Hugo Sinzheimer Institute/ Amsterdam Institute for Labour Studies
Universiteit van Amsterdam
The wording of EU-proof social housing?
A lesson from the casus the Netherlands
Els Sol
c.c.a.m.sol@uva.nl
'Contemporary Housing Issues in a Changing Europe'
National University of Ireland, Galway
Galway, 20 -21 April 2012
Outline of presentation
1. Europe: a threat to existing systems of social housing ?
2. The relevance of the example of Dutch social housing
3. The Dutch casus explained
4. Europe’s ruling
5. Consequences
6. Conclusions
Member states fear for loss of autonomy
‘The European Union has said that it has a position in
determining what individual governments can and can’t do with
social housing.’
‘If unchallenged [this kind of interference from the European
Union] could have as profound an impact on social housing in
this country as Tuesday’s Budget.’
Source: Inside Housing UK
EC ‘State aid’ decisions on social housing
• N209/2001
Ireland
• N42/2004
Germany
• E 2/2005
The Netherlands
• N789/2006
Sweden
• N358/2009
Hungary
• N642/2009
The Netherlands
• N725/2009
Ireland
Tensions EC and member states
The EC: The definition of social housing remains the
exclusive competence of member states.
On the other hand, DG Competition’s decision making
practices call into question the boundaries of the public
service mission carried out by social housing bodies
How far does the Commission’s control go?
Dutch Social Housing
EU ‘interference’ could harm character
of the Dutch social welfare state
Social housing is at the core of the Dutch welfare state
Thirty three per cent of housing stock in the
Netherlands is owned by bodies that receive state
funding. In 2005, the Commission – the executive body
of the EU – argued having more than 30 per cent of
homes belonging to the social housing sector seemed
‘disproportionate’.
Background
1995:
´Brutering´ Social Housing Associations
– Balancing out of state-loans and future subsidies
– No new subsidies
– Remaining: state guarantee on loans, tax advantages,
municipal discount on land
– Agreement on rent increase 5 year
– Housing Associations to earn money in the market
Dutch Housing stock by sectors
sectors
1993
2001
2010
Home ownership
Privately rented
Social rented
47%
15%
35%
53%
12%
35%
57%
10%
33%
Total stock (mln)
6.0
6.7
7,1
Source: Aedes
Size of Social Housing Organisations (2010)
Number of
dwellings
Number
HA
percentage
0-500
56
13%
500-5.000
228
55%
5.000-10.000
74
18%
10.000-20.000
38
9%
>20.000
22
5%
418
100%
Source: Aedes
Typology of approaches to social housing
SIZE SOCIAL
RENTAL
SECTOR
>+ 20%
United
Kingdom
11 % – 19 %
5 % - 10 %
0–4%
Austria
France
Ireland
Estonia
Spain
Hungary
Germany
Belgium
Czech Republic
Finland
Poland
Italy
Slovenia
Luxembourg
Greece
Portugal
Bulgaria
Greece
Residual
Generalist
Targeted
(Dualist)
Source:: Aedes
The Netherlands
Denmark
Sweden
Universalist
(Unitary)
Features of dual and unitary rental markets
Objective of social housing policy
Function of non-profit rental sector
Development of non-profit rental
sector
Brick and mortar subsidies
Rent levels and differentiation
Rent subsidy
Segmentation of the sector
Households non-profit rental sector
Dual rental market
Unitary rental market
Separate non-profit from market: no
direct competition between nonprofit and profit rental sector
Safety net
Integrated rental market, with direct
competition between profit and nonprofit rental sectors
Housing for broad layers of
population
Growth of non-profit sector is
inhibited and financial resources are
not withdrawn from the sector, but
object subsidies are phased out as
the sector becomes more mature
Subsidies phased out as the nonprofit rental sector becomes mature
Market dependent rent level, at a
level that is lower than the market
rent
Financial resources are withdrawn
from the non-profit sector when it
reaches a certain level of
maturation(by selling housing stock
at a high discount)
Non-profit rental sector strongly
subsidised
No market dependent rent level and
differentiation in non-profit rental
sector: demand is by definition
higher than supply
Rent subsidy strongly dependent on
income but independent of rent level
and housing quality
Strong market segmentation
Owner occupation sector dominant
Profit rental sector is for those who
do not want to buy
Non-profit rental sector is for those
who are unable to buy (stigmatised)
Strong concentration of low income
groups
Rent subsidy determined by market
forces
Limited market segmentation
Owner occupation sector less
dominant
Sectors compete for favours of
households (tenure neutrality)
Less strong concentration of low
incomes, more medium and high
incomes
State aid and Services of General Economic
Interest (SGEI)
State Aid (before Altmark)
• State aid is a measure of the government which yields a
benefit for an entrepeneur f.e. a subsidy or a
renumeration. Under regular market conditions the
entrepeneur would not have recieved the ‘advantage’.
• State aid must be notified to the EC ('notification'). The
Commission examines whether the 'benefit' is
permissible. Aid is incompatible with the common
market in case the measure distorts or threatens to
distort competition. The Commission looks at the
potential economic effect of the measure, not at its
purpose. The aid must not be granted before the CIE has
adopted the measure.
State Aid (after Altmark)
• In 2003 a court ruling by the Court of Justice of the EC:
the Altmark judgment (C-280/00​​). The ruling states that
the granting of benefits under certain conditions is not
state aid; The ruling applies to all services of general
interest.
• The Court believes that a 'benefit' is not to be regarded
within the legal meaning of state aid in case a
government measure is to be regarded as a
compensation for the implementation of services of
general interest. But the four Altmark conditions must
be met. A benefit of the government that does not meet
one or more of these conditions is aid.
The Altmark criteria
1. The beneficiary must be charged with implementing clearly
defined public service obligations
2. The parameters for calculating compensation must be
established in advance in an objective and transparent way
3. The compensation must not exceed what is needed to cover
the costs of providing the service including a proportionate
profit
4. If the company is not selected under a public procurement
procedure, the level of compensation is set on the basis of an
analysis of the costs of an average, well managed company
that is suitably equipped to provide the public service.
State Aid (after Altmark): consequences
• Until the ruling of the Court, there was uncertainty about
whether funding of services of general interest is state
aid. Before Altmark there were two directions in
jurisprudence: either aid or no aid. Altmark created a
middle way
• However the four conditions of the Court shall neither
give legal certainty. What exactly is a proportionate
profit? And when is a company well managed?
The Dispute between EC and the
Netherlands
Public service mission of social housing
• Social housing is a general interest objective since it addresses
a fundamental right - access to housing - recognised in the
Charter of Fundamental Rights -> SGEI
• Social housing associations address this need by making up for
the market’s inability to cover the right to housing of the
neediest citizens.
• Obligations: social prices (rent ceiling) and the grant of
housing units (according to arrangements determined in each
member state) -> lower revenues and higher management costs
• Public aid compensates for these public service obligations
and specific costs
• -> bound by rules applicable to state aid for SGEIs.
The EC ruling on Dutch social housing ……
2002 Draft of Housing Act is sent to EC for notification
2005: The European Commission starts an investigation
to see if the housing aid is state aid in the sense of Article
107 TFEU.
The EC (E 2/2005) expresses doubt about the
compatibility of the Dutch social housing support systems
with the European competition rules. The EC suggests
that it could be a possible ‘manifest error of state aid’.
… and the consequences
• In response the Dutch government introduces eligibility
criteria ruling only those households with an annual
income of €33,000 or less will be allowed access to social
housing.
• 2005 Monti-Kroes package’ liberal restrictive definition
of social housing: undertakings in charge of social
housing “providing housing for disadvantaged citizens or
socially less advantaged groups, which due to solvability
constraints are unable to obtain housing at market
conditions”.
-> excluding social housing having an objective of
social diversity or a ‘universalist’ aim (Ghékiere,
representative of Union sociale pour l’habitat)
EC Decision N649 - 2009
Summary of the EC ruling, following negotiations between
Dutch government and EC:
• the Dutch housing target group has been limited:
90% of the Dutch social dwellings with a rent under
€ 647 must be allocated to households with the set
max income of €33.000
-> Dutch state aid is compatible under art 106(2)
TFEU
• the Commission accepts project aid for the revival of
declining urban areas
Reactions
• April 2010 a complaint is lodged by 133 housing associations
Case T/202/10 and T/203/10
Argument: Commission is abusing its power as it requires a new
definition of social housing from the Dutch government.
Commission does not have the power to impose a specific definition of
the concept of services of general economic interest in the social
housing sector. The ruling goes too far.
• April 2010 complaint submitted by the Association of
Institutional Property Investors & Vesteda T/201/1
Argument: Decision by the Commission will obstruct commercial
housing market. The ruling does not go not far enough.
Latest developments (on the side of the HA)
• The accord does not provide a solution for Dutch housing
policy. Due to a substantial gap between the prices on the
rental market and the market for owner occupied
dwellings households with income just above 33000
have difficulty finding housing
• Associations are considering to go to court once again
Latest developments (on the side of the
Dutch government and parliament)
• 2011 ministerial order regulating the activities for which
state aid is allowed, the 90% rule and the obligation to
tender societal property
• 2011 Parliament urges the Minister to renegotiate with
Brussels on the topic of state aid as too little dwellings
are available for lower middle income people. The
Minister refuses.
Latest developments (on the side of the EC)
• The General Court has dismissed both Dutch complaints
on technical grounds (Cases T-151/10, T-202/10 and T201/10).
• 2011 Almunia’s draft decision abandons the restrictive
definition of social housing on notification of SGEI +
integrates it in a broader category of services that satisfy
“essential social needs”: less binding provisions for social
housing
• …according to Amunia the accord between EC and Dutch
government fits in the revised 2012 Almunia package.
• de minimis regulation expected this month?
-- reconsiders the restrictive scope of earlier measures
Conclusions
• The casus of social housing in the Netherlands shows the asymmetry
in the effect of EU legislation which varies according to ideal types of
social protection. It undermines the social markets of the northern
welfare states. The unitary housing market (The Netherlands,
Denmark, Sweden) is forced to become a dualist market.
• European model asks for a different way of policy making in which
proper explicit definitions and governance principles play an
important role fe transparancy, coherence, logic.
• (Legal) uncertaintes still there. How far goes the control of the EC?
Thank you!
The text of the background paper is available as Discussion
Paper at two sites
University of Amsterdam site:
• http://www.jur.uva.nl/hsi/Discussion_papers.cfm/D0F
EE8EA-D782-44BE-968585670FF9D861
GUSTO project site ‘Governance of Uncertainty and
Sustainability’:
• http://www.gusto-project.eu/