal republic, and for the last hundred years the Viennese state government has always been led or controlled by the Social Democratic Party, apart from the fascist period from 1934–45. After the First World War, when the party first took powINTERNATIONAL MODELS VIENNA “Living Side by Side” er, housing became their first priority and they began establishing massive publicly-owned housing complexes called Gemeindebauten or “municipality buildings.” The planners of what became known as “Red Vienna” started from nothing—and built high quality housing developments which are often still in use today.
By 1934, one in ten residents of Vienna lived in publicly-owned housing. The next eleven years, which saw a fascist coup, the annexation of Austria by Hitler, and the devastation of Second World War, took a massive toll on the city. Despite all this, however, when democracy was restored the new state government immediately got back to work on rebuilding social housing infrastructure
Unlike the United States, Austria has never treated municipal housing as an option of last resort or a welfare program exclusively for the poor. No less than 80% of the country’s population is eligible to receive social housing by their income.47 In Vienna, this threshold is about twice the average annual income.48 Welfare recipients, politicians and sports stars live side by side in projects like Alt-Erlaa, which houses approximately 10,000 residents in a visually impressive and spacious community. The municipal government invests in upgrading older properties and in new developments such as smart flats which have sliding partition walls, allowing residents to change the layout of their home in order to give them a unique character.49
In addition to municipal housing, Vienna funds large non-profit housing cooperatives that house almost as many individuals as directly state-owned properties, all under strict conditions set by the government. Consequently, the per-capita living space for Vienna residents rose from 22m2 to 38m2 between 1961 and 2011.
Unlike public housing in the United States, subsidized rents in Vienna are based on the cost of the property and its maintenance. This has ensured a much higher quality of life in publicly-owned housing than exists in the United States, and indeed in much of Europe. The following table shows the various components of rent in a typical Viennese housing project as calculated by cecodhas, the European Social Housing Observatory
The rents are linked to costs over the course of an approximately 35-year maturity period, after which this component falls to a statutory limit. Other components such as utilities, maintenance and repairs increase over time. The rents remain extremely reasonable compared to other major European capital cities, but the small number of residents who are unable to afford rents are covered by the welfare state (though it should be noted that austerity measures adopted after the financial crisis have caused difficulties in meeting costs for some welfare recipients).50
Initial financing for social housing development is primarily accomplished through a combination of public and subsidized private loans: public loans with interest rates between 0 and 2 percent cover an average of 35% of construction and land costs, and bank loans (subsidized through tax incentives so as to ensure interest rates that are 50 basis points lower than ordinary loans) cover an average of 43% of the costs. Much of the remainder is financed through “tenant equity”, a quasi-loan by the prospective tenant. If they cannot afford this contribution a public zero-interest loan is provided to them by the provincial government.51
The Viennese model is attractive insofar as it prevents longterm deterioration of the social housing stock. The upkeep of homes is financed by their residents, who receive social assistance from the welfare state where necessary.
Vienna implements rent controls on many houses, but even those which are exempt from rent controls end up finding that the mass intervention of the state in the supply of housing sets effective caps on market rents, creating a more affordable rental market for everybody, whether renting privately or from the municipal housing system. The Viennese model interacts with the private rental market in a way that functions similarly to American proposals for a robust “public option” in the healthcare market—an initiative supported not just by the most progressive elements in the Democratic Party but by the vast majority of centrist and centre-left politicians.
The Finnish housing system is remarkable for its success in combating a recent international trend of increasing homelessness. In 2008, the Finnish government officially adopted a model known as “Housing First”, which focuses on the provision of permanent supportive housing to long-term homeless individuals. This model has gained some international attention for its considerable success in pushing down the rate of long-term homelessness.
Housing First works by targeting homeless groups with specific needs and providing unconditional housing support to them— much like smaller-scale initiatives undertaken by the Bush and Obama administrations (primarily targeted at those with disabilities). Those programs have seen some success,52 though falling well short of the progress needed to meet Obama’s commitment to end homelessness within ten years.53
What is important to note, however—and what has been ignored by some of the international advocates of this model—is that this program works in tandem with other measures that support those who are not adequately served by existing social housing structures. Before Housing First, the number of homeless people in Finland had already fallen to 8,000 people in 2007 from over 18,000 FINLAND “Diversity of Dwellers” in 1987, when the country first began collecting statistics. Since then, that number has fallen to below 7,000 under the new Housing First program.54 (It is worth noting that Finland uses a considerably broader definition of homelessness than the United States; these figures are not comparable on a cross-national basis.)
Finland’s first postwar housing program established arava, the National Housing Production Board. The board provided low-interest government loans for the construction of housing “for all Finns, not for low-income housing specifically.”55 Now called ARA, it primarily finances the construction of municipally-owned and nonprofit housing through loans, guarantees and interest subsidies while also providing grants for upgrading the energy efficiency of older properties.56