Aibreán Ó Conalláin examines how Austria’s housing model could transform what we think about social housing
Austria experienced one of the weakest recessions in 2008 while Ireland experienced one of the worst. One that is still affecting our housing crisis today.
In the aftermath of the 2008 crash, while the Irish government pursued a policy of austerity where social housing provision came to a halt, in contrast, Austria was able to increase their housing output at little cost to the taxpayer, using a public housing system that serves those on average wages, not just the poor. Could we learn a thing or two from Austria’s housing model?
Dublin is the 6th most expensive city in the world for renters. Whereas Austrians on average spend just 21% of their income on rent. In Ireland that figure is 36% with Dubliners spending up to 64%.
Even with the tighter controls introduced in Rent Pressure Zones in 2019. For a lot of renters, the place they find themselves living in often does not feel like home.
Both rents and house prices have soared, stability for renters is low and we now have a situation where even people on decent wages can no longer afford to get on to the housing market.
Ireland is currently in the choke hold of a housing crisis. In early 2021 there were 61,880 families on the housing list. In 2020 60000 tenants received HAP. That number is likely to grow due to the effects of the pandemic.
Many factors have combined to create an unstable private rental and property market. The potential for speculation, facilitated by loose planning regulations and the availability of credit for the buy to let investment has led to the property bubble and booming house prices.
This combined with the lack of social and affordable housing provision by successive governments has led to an over reliance on the private rental market.
The selling off of existing social housing has also served to worsen the issue.
Two-thirds of social housing built in Ireland since the 1930s onwards has been sold off and have not been replaced.
Professor of Social Policy at UCD and Chair of Housing Finance Agency, Michelle Norris explains: “In Ireland. We have been selling social housing to tenants since the 1930s, and actually the legislation was introduced in 1936. And crucially, we sell the dwellings at a discount from market value. So if you buy your Council house. Currently you can buy it at a discount of between 40 and 60% of the market value. So if the house is worth E200,000, you could buy it for less than half of that price.”
Governments have failed to replenish this housing stock by building social housing and affordable housing. Between 1930-1950 social housing made up 55% of all new housing built. By the end of Q3 of 2021 only 3144 social housing units were delivered by the government. The government also failed to deliver any affordable housing in 2021.
Due to a lack of social housing many young people looking for their first home are pushed into the unregulated private rental sector. With those in lower income brackets placed on supports like House Assistance Payment (HAP), which subsidises people renting within the private rental sector. While 350,000 young adults aged 18-29 still live with their parents.
This has left people in receipt of HAP as well as first time buyers who are unable to afford mortgages trapped in the private rental sector. With the lack of competition from social housing and regulated rent options have caused both rents and house prices to rise.
While many countries in the English speaking world are facing similar issues with housing they are countries that are bucking this trend. One of those countries is Austria.
Austria’s housing system is often looked to as the gold standard for getting the balance between public housing and the private sector right.
Housing scholar Jim Kemeny divided housing systems into unitary and dualist models. Austria’s housing market is considered a unitary system. Unitary systems are defined by a strong not for profit housing sector and a highly regulated private sector.
The public housing sector competes directly with and puts pressure on the private sector and housing market. This competition drives rents and house prices down as residents have a viable alternative to the private rental and housing market.
Ireland and other English-speaking countries such as the UK and the US classed as having a dualist model where the private rental sector and social housing provision operate separately.
Austria’s social housing provision utilised the cost rental model. Cost rental is a way of funding house building whereby the tenant pays rent which funds the cost of building the property. Cost rental accommodation is provided by local authorities and non-for-profit organisations.
The local authorities and non-for-profit housing bodies recoup the cost of building the homes through these rents and any profits are reinvested and used to fund building new social housing. The funding structure also differs from here in Ireland.
Very little of the social housing is sold off. However, Professor Michelle Norris says that in Ireland this system relies on social housing being sold to tenants as councils and government bodies cannot afford to maintain ageing properties.
In Ireland social housing is usually provided by government grants and funding. Housing is considered a lumpy good meaning that it has a high upfront cost. For this reason, the amount of funding that is granted is determined by the state of the government or councils’ finances. Therefore, more housing is built when these bodies are doing well.
However, when there is a shortage of government capital due to a recession there is usually a greater need for social housing due to job losses and the inability to access private finance. This means social housing output is directly tied to the state of the economy.
After the recession in 2008 the government pursued a policy of austerity and a curtailing of government expenditure. As a result, the number of social and affordable homes being built dropped by 92% and has yet to recover.
In 2008 Austria “experienced one of the weakest and shortest recessions”. Professor Michelle Norris argues that the stability in Austria’s housing cushioned the boom and bust that was brought on by the global financial crisis. As well as pursuing a counter cyclical housing provision whereby public housing providers avail of lower interest rates when the economy is depressed.
According to economists like John Maynard Keynes this approach can help create jobs and stimulate the economy. Keynes believed that increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the depression. This approach can be seen in how Austria funds its public housing development.
Austria was able to build public housing counter cyclically or against the direction of economic and business cycles after the 2008 recession due to how they finance public housing. Local authorities and non-profit housing groups use a wider array of finance options than Ireland. Therefore, if the government is short of money they can fall back on other sources of finance.
The majority of the finance is made up by government loans which have to be paid back. Tenants are also required to pay up to 10% of the costs up front. Savings schemes are available for tenants and those who cannot afford to pay are provided with subsidies. The rest of the funding is provided by highly regulated commercial banks which are comparable to building societies here in Ireland.
As well as the finance local government and non-for-profit housing agencies provide from their own reserves. Overall, the cost of providing social housing is practically zero for the taxpayer.
A cost rental model could lower costs of social housing provision. As the cost is being paid by the tenant it means that there is more transparency. As a result, it allows social housing provision to be more efficient.
There are negative associations with social housing here in Ireland. This is mainly due to how many social housing developments were allowed to fall into decline. Michelle says: “In some ways our system is dependent
on the social housing being sold off. There’s no real money to maintain houses over the long term, and after you have a house for 2030 years, some major components need replacing. You may need to replace the windows. You need to replace the lifts and parking blocks. You need to replace the heating, the wiring, et cetera. So over time, unless there’s money put aside for that, and we do get dwellings becoming run down.”
In the cost rental model, the money paid for tenants is used to maintain the properties.
Social housing rents in Ireland are linked to income. They currently average at E58 per week. While this is very affordable for tenants it is not enough to pay for the maintenance of social housing.
Professor Michelle Norris says: “We actually spend a huge amount of money on social housing regeneration refurbishment in Ireland as a result, because obviously, if you don’t maintain the dwelling, the maintenance doesn’t go away. It just accumulates and the quality of dwellings gets worse over time.”
In Vienna, the money derived from tenants is also used to fund local amenities such as pools, saunas, tennis courts, cafes, and creches, and even local television stations. This makes renting in these developments attractive not just because of the cost but also due to the social amenities available to tenants.
Vienna is often cited for its high quality of life and having quality affordable accommodation with many amenities nearby hugely contributes to that. Vienna’s “Gemeindebau ” are an attractive alternative to home ownership and as it is accessible for higher income thresholds rental make public housing provide an actual long-term option rather than a stop gap measure for those on lower incomes. 3 in 5 residents of Vienna live in public housing.
In Austria, the upper income threshold is E50000 for a single person and E75000 for a couple. Whereas in Ireland it is currently E35000 for a single person and E42000 for a couple. As a result, many people are caught by not earning enough to secure a mortgage and earning too much to avail of subsidies.
The higher thresholds also provides for a greater mix of economic and social backgrounds amongst the tenants. TD and Sinn Fein Spokesperson on Housing, Eoin O Broin says of council developments in his constituency: “I look at the really good council estates in my own constituency, they have a much broader income mix in them that makes them more economically viable as communities, and they have much greater security of tenure and diversity of occupation types and household types.”
Kurt Puchinger, Vienna’s housing director states that: “We don’t want to have a situation where you can identify the social status of a person by their home address.”
Whereas in Ireland many social and economic stereotypes are attached to where we live. Especially in areas which were developed as council or social housing.
There are plans to introduce cost rental developments in Ireland in the Programme for Government’s Housing for All plan. However, the plans which currently consist of just 390 units are unlikely to create competition with the private rental market that could help bring down rents.
Ideally, we would need to introduce public housing for higher income levels, as well as tighter rent controls to ensure a stable and affordable alternative to the private sector in order to drive rents down.
Professor Michelle Norris says we would also need to make sure that access to public housing is affordable by providing subsidies to people on lower incomes.
“The key challenge is doing that in a way which is affordable for tenants, because even though there are problems in our social housing sector in Ireland, there is a huge benefit in terms of its affordability to people on low incomes. So that’s very important that we retain that.”
The introduction of a widespread cost rental model would require some economic and policy changes. From how we acquire the land for any potential public housing to how we finance and subsidise it. For that reason, the political will needs to be there in order for these changes.
That is where you come. Change happens when people come together. We saw that in the Equality Referendum and Repeal campaign. It did not start with politicians, it started with grassroots activism years beforehand.
There had been a gathering of momentum in housing activism in 2018 when the Raise the Roof protest took place in Dublin. The pandemic has put a stop to widespread protesting.
Eoin O Broin has been proposing a referendum on adding the right to housing to the constitution. He does not believe that doing this will solve the problem overnight but by holding a referendum it would open up discussion.
Eoin O Broin recommends that people should not be despondent. He says: “The more people get involved in whatever way. Political party, a trade Union, a community-based housing rights group, alternative media, writing letters to the pages, letters pages of the mainstream media right into your local TDs.”
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