International measures to channel investment towards affordable rental housing: Austrian case study
Introduction:
Encouraging an adequate flow of investment into the supply of affordable housing in Australia is a major challenge for all governments and for the housing industry. This research project aims to inform the development of policies, institutions and instruments that could promote reliable levels of investment at sufficient volume to address the need for affordable housing by examining a variety of models that have been used successfully by international governments for that purpose. The project is being undertaken in two stages:
1. Analysis of a variety of mechanisms that are being used successfully to attract private investment towards affordable rental housing in the Netherlands, France, UK, Switzerland, Austria and the US.
2. In depth case studies of the design, operation and performance of the Austrian and UK models.
FINANCING AFFORDABLE RENTAL HOUSING:
A supply orientated strategy:
In Austria’s cost rent regime, affordability is produced by reducing the cost of housing supply and does not heavily rely on demand side assistance to reduce rents. Critical in achieving is well regulated limited profit organizations building cost capped modest size projects (150 square metres). Demand assistance currently plays a modest role in Austrian affordability. It is available for those receiving social security in social and (more recently) private rental housing. A second form of assistance may also be available depending on the type of dwellings occupied and varies across provinces.
Components which finance supply:
Austrian affordable rental housing finance consists of a number of different layers. As the funding contribution varies in scale, a typical project is difficult to specify. Nevertheless, the volume of conditional public loans has a strong influence on the volume of affordable rental dwellings supplied. Adjustments to subsidy schemes are closely monitored by developers of rental housing. Tenant equity has become more important to GBV developers over the past 15 years and plays an increasing role in their development strategies.
Public loans and subsidies:
Housing budgets are endorsed for five years by agreements between the Länder and the Federal Government. Nearly 75 per cent of the total budget is refinanced from the federal authority with the remainder covered by regional sources. These include the repayment from public loans, certain local duties and, in case of strong demand, the Länder makes a direct contribution from its own budget. In times of excess demand, the Länder authorities adjust the housing assistance budget to the expected demand.
Private sources of funding:
Private finance, assisted by the establishment of the tax-privileged bond finance circuit delivered by nominated banks, has been targeted to limit profit cost affordable rental housing developments (LPHA) since 1993. The use of tenant equity to finance projects increased over the past two decades in more expensive cooperative housing developments. There have also been broadly unpopular experiments involving the privatization of public housing. However, strong LPHA regulations, concerning the tie up of housing assets and political opposition to privatization have mitigated against further transfer of social stock out of the public sector.
Conclusion:
We recommend a number of foundations or pillars that need to be consolidated. First, an established and financially sound social/affordable housing sector, which not only targets low-income tenants but is open to a mix of household incomes, is socially accepted and inclusive with appropriate subsidies for income constrained households. Second, a national agency or federation will be required to accredit, audit and regulate the affordable housing sector, and promote its financial continuity and credit worthiness. Third, there must be a willingness among long-term institutional investors to invest in the sector, which implies adequate returns to investors and financial viability for providers.
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