Challenge the future

DelftUniversity ofTechnology

The Dutch business model in social renting:

25 September 2014 – Brazil/EU Dialogue seminar, LSE, London

Marietta Haffner OTB – Research for the Built Environment / TU Delft

A historic perspective

2Social housing in the Netherlands |

Dutch social rental sector – biggest

Haffner et al. 2012 (diverse sources, most recent year)

0%10%20%30%40%50%60%70%80%90%

100%

Social renting Other Owner-occupation Private renting

3Dutch business model in social renting

Structure

1. History -1990s in a nutshell2. Revolving fund business model3. Institutional landscape4. Ingredients to remember

4Dutch business model in social renting

From private initiative…

… to “extension of government”•Roots in 19th century civil society •Providing housing for workers, not the most vulnerable•State involvement: Housing Act of 1901•Government influence increased in the 20th century•Social landlords transformed into semi-public institutions with strong financial and hierarchical ties with central government up until the 1980s

… towards independence•Decentralisation in the 1980s and 1990s•1995, cancellation of outstanding government loans to social landlords in exchange for future owed supply subsidies

Financial independence and social entrepreneurship

5Dutch business model in social renting

Towards financial independence

Government loans: social renting

Supply subsidies: renting

Rent control:

rental sector

GovernmentGuarantee: social renting

Housing allowance:rental sector

1945-1960

++ +++ +++

60s + +++ +++ +

70s + ++ ++ + +

80s + + ++ + ++

90s + ++ ++

00s + ++ ++

6Dutch business model in social renting

Towards social entrepreneurship

Housing associations (HAs)

•are private registered organizations with a public task (legal status)

that

•operate within central government framework

•operate in the interest of housing

•should re-invest in social housing any profits made (non-profit)

7Dutch business model in social renting

Structure1. History2. Revolving fund business model3. Institutional landscape4. Ingredients to remember

8Dutch business model in social renting

Rent income

Housing sale revenues

New affordable housing

Community investments

Revolving Fund Principle

Housing refurbishment

9Dutch business model in social renting

Asset management

Sales

•About 15 000 sales per year in the period 2007-2010

Intermediate tenure

•Sector initiative•Instrument to create mixed neighbourhoods•Risk of deterioration is risk for housing association (HA)•Sold dwellings remain tied to housing association• HA guarantees to buy back the dwelling• HA shares value gain/loss• HA can then invest in deteriorated neighbourhood

10Dutch business model in social renting

Structure

1. History2. Revolving fund business model3. Institutional landscape4. Ingredients to remember

11Dutch business model in social renting

Housing Housing associationsassociations

GovernmenGovernmentt

Local Local authoritiesauthorities

Tenants

Housing allowance

Rents

BanksBanks

CentralCentral FundFund

WSWWSW

Loans

Guarantee

Subsidy

Performance agreementsRegulation

12Dutch business model in social renting

Social housing governance

•Tasks

•Supervision by ministry

•Performance agreements between housing associations and local authorities

•Self-regulation

• Governance code

• External performance assessments

•Tenant Participation Act

13Dutch business model in social renting

Social housing finance

Housing associationHousing association BankBank

Social Housing Guarantee Fund (WSW)Social Housing Guarantee Fund (WSW)

Guarantee bynational and local governments

Guarantee bynational and local governments

Triple A or AA+ credit ratingContribution

LoanLoan

Central Housing Fund (CFV)Central Housing Fund (CFV)

14Dutch business model in social renting

Bank loans

Mainly provided by two government-related banks:

1. Bank Nederlandse Gemeente (BNG)

2. Nederlandse Waterschapsbank

Not a closed financial circuit

15Dutch business model in social renting

Central Housing Fund (CFV)

Government agency

which

•supervises the financial viability of housing associations

•can order remedial actions from housing associations if they run into financial difficulties

•provides additional financial support to housing associations while they implement remedial actions

16Dutch business model in social renting

WSW and its guaranty structure

Primary security:Housing associations

Secondary security:WSW

Tertiary security:State and municipalities

17Dutch business model in social renting

Structure

1. History2. Revolving fund business model3. Institutional landscape4. Social renting

ingredients to remember

18Dutch business model in social renting

Social entrepreneurship– what went wrong?

Loss societal support

because of

•Sideline activities• better financial position allowed for taking on more

tasks•Fraud and mismanagement (often in sidelines)

• Supervision not strong enough• Self-regulation did not work

•Towards market rents •Loss of social basis for the societal democratic ideal for a broad ‘social’ rental sector

19Dutch business model in social renting

Social entrepreneurship– what may be worth remembering?

•Cooperation for achieving public task between state and non-profit organizations to realize

•Benefits created by revolving fund principle involving dwelling sale, dwelling management, new affordable housing, maintenance and refurbishment of affordable housing, community investments, including the neighborhood

•Realization of investment programs for energy efficiency

•Financial safety net created by guarantee structure

•Development of skills in social management and allocation

20Dutch business model in social renting

Thank you!