2022
Alice Pittini, Dara Turnbull, Diana Yordanova, and others
This document presents a report on cost-based social rental housing in Europe, highlighting its implementation in three key countries: Austria, Denmark, and Finland. Prepared by Housing Europe and authored by experts in the field, the report offers insights into how these countries have successfully adopted systems that prioritize affordability and sustainability in social housing. The report outlines that cost-based social rental housing systems focus on setting rents based on the actual costs of providing and maintaining housing rather than market rates. This approach helps ensure long-term affordability for residents. In Austria, for example, social housing accounts for 24% of the housing stock, with rents determined at the individual building level and a commitment to maintaining affordability in perpetuity. Denmark and Finland also showcase effective models. Denmark's non-profit housing constitutes 20% of the housing stock, promoting strong tenant democracy and reinvestment of surpluses, while Finland's social housing ranges from 11-20% of its stock, allowing flexibility in rent-setting. Common challenges across these systems include high land costs and the need to balance quality with affordability, yet the report emphasizes the potential for adaptability within different national contexts. In conclusion, the findings illustrate that while each country has tailored the cost-based model to suit its unique environment, the principles of long-term planning and stable funding remain crucial. This report provides valuable lessons for other nations aiming to enhance their affordable housing options through sustainable practices.
Context and Authors: This report was prepared by Housing Europe (the European Federation of Public, Cooperative and Social Housing) in partnership with the Housing Agency of Ireland. It was authored by Alice Pittini, Dara Turnbull, and Diana Yordanova from Housing Europe, with contributions from housing experts in Austria, Denmark and Finland. The report was published in 2022.
Key Findings:
- Cost-based social rental housing systems exist in several European countries, with Austria, Denmark and Finland providing some of the best examples of large-scale implementation.
- In these systems, rents are set based on the actual costs of providing and maintaining the housing, rather than market rates. This helps ensure long-term affordability.
- Austria:
- Social housing makes up 24% of the housing stock
- Provided by Limited-Profit Housing Associations (LPHAs) and municipalities
- Rents based on costs at the individual building/estate level
- After loans are repaid, a fixed "basic rent" (Grundmiete) is charged
- Funding comes from a mix of public loans, bank loans, provider equity, and tenant contributions
- Affordability guaranteed in perpetuity
- Denmark:
- Non-profit housing is 20% of the housing stock
- Provided by over 500 housing associations
- Rents based on costs at the individual building/estate level
- After loans are repaid, rents remain at previous levels with surpluses reinvested
- Funding primarily from mortgage loans with state guarantees and municipal loans
- Strong tenant democracy in governance
- Finland:
- Social housing is 11-20% of stock depending on definition used
- Provided mainly by municipal housing companies
- Rents can be "equalized" across a provider's entire stock
- After 40-year restriction period, homes can leave the social sector but often remain affordable
- Funding from private loans with state guarantees and some public grants
- System allows flexibility in rent-setting
- Common strengths across the three systems:
- Long-term financial sustainability
- Affordability guaranteed for extended periods
- Providing housing for a social mix of residents
- Rents significantly below market rates
- Common challenges:
- High land and construction costs in urban areas
- Balancing affordability with quality standards
- Adapting to changing demographics and housing needs
- The report concludes that while the basic principles are similar, each country has adapted the cost-based model to its own context. This demonstrates that the system can be flexible and tailored to different national circumstances.
- Key takeaways are the importance of long-term planning, stable funding mechanisms, and structures that allow reinvestment of surpluses to reduce reliance on ongoing public funding.
In summary, this report provides a comprehensive overview of how cost-based social rental housing operates in three European countries, offering potential lessons for other nations looking to expand affordable housing options. The systems described demonstrate how social housing can be provided at scale in a financially sustainable way while maintaining long-term affordability.