Brazil-EU Dialogue seminar on low
income housing finance and subsidies
Social Housing in Spain
Baralides Alberdi
25/09/2014
1
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•
•
•
•
•
•
Introduction
Historical development
Structure of social housing
Funding of social housing
Prices and rents
Access and allocation
Current policies environment
2
Social housing and comparison with other
tenures
Owner occupation
%
1960
51
1970
64
1981
73
1991
78
2001
82
2011
79
Source: INE Census 1960-2011
Rental
All
%
45
32
23
16
11
13,5
Private
%
43
30
21
15
10
11,5
Social
%
2
2
2
1
1
2
Others
Total
%
4
4
4
6
7
8
ms
7.0
8.5
10.4
11.8
14.2
18.1
Housing policy fundamentally emphasizes home ownership.
Access to rented accommodation residual both through the public and the
private sector.
Owner occupied sector, up to 82% in 2001, including market housing but also
social housing for ownership.
The rented sector, 13%, divided into private rented and social rented, only 2%
of the total stock.
3
Social housing and comparison with other
tenures
• Two kinds of social housing
– Officially protected housing (VPO), peculiar
compare to social housing models in EU countries
in that it is provided almost entirely for owneroccupation. Only a small proportion is built and
offered for rent.
– Social rented housing, which is comparable to
what is normally called social housing elsewhere
in Europe.
4
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
New construction: market and social housing
700000
600000
500000
400000
300000
200000
100000
0
Market Housing
VPO Social Housing
5
Historical developments
• The 1978 post-Franco constitution divided Spain into 17 regions, each with
its own legislative body and autonomous governments that control most
of their own housing policies. Central governments only retain control
over some of the design of fiscal and social housing policy through a series
of national housing plans that have been rooted in two principles:
• One is the public financing for VPO social housing built by private
developers.
• The other is the temporary nature of the protection regime for
such dwellings, which allows them to eventually move into the
free housing market.
• Given the multiple and decentralised decision-making processes, the
implementation of housing policy in Spain is not always coherent or
straightforward.
6
Structure of social housing
•
•
•
•
The development, construction and rehabilitation of VPO housing is open to a
wide spectrum of providers including the State, regional governments,
municipalities, public developers, mixed public-private companies, commercial
developers, associations, co-operatives, not-for profit organizations, and private
individuals provided they fulfill the criteria established by law.
Once the VPO houses are built they are sold, making the property and its
management the private responsibility of the owners. Dwellings maintain their
social character for a limited period of time (20 years) after which they can be
traded at market prices. Within the 20-year period, re-sale prices are controlled
and owners who sell must repay subsidies. Despite this requirement, owners can
make substantial capital gains in the long run.
Only a small percentage of the social VPO houses built are rented and those are
owned and managed by specialized institutions. Since the 1980s, most regional
governments and municipalities have created public housing corporations to deal
with this rented stock.
Professionalism varies greatly among different companies and most providers
administer, maintain and repair existing stock; select its beneficiaries; enforce
eligibility conditions including the possible rotation of tenants. Also are fully or
partially responsible for developing the land (normally supplied free by the
municipality), and engaging a private contractor to construct the dwelling.
7
Funding VPO social housing
• The main form of subsidy is through the provision of free or cheap land
(the cost of land cannot make up more than 15% of the final price of the
unit) for construction by municipal landowners.
• The additional cost of VPO social housing are financed through two
avenues: the public budget and the banking system.
• Some of the social housing built during the 1960s, through to the 80s was
partially funded through the public budget. It also provided funds for
upfront subsidies to lower income households. The public budget also
funded the interest rates subsidies embedded in VPO loans. The fall in
interest rates has reduced the importance of such subsidies and state
funds for housing go now mainly to demand side subsidies which had
been increasingly eliminated since 2010.
• The other major source of funding is the banking system. Since the mid1970s, mortgage funding was the responsibility of banks and savings
banks, including mortgages for VPO dwellings. The state contracts with
these private credit institutions, which in turn provide loans on favourable
conditions.
8
Taxes and subsidies
• Since the 1970s, owner-occupiers (including owners of VPO
social housing) have been able to deduct a proportion of
mortgage loan payments from income for tax purposes.
• Over the years, there were changes to the details of the
scheme and it had been eliminated since January 2013, but
only for new mortgages.
• VPO social housing also benefits from a range of upfront
subsidies and grants. They vary by regions but are minor
compared to the mortgage tax deductions.
• Since 1995, VPO social housing has been eligible for a reduced
rate of VAT (4% as opposed to 10% for other housing).
9
Nature and scope of rental assistance
• The state budget has always contained some funding for the
construction of social housing for rent, but the amount was
insignificant until 2004.
• In that year, the new socialist government offered developers
a 20% upfront subsidy and a 50% interest-rate subsidy for
building rental dwellings, on the condition that rents were
kept low.
• In 2008 a housing allowance was introduced for tenants of
certain age and income. It was revoked in December 2011 by
the new conservative government.
• Many autonomous governments have their own tax
deductions for tenants, which have created inequalities
between people living in different parts of Spain.
10
VPO prices and rents
• We can compare VPO and market house prices. Converging since the global
financial crisis hit. Gone from 50% of the market price in 2007 to 75% in
2014.
• No statistics available for social rents. For units of similar size and quality,
social rents are estimated to be around 50% of private rents.
2150
1950
1750
1550
1350
1150
950
750
1º2º3º4º1º2º3º4º1º2º3º4º 1º2º3º4º1º 2º3º4º1º 2º3º4º1º 2º3º4º1º 2º3º4º1º2º3º4º1º2º
2005
Source: Ministry of Public Works
2006
2007
2008
2009
Market €m2
2010
VPO €m2
2011
2012
2013
2014
11
Access and allocation of VPO social housing
Eligibility criteria vary somewhat by autonomous government but in general require that the purchaser:
• Not own or have a permanent right to use another dwelling
• Not have obtained financing under the Housing Plan over the previous 10 years
• Have an income below a certain level, and
• Have lived in the area for at least two years
Broadly speaking, some 80% of households have an income below the ceiling for access to some form of
VPO social housing.
Although VPO social housing continues to be built, its effectiveness has been extensively questioned.
During the last 40 years more than 4 million of VPO social housing units have been produced. This
significant amount of stock has not been reusable as a buffer to resolve the new problems of accessibility
as most was sold to owner-occupiers. Owners can them easily “reclassify” these VPO dwellings and sell
them at market prices, producing considerable transfers of income for themselves.
These houses also pose a problem of equality in their distribution. Although eligibility criteria are applied,
there is no legally required ranking procedure, meaning that developers themselves can select buyers from
among eligible households. It is in the developers interest to sell to creditworthy buyers because the buyer
assumes a portion of the developers loan and the lending bank must agree to accept the transfer. These
factors mean that households with low incomes or more precarious economic situations are vulnerable and
systematically disadvantaged .
12
Effects of the global financial crisis
• The specific housing circumstances of the country at present are the result
of a combination of the global financial crisis, tightened mortgage
regulations, increased unemployment and years of oversupply.
• When the crisis hit, credit dried up, the massive housing boom ended
abruptly, the amount of vacant stock increased dramatically and it was
estimated that an additional 1 million empty houses were added to the
stock.
• Developers were left with blocks of unsold properties and massive debts.
Since 2008, the government has been attempting to promote the sale of
this vacant stock.
• The crisis has also resulted in a rapid increase in the number of bad loans
and repossessions, making Spanish banks the largest property owners in
the country. At the moment, the biggest banks are trying to sell as many
houses as they can, as well as to rent below market prices. And at the end
of 2012 a “bad bank” was created to absorb part of it.
13
The future of the sector
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•
The future of social housing is bleak. After the crisis hit, most demand-side
subsidies were reduced and many have now disappear entirely. The number of
new VPO social units have plummeted. Social housing, both VPO and rented, is
increasingly disappearing and social housing developers try to sell their already
small stocks to get cash to maintain their administrative structures.
The overall shape of the puzzle remains unclear: there are many actors with vested
interest involved in the social housing sector, but it lacks a leading voice or clearcut policy direction.
90000
VPO housing starts by tenure
80000
70000
60000
50000
40000
30000
20000
10000
0
2005
2006
2007
2008
2009
Owner-occupation
2010
2011
2012
2013
Rented
14