Main messages : Policy Roundtable on Investment in Social and Affordable Housing

Policy Roundtable on Investment in Social and Affordable Housing: OECD Country Experiences 8 June 2022

Main Messages The Roundtable brought together high-level policymakers, sector representatives and experts from a cross-section of OECD countries (Austria, Canada, Italy and Latvia). They discussed the key challenges they are facing to expand the provision of social and affordable housing. The exchanges were informed by the international evidence and insights provided by the OECD Housing Policy Toolkit, the OECD Affordable Housing Database and OECD Policy Actions for Affordable Housing in Latvia.

A starting point for the discussions was that, with lockdowns, home schooling and working from home, COVID-19 has brought to the fore the question of access to quality housing for all. Rising rents, which in many countries have increased faster than consumer price inflation and wages, have made it increasingly difficult for many low and lower-middle-income households to afford good-quality housing.

Panellists highlighted the merits of expanding the supply of social and affordable housing. This is against the background of a decline in public investment in housing development in a number of OECD countries, and a shrinking of the relative size of the social housing stock (OECD, 2020). A sign of the renewed importance given to social housing is its return on the agenda of national governments, a change that has been maturing since the financial and economic crisis and it is now receiving new momentum. Participants noted the challenge of reaching a balance between national impetus and local autonomy, as needs and possibilities can differ considerably across jurisdictions.

Participants observed that governments must also adapt investments in social and affordable housing to the demographic and economic changes that shape social and affordable housing demand. For instance, jurisdictions that spent little on social housing in periods of stable or declining population experienced housing pressure as population increased, typically following inflows of workers attracted by favourable labour-market conditions. Providing social and affordable housing in such situations becomes important not only to reach social inclusion objectives, but also to maintain the capacity to attract workers in economically dynamic regions. Without an adequate housing supply, including in the social and affordable segments, rising housing costs risk curtailing the growth of regions with productivity potential.

Panel exchanges also underlined the central role of new construction as an effective long-term solution to addressing housing needs. This can be in contrast to other interventions, such as rent control or housing allowances, which may provide short-term relief but can generate trade-offs over time, particularly in tight housing markets. There are a variety of funding models across OECD countries to channel investment to social and affordable housing. For instance, countries with a large existing stock of social and affordable housing can rely on cost-plus pricing of the existing stock of affordable housing, where tenants have capacity to pay, to generate part of the financing needed for maintenance and new construction. Countries

2| with a smaller stock may need to rely more on the government to fund the initial investment. Over time, however, housing funds can become financially sustainable as the stock expands and access to affordable housing includes tenants with greater capacity to pay.

The roundtable brought to the fore the importance of incorporating the provision of social and affordable housing into a framework that is consistent across policy areas. For instance, fostering the emergence and growth of a sustainable affordable housing supply requires balanced landlord-tenant relations, so that housing providers, such as non- and limited-profit developers, have a sufficient degree of income security to be viable and generate returns for maintenance, renovation and new construction. Another key policy area is land use regulation, which at a minimum has to be compatible with social and affordable housing objectives but can also support their attainment, while encouraging social mixing, by requiring a share of social and affordable housing in new developments.

Looking ahead, participants emphasised the challenge of bringing the social and affordable housing stock in line with climate objectives. This imperative, together with the recent strong rise in construction costs, increases the funding needs of the sector. It also reinforces the importance of developing the capacity of social and affordable housing providers, including non- and limited-profit developers, to plan and manage developments efficiently.