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Why city halls should look to Vienna, not big developers, to solve their affordable housing crises

Viena's Alt Erla housing complex
Viena's Alt Erla housing complex

OPINION: The dilemma that faces many local governments in cities around the world is how to finance regeneration schemes when their central government does not offer sufficient support and land prices are high. Cities like Vienna and Hamburg have found a solution that doesn’t price out their own citizens. London has not.

When trying to finance housing schemes most local authorities usually turn to the private sector knowing that their public funds can attract private investment by mitigating the latter’s risks. 

But there can be many trade-offs. Often it is the loss forever of publicly-owned land to the private sector, which uses the uplift in land value to generate funds to pay for the project. 

Once a city has been built, its fundamental fabric tends to change very little. Decisions taken at this expansion or renewal stage are crucial in determining sustainability levels and the quality of community life. 

Letting the private sector alone take these decisions is not necessarily a great idea, as the bigger the company, the more they bring their legal clout, their own agendas and problems. 

It follows that there must be effective management in the public sector. Officers need to be skilled negotiation. Private investment, however welcome, must not be seen as a magic bullet. 

Too often, existing residents find themselves priced out unless great care is taken. 

London

London is one of the most expensive cities in the world. But unlike the other cities with high property prices such as Hong Kong and Singapore, the problem is not lack of land, but because there are high rates of well paid employment, such as in the financial centre, which make it a desirable place to live. 

Many properties are empty for large parts of the year as wealthy people want to have a base in the city but prefer to live most of the time somewhere else, or simply because the property is an investment.

All of this is a perfect storm for the vast majority of citizens seeking a roof over their heads that they can pay for on an average salary.

Social rent homes – those with the lowest rent levels – have been disappearing in favour of so-called “affordable rent” homes, where tenants can be charged up to 80 per cent of what the private market demands. 

Social rent is intended to be one that essential workers such as teachers, nurses, cleaners and cooks can afford. 

But in order to let developers build at a sufficiently dense level for them to recoup what they see as a healthy profit, some councils have been allowing perfectly good homes to be abandoned and demolished, such as on Doran Walk, in London’s E15 district – these were social homes owned by Newham Council.

According to figures on London’s delivery stream of housing regeneration schemes obtained by the London Assembly Green Party Member Sian Berry, more than 60 per cent (33,424) of affordable homes have disappeared in two years, despite City Hall’s strategic target of at least 17,000 more affordable homes per year.

One project, Elephant Park, which we reported on recently involving Australian developer Lendlease, and is managed by Southwark Council, was criticised for pricing out residents. 

Writer Catherine Slessor reported in the Architects Journal: “Despite assurances, out of the proposed 2704 new dwellings, the number of socially rented units has shrunk to 82 from 1194 when the estate was operational. The last residents left in 2013, evicted, decanted and dispersed miles from their original neighbourhood.” 

According to a report called Faulty Towers into London’s housing crisis by Transparency International, all of the 51 Elephant Park’s South Gardens units were sold abroad, at prices of £790,000-£1,500,000 ($1.4-$2.64 million) to international investors. They calculated that so-called “affordable” houses in the Elephant and Castle area can only be occupied by people earning £60,000 to £90,000 ($105.000-$158.60) a year. This excludes the average Southwark resident, who simply cannot afford it. 

Yet Southwark Council Councillor Mark Williams, the cabinet member for regeneration, defended the policy by saying, “All homes sold by Lendlease help pay for the affordable homes. It is not within the council’s interest to manage regeneration schemes which do not offer the best deal for residents – everything we do is for the benefit of residents.” Basically, he didn’t feel he had a choice. 

A Lendlease spokesman told The Fifth Estate that the decision to demolish the estate was taken by Southwark Council. Elephant Park was part of a bigger zone called the Elephant and Castle Opportunity Area, which would produce around 3000 homes in total, of which 25 per cent would be a mix of social (around 82 home), affordable and for shared ownership. The final mix would be up to the council, the spokesman said. 

Affordable rental homes would be at 50 per cent of market rent and all three types of affordable, social and shared ownership homes would be placed in the hands of affordable housing provider L & Q on a long term lease basis on completion.

The spokesman said Lendlease would contribute profit to the council under an “overage” agreement. One part of that had been completed, 1 The Elephant, and the balance would be assessed on completion of the project in 2025.

But do developers have to be involved at all?

Australia’s Nightingale Housing Model finances developments using equity investors to raise funds and by placing a cap on profits. But this is only for property for sale, not rent; and so far only one project has been completed.

Austria and Germany are leading the way in this type of financing model, with the city of Hamburg having made available 25 per cent of its development land for cooperative housing projects called Baugruppen.

The city’s intentions are to eliminate the barriers facing small cooperative construction projects and to ensure long-term affordable housing.

Rather than going for huge regeneration projects, breaking the project down into smaller chunks leaves the field open for smaller investors and more innovative financing approaches where risks are better shared between the local authority, the developer, and the not-for-profit social enterprise managing the project.

Vienna Wild Garden Housing Project is for “people who want to shape their living and living situation” – single, family or senior. Around 1100 dwelling units – two-family houses to a multi-storey residential building – occupy 10.73 hectares (26.5 acres) with 4.6 ha (11.37 acres) of green and open spaces. Other facilities include a neighbourhood centre and a kindergarten, about 200 rented housing, a local energy supply, 80 owner-occupied apartments, and 50 self-financed apartment buildings.

If that seems unusual, consider this: housing cooperatives, combined with state owned apartments, make up an amazing 60 per cent of Vienna’s housing today.

This is what happens when a city authority has faith in its people and wants to work with them to make the city rather than prestige investors.

David Thorpe is the UK based correspondent for The Fifth Estate and author of The One Planet Life, about living within planetary boundaries, Passive Solar Architecture Pocket Reference and Sustainable Home Refurbishment.

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