Round table on Housing Policy Responses to the COVID-19 crisis

Roundtable on Housing Policy Responses to the COVID-19 Crisis 14 May 2020 Main Messages The Roundtable brought together experts, policy-makers and delegates to discuss key challenges caused by the COVID-19 crisis, associated policy responses and longer-term implications for housing policies (oe.cd/housing).

The Roundtable is part of the OECD Horizontal Project on Housing, which aims at providing evidence-based analysis to help governments design and implement coherent policy strategies to ensure a well-functioning and sustainable housing sector.

Discussions focused on three main questions: How is the COVID-19 crisis affecting housing markets? What tenures of housing markets are at greatest risk? How can loss of homes and evictions be prevented?

Participants highlighted that the COVID-19 crisis is exacerbating pre-existing difficulties in access to housing, especially for vulnerable households, such as those on low incomes and renters. Overcrowding and poor quality of housing were already present before the COVID-19 crisis for many vulnerable households, which pose challenges to physical distancing and successful implementation of containment and confinement measures. Living conditions became exceptionally difficult for overcrowded households. In addition, children in low-income, overcrowded households often simultaneously lack access to the IT equipment and internet connection needed for e-schooling.

Consistent with the slowdown in demand, participants also noted that construction has plunged across the world, real estate transactions are slowing, and in some cases house prices are adjusting. Experience with previous episodes of sharp contraction in construction activity shows that they often result in housing shortages during the recovery. Participants argued that support for the construction sector during the downturn could focus on boosting the supply of affordable housing and facilitating the transition towards sustainable housing through investment in energy efficiency.

What are the most effective policy options to deal with the crisis? What is the experience of different countries to date? Can good practices be identified?

Participants welcomed that many OECD countries have put in place emergency housing measures in the wake of COVID-19 crisis. Policy responses have varied across countries, depending on the specific features of their housing markets and their institutional settings. Nevertheless, measures have aimed at ensuring that households (both owners and renters) can stay in their homes during the crisis and include forbearance and foreclosure moratoria, support for mortgage servicers, eviction bans, temporary rent control and emergency support to provide shelter for the homeless. Country experience so far is encouraging as eviction rates have not increased significantly. Speakers stressed the need for a mix of policy responses, because the housing market consists of different tenures and income groups, with specific needs and demands.

Since the crisis is still unfolding, it is too early to assess the effectiveness of the various measures. However, participants noted that policy responses need to be monitored so that lessons can be learned, and good practices can be identified. This calls for taking stock and developing a typology of policy interventions at the country and subnational levels that can be used in empirical analysis and policy development.

Participants also noted that while support measures are needed in the short term, if kept in place for too long, they may undermine the efficiency of housing markets and discourage investment in the sector. As the economic recovery begins in earnest, it is therefore important to reconcile the short-term imperative to shield households from the housing-related hardship brought about by the COVID-19 crisis with the long-term reform requirements to improve the efficiency of housing markets.

What policies can best prepare housing markets for the recovery phase? What are the key challenges for the future?

The main future challenge that emerged from the discussions is that the COVID-19 crisis is likely to have longer-lasting effects on residential and commercial property markets. For example, the containment and confinement measures taken so far may have affected work relations and elicited behavioural responses by owners, renters and investors that could change demand for residential real estate in a durable manner. In the near term, especially if the health threat lingers, and over time if teleworking becomes widespread, housing demand could shift towards less central urban areas, with implications for urban development.

Understanding and building an evidence base on these changes will be an essential step towards identifying appropriate policy responses that can support the recovery and meet future housing demands and needs.

Finally, to the extent that the COVID-19 crisis will shape demand for housing in the years to come there will be a need for supply to adjust. This requires a better understanding of how both housing finance and investment will respond to changing demand patterns. This adjustment will also be influenced by other underlying factors that have already been conditioning developments in real estate markets, including population ageing, technological change in construction, and the emerging of on-line shorter rental platforms, to cite a few.

In the area of housing finance, an important condition for a speedy housing recovery is to keep markets open and liquid, including by maintaining bank-lending capacity. Participants observed that, unlike the global financial crisis, distress in housing finance has not been associated with an accumulation of non-performing loans in the banking sector. Regulatory measures, such as those undertaken by the Basel Committee on Banking Supervision and the European Banking Authority have proven particularly important in this regard.

Looking ahead, the recovery provides an opportunity to introduce incentives that accelerate the spread of green mortgage in support of the transition towards climate-sustainable housing.