- Email: [email protected]
Housing Policy Trends
Housing Policy Trends J Doling, University of Birmingham, Birmingham, UK ª 2012 Elsevier Ltd. All rights reserved.
Introduction The aim of this article is to present the development of housing policy, principally but not exclusively, in the economically more advanced countries of the world. These make up three broad groupings: the New World, English-speaking Western countries of North America and Australasia; the Old World, particularly Western Europe and the more advanced of the Eastern European countries; and East Asia including Japan, Korea, Taiwan, Singapore, Hong Kong, and Malaysia. Given the large numbers of countries, their wide geographical coverage and in the case of many the long historical period during which they have been industrialised, the presentation of developments will necessarily be fairly general. Indeed, for the earliest years, perhaps 150 or more years ago, when rapid industrialisation and urbanisation provided an impetus to state housing policies, the coverage will be painted with a very broad brush, glossing over the differences and exceptions to highlight general tenden cies. Rather, there is detail about trends only with respect to recent decades. Both past developments and possible future directions of housing policy are discussed within a framework that focuses on tendencies towards convergence and tenden cies towards divergence. In other words, the aim is to identify not only the main policy developments and trends, but also the extent to which they can be inter preted as a narrowing of the differences between countries – are they becoming more similar – or a widen ing of the differences – are they becoming less similar. Such an emphasis requires that policy developments are considered against a number of theoretical perspectives that provide understandings of the origins of and influ ences on housing policy: why do governments have housing policies, what determines the content and aim of housing policies, and to what extent are these similar across countries – thus leading to convergence – or dif ferent – thus leading to divergence. For the purposes of achieving these aims, the article, following this introductory section, is arranged in four sections. The first section provides a broad understanding of the meaning of convergence and divergence in policy systems with some indications of their theoretical under pinnings and of how they might be recognised empirically. The second section presents the broad development of housing policies in the now advanced economies during
596
the period of their initial moves towards industrialisation up to the present era, or at least up to the start of the current economic difficulties. For each of them, the tim ing of their economic take-off differed, as did the speed and nature of the economic, social, and political changes. But all developed state housing policies. Moreover, not only did they develop housing policies but also, at a high level of generalisation, there are at least some indications that they have tended to follow a similar trajectory char acterised by an initial period of increasing state intervention followed by a second period of some with drawal of the state with more reliance on market mechanisms. So, the (very) broad picture is: stage 1, growing reliance on the state: stage 2, growing reliance on the market. An important question, then, concerns why, as a response to the challenges of industrialisation and subsequent economic development, was there this degree of similarity, or convergence, in the field of housing? The third, and somewhat more detailed, section focuses on housing developments over the last three or four decades. Here there have also been some across country similarities, for example, in the continuation of an active state role in housing combined with important moves towards privatisation and deregulation of housing finance markets. While these trends can be characterised in many countries by a common and increasing impor tance placed on homeownership, there have also been some marked differences. In other words, there is evi dence of both convergence and divergence, so that part of the aim of this section is to provide an understanding of the contrary processes. The fourth, final, and brief section provides some speculation about future developments and the likelihood of convergence or divergence in the context of two macro processes: the changes in demographic structures result ing from the ageing of populations; and the restructuring of financial markets and other changes taking place as a direct result of the global, economic hiatus occurring from 2008.
Understanding Convergence and Divergence The terms ‘convergence’ and ‘divergence’ have long been part of the vocabulary of those engaged in the compara tive study of housing policy, indeed of policies across a
POLICY (Overview)
Housing Policy Trends
broad range of areas. They have come to be frequently adopted as, to use Michael Oxley’s phrase, ‘‘a sort of theoretical string’’ that helps to tie the comparative story together, the general term that encapsulates and sum marises the developments in the myriad of housing policies under review. Meaning and Empirical Indicators While the literal and everyday meanings of the two terms are perhaps simple and clear, the scientific meanings are arguably less so. One view, espoused by Kemeny and Lowe (1998), is that convergence refers to analysis in which it is taken, more or less for granted, that housing systems everywhere have been moulded by the same influences. Further, they recognise that underlying such analysis may be explanations of why those influences have led to similar outcomes, and thereby acknowledge that convergence refers to a process, or processes, operat ing over time such that housing policies in different countries are somehow moving towards a common point or model. Empirically and theoretically this dynamic might be recognised through a narrowing of differences that might take the form of either common policy developments, such as the reduction of mortgage interest relief on hous ing loans or the deregulation of financial sectors, or narrowing of statistical differences, such as in the propor tion of national housing stocks accounted for by social housing. The latter has been the basis of a number of studies in which the statistical variance of a number of indicators of housing systems over successive decades has been computed in order to test whether convergence had taken place. But, convergence might be recognised in a slightly different way: each country being at a different point or stage on a common trajectory. Thus, if housing policy was a direct reflection or consequence of the stage of eco nomic development, then countries, depending on their economic position, might be spaced widely apart but heading in the same direction, and in that sense conver ging. However, it is also possible, if the relationship between economic development and housing policy was nonlinear (say little investment in social housing at low and high levels of economic development, but consider able investment at medium levels of economic development), that over some periods national housing policies would statistically get further apart. In such cir cumstances, convergence might be happening but it might not be confirmed empirically as a reduction in statistical differences. Divergence, in contrast, refers to differences in hous ing policy. This can have two distinct meanings. The one is that all countries are somehow unique and particular, and that with different social and economic
597
circumstances, their policy responses would adapt to those different circumstances. Kemeny and Lowe (1998) argue that divergence might also be seen as classes or types of housing policy. This could be interpreted as a notion that while not all housing systems are essentially the same and proceeding in the same direction, it is possible to identify groupings of countries in which hous ing systems were different from those in other groupings and proceeding differently to those in other groupings, but the same as, and proceeding in the same direction as, countries in the same group. On this basis, then, it is possible to recognise three categories of Oxley’s string that ties comparative research together: particularism in which everywhere is considered unique and different; convergence in which everywhere is the same; and divergence in which there are groupings that are different from other groupings, but, within any one grouping, everywhere is the same. Theoretical Foundations It is possible, in turn, to attach different theoretical per spectives to each of the three categories. Kemeny and Lowe (1989) argue that particularistic approaches have tended simply to juxtapose information about different countries generally without positing explanatory frame works that help an understanding of why there are similarities and differences. Given the tendency in such studies to present the fine detail of housing policies and outcomes – the precise dates, the precise actors, the pre cise percentages – their particularity is hard to resist. In their view, however, an often implicit framework in such studies is based on the notion that national governments act independently from one another, responding to dif ferent sets of circumstances effectively to determine the particular shape and direction of national housing systems. The convergence approach, in contrast, is generally based on one or more theoretical perspectives that emphasise a deterministic response to a common process, what might be called a universal law. These high-level theories stress the significance of the logic of capitalism or the logic of industrialism, or refer to the irresistible con sequences of demographic change or globalisation to provide an overarching template onto which may be mapped the development of national housing systems. It might also be said that these theories emphasise the importance of structure rather than agency. Divergence approaches, for their part, are usually based on theories that reject the notion of the inability of nations to resist the impact of structural or universal forces, emphasising rather their capacity to impose and negotiate other outcomes. Here, politics, ideology, geo graphy, and culture may all play a part in guiding and achieving choice. These middle-range theories inform the
598
Housing Policy Trends
now large body of research that has sought to establish typologies of policy models or regimes and that received considerable encouragement with the extensive literature on more general social welfare regimes. One outcome of this research has been the frequency of attempts, on the basis of their housing systems, to locate each of the advanced economies, with some other advanced econo mies, in one of a set of groupings.
Broad Trends in Housing Policy: From Industrialisation to the Credit Crisis This convergence–divergence background assists consid eration of the long-run policy trends. Here, one way of approaching an understanding of the trends in housing policy is through the utilisation of the notion of the ‘European Paradigm’. The value of this lies not in the fact of its Europeanness, as if European countries are somehow a model for everywhere else or even that the paradigm signifies a high degree of convergence, but simply that what we would now recognise as housing policy first developed in Europe and that this was a product of it being the birthplace of the industrial revolu tion and its associated urbanisation. The Broad Trajectory of Housing Policy The European paradigm, therefore, starts with the transi tion from feudal or preindustrial societies to industrial ones. In the late eighteenth and early nineteenth centu ries, in a number of Western and central European countries, manufacturing enterprises were set up, mainly in urban areas that expanded with the influx of labour from rural areas. This rapid expansion of the new indus trial towns and cities and the growth of a new, urban labour force was also part of the development of socio– economic–political systems based on free markets. But this also coincided with the sanitary reform movement which itself was born out of the epidemic diseases, prin cipally cholera and typhoid, that flourished in the types of housing development that characterised the period. The free markets in land and urban development resulted, for the great mass of the new urban working classes in Europe, in housing that was built at high densities to low standards of construction and amenities frequently without adequate sanitary facilities or supplies of fresh water, and crowded onto sites that were adjacent to noisy and polluting factories. It was against this background that European govern ments, particularly from the last quarter of the nineteenth century began to place constraints on the operation of the urban housing market. While the details differed, the general approach was similar: governments introduced legislation to control overcrowding at least in the sense,
if not in the number of people that then lived in each dwelling, of a maximum density of development, that is, the number of dwellings per unit of area, as well as such matters as construction standards and public health pro visions including sanitation facilities. In essence, these were constraints, or regulations, imposed on the supply side of the market, and intended to bring about a mini mum quality or standard of the housing stock and an associated raising of the quality of housing consumed. Moving into the early parts of the twentieth century, particularly coinciding with the time of the First World War (1914–18), there were further, and also widely com mon, interventions. The first involved controls over landlord–tenant relationships. Legislation in France in 1914, Britain in 1915, Denmark in 1916, and Germany and the Netherlands in 1917 took two main forms: the capping of rents so that these were lower than those that would be set by the usual market mechanism; and security of tenure. Together, these had the immediate effect of protecting tenants against high housing costs that might exceed their reasonable ability to pay out of the prevailing level of wages enjoyed by working families, alongside protection against eviction. The second intervention also came out of a recogni tion that even a market subject to some regulations about minimum standards resulted in dysfunctional outcomes. European governments began to accept that if housing for the urban worker was to be of a politically and socially acceptable level, it would be necessary for even greater intervention, in the form of what has come to be known as social housing, supported by government subsidies to supply, often in the form of finance provided at an interest rate below the prevailing market rate, and made available to public bodies as well as to housing cooperatives and associations of the not-for-profit sector. Again, as a general pattern in the European countries, support for the principle and practice of social housing expanded in the conditions prevailing in the aftermath of the First World War when generally there was a combi nation of housing shortage resulting from a lack of investment during and before the war years and the influx of the returning soldiers. But, such support expanded much further after the Second World War (1939–45), when the shortage of housing was even greater because added to the underinvestment and population movements that had characterised the First World War, was a third factor, the very high levels of destruction of housing stock as a direct consequence of the war effort. It was in these early, postwar years that the support for social housing was particularly large. Once, after some decades, the housing shortages had largely been overcome; however, European government attention typically turned from questions of quantity to those of quality. This has translated into two, broad policy approaches. The first was the demolition of old dwellings,
Housing Policy Trends
frequently built to low standards and in poor physical condition, along with the provision of new housing built to higher amenity and construction standards. In Western Europe, this occurred particularly in the 1960s and early 1970s. The second policy approach developed even more widely in the post-1970 period and took the form of the promotion of homeownership, a form of housing tenure that has been widely perceived as offering, in comparison to the position of tenants – whether of private or social landlords – distinctive financial and ontological advan tages to households. According to the European paradigm, therefore, there has been a typical, historical trajectory of state interven tion in housing. This has been characterised as a progression through a number of distinct phases or stages. The first involved government efforts to ensure that the rapidly expanding number of urban workers had some where to live, followed by a second stage in which there were attempts to provide more than the minimum level of space, with the third stage developed when the shortages had been largely overcome and governments turned to a concern with quality, and fourthly, once quality had been widely achieved governments reverting once again to market-based housing solutions, frequently homeownership solutions. Looking at this trajectory as a continuous progression, rather than as discrete stages, it can be described as having an inverted U shape. At first, countries have very low levels of intervention, in terms of regulation and finan cing, their governments leaving housing largely to the market. Gradually, over time, there are more and more interventions as governments place more restrictions on the operation of the market and then begin to intervene heavily through subsidies and even direct provision in the form of social housing. Eventually, some point is reached where the basic quantity and quality needs of the bulk of the population are met, and governments begin to draw back from intervention, again relying heavily on market solutions, particularly those supporting homeownership.
Explaining the Common Trajectory Leaving aside the issue of how representative this para digm is, even of European countries – that issue will be taken up later in the article – the question considered here is how can this apparent convergence be explained? Why is it that advanced economies consistently have intro duced housing policies and why has housing policy consistently proceeded in the same general direction? One view is that policies addressing housing issues, like policies addressing more general welfare concerns, are an integral part of the process of modernisation, which in turn is indicated by the transition from feudal to industrial societies. The point here is that countries
599
have housing policies simply because it is part of the path of modernisation. Another view, providing a more explicit explanation, is that interventions in housing, again like interventions in general welfare, are driven by the logic of industrialism. The argument here is that as countries undergo a process of industrialisation and as they then develop to more and more economically advanced levels, with higher and higher gross domestic products (GDPs), they face similar problems and opportunities. Thus, at an early stage of industrialisation, as workers are drawn into towns and cities where manufacturing plant is located, countries face new, but common, housing problems: overcrowding and unhealthy living environments. As industrialisation advances further, in order to compete with other manu facturers and other countries, it has, universally, become increasingly important that workers are productive and this in part demands that they are fit and healthy, so requiring – among other things – decent homes that keep them fit and healthy. Logic of industrialism explana tions therefore envisage that at each step along the path of economic development, sets of problems and opportu nities arise that are common to all countries and some of these require housing policy solutions. One version of this – though with an emphasis on resource allocation rather than directly on policy – was developed some years ago in a study by Burns and Grebler (1977) in which they used data for the period 1963–70 covering a total of 39 countries which ranged from those at low levels of economic development – Kenya, Bolivia, and the Philippines – to those at the highest – in Western Europe as well as Japan and the United States. Fitting a regression model, they established an inverted U-shape relationship such that countries at low levels of GDP per capita typically had low total expenditure on housing, while countries at medium levels had high total expenditure on housing and those at the very highest levels, again, had only low levels of expen diture. This version thus fits broadly with the observation underlying the European paradigm and McGuire’s stages. In addition, it indicates that the European paradigm may hold more widely, not only describing the European experience but also locating it in a more general process of economic development. In other words, suggesting a global paradigm. Another version of convergence, which might more accurately be labelled a logic of capitalism explanation, is provided by Harloe (1995). Among other things, this suggests that the European paradigm is really European and not global, at least in so far as the development of mass social housing is concerned, since this has been largely specific to Western European countries. The basis of Harloe’s view is that capitalism requires states to organise themselves around the pursuit of surplus value and, among other things, this means the extension of
600
Housing Policy Trends
private ownership and commodification, such that gener ally wherever there was an opportunity to extract surplus value private markets would be established. On this view, state welfare systems – including some housing policies – provided outside the market would be set up only as a compromise, forced on capitalism by the particular circumstances arising at historical points in time. From this, Harloe argues that social housing was initiated in many European countries prior to the First World War only as it became apparent that pure, com modified forms of housing were not capable of meeting the needs of poor people, nor of ensuring their fitness and healthiness as workers. But, it was small-scale or residual social housing with only a minimal impact on the princi ple of private market solutions. From this, he further argues that the shift from residual social housing to mass social housing, which occurred after each of the two world wars, was the consequence of extraordinary and tempor ary conditions. These were periods of system-wide crisis in which mass social housing was seen as part of the solution. In the first period, the aftermath of the First World War, the common Western-European-wide pro blem was to reestablish the status quo in the maintenance of the system of liberal capitalism. In the second period, from 1945 until the start of the 1970s, the challenge was the reconstruction and restructuring of national econo mies. In both periods, to different degrees in different countries, mass social housing was seen as part of the solution, but once the crises, the extraordinary conditions, were resolved, social housing returned to its normal, residual role. One of the implications of this position is, therefore, that periods of mass social housing would occur only in countries which experienced system-wide crises to which it would be seen as part of the solution. So, countries like the United States, Australia, and New Zealand which did not face similar circumstances after the two world wars, or some of the countries of East Asia, for example, Korea and Taiwan, that have achieved rapid economic growth, industrialisation, and urbanisation only in the last few decades, have not developed large social housing sectors. They may – and indeed have – developed policies that regulate aspects of private housing markets and provide subsidies, so have some features of the European para digm, but they have not adopted all the features.
Increasing the Role of Homeownership: Convergence and Divergence Having set out the general pattern of housing policy development over the entire period from the beginnings of industrialisation to the present day, the attention paid in this section is focused on the last few decades, roughly from the mid-1970s until the start of the current credit
crunch. During this period, the single most consistent development over most economically advanced countries has been the growth of homeownership. Whereas the recognition of this consistency provides a vehicle for examining the convergence processes of globalisation, the intention is also to stress differences around the com mon pattern, so enabling the examination of divergence processes. Policy Trends: The General Pattern The general pattern of housing policy developments over recent decades, then, has involved some retrenchment of state intervention with a reversion to the market and particularly homeownership (Table 1). In European countries, and indeed elsewhere, a raft of policies have been involved. Some have been directed specifically at making homeownership more attractive to households, in the case of many countries explicitly for those with low incomes. These interventions, many of which have also been adopted in countries outside Europe, include tax breaks on housing-related invest ments, such as relief from tax on imputed rental value of owner-occupied housing and reductions on loan interest. The policy support for homeownership has been accompanied by a general move towards the deregulation of financial markets that have resulted in increased lend ing to the housing sector. In some countries, for example, Australia and the US, deregulation has a history of several decades. In Western European countries, mortgage loans as a proportion of GDP have expanded considerably even over the last decade. More recently, the same general trend has been apparent in the European transition coun tries, where following the collapse of the Soviet Union market-based housing mortgage systems have been devel oped: The result in most economically advanced countries has been a large increase in the amount of residential mortgage debt as a proportion of national GDP (Table 2). Other policies have been aimed at reducing the supply of, and demand for, nonmarket forms of housing often involving the privatisation of social housing stock. In fact, even if the numbers involved are not always large, most EU member states now allow the sale of social housing. The selling off of social housing has even extended to non-European countries, such as the United States, where there was only a small stock anyway. In the East European countries that had come under the control of the Soviet Union, the privatisation of former state housing has been particularly large, a result not only of the distinct change in their political systems, often with the enthusiastic embrace of private markets, but also the decision to sell them at relatively low prices. The outcome has been that social housing has largely disappeared from most of the transition countries.
Housing Policy Trends
601
Table 1 The postwar growth of homeownership: percent share of total stock by (approximate) year
Country
1960 (%)
1970 (%)
1980 (%)
1990 (%)
2002 (%)
Australia Canada United States Austria Belgium Czech Republic Denmark France Finland Germany Greece Hungary Ireland Italy Lithuania Netherlands Norway Portugal Slovenia Spain Sweden United Kingdom Hong Kong Japan Singapore Taiwan
– – – 38 50 – 43 41 57 – – – – 45 – 29 – – – – 36 42 – – – –
– 60 64 41 55 – 49 45 59 – – – 71 50 – 35 53 – – 64 35 49 – – – –
71 62 66 48 59 – 52 51 61 – 70 – 76 59 – 42 59 57 – 73 41 56 – 60 59 74
72 63 64 55 67 – 51 54 67 38 77 – 81 67 – 44 59 58 68 76 42 68 42 61 88 81
70 65 68 56 71 47 51 55 58 42 83 92 77 80 84 53 77 64 82 85 42 69 56 62 93 85
Sources: Catte P, Girouard N, Price R, and Andre C (2004) Housing Markets, Wealth and the Business Cycle, Economics Department Working Paper No. 194, OECD: Paris; Scanlon K and Whitehead C (2004) International Trends in Housing Tenure and Mortgage Finance. London: Council of Mortgage Lenders; National Board of Housing, Building and Planning (2004) Housing Statistics in the EU 2004. Karlskrona, Sweden: Boverket; UNECE (2006) Guidelines on Social Housing: Principles and Examples. United Nations, New York and Geneva; Lu H-c and Chen M (2006) Cultural norms and tenure choice? Investigating the high homeownership rate in Taiwan. www.fin.ntu.tw/-conference/conference 2006/powerpoint/academic7/7-1.ppt (accessed 25 July 2011).
The overall effect of these and other pro-owning poli cies, in Europe and elsewhere, has been continuous increase in the size of homeownership sectors. Table 1 shows this to be the case in almost all the countries included. Notwithstanding some gaps in the data, in only a few countries, for example, Australia, Finland, and Ireland, are there exceptions to this general pattern, and even then the decreases have been small, just a few percentage points. Moreover, in some countries, the increases have been particularly large, for example, in Italy from 45% in 1960 to 80% in 2002 and in Singapore from 59% in 1980 to 93% in 2002. Globalisation and Neoliberalism How can this convergence towards homeownership be accounted for? One view, widely held, is that such moves towards pro-ownership policy regimes, particu larly as they characterise the older EU member states, are part of a general restructuring of welfare systems brought about by the imperatives of globalisation.
Specifically, the desire of governments to want to hold on to jobs, leads them to adopt business-friendly policies characterised by low taxation, low social overheads regimes as well as flexible labour markets in which work ers have fewer rights vis-a`-vis their employers. This ‘strong’ version of globalisation is thus one in which, in comparison to the past, nation-states have less autonomy over social programmes. In this context, the pressure to reduce expenditure on social housing and to encourage homeownership becomes compelling. Insofar as social housing has mainly met the needs of lower (including the unemployed) income groups, providing them with an amount and quality of housing that exceeds the ability to pay from their own resources, there may be a perception of a heavy call on taxation to meet either production and/or consumption subsidies. Moreover, the more unemployment rises – with most economically advanced states experiencing rising unemployment in some years in recent decades – the more the income of the poorest groups in society drops and the greater the subsidies and the redistribution may
602
Housing Policy Trends
Table 2 Residential mortgage debt as percent GDP
Australia Canada New Zealand United States Belgium Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Netherlands Poland Slovenia Slovakia Spain Sweden United Kingdom Japan
1992 (%)
2002 (%)
2006 (%)
24.2 42.7 32.6 45.3 19.9 63.9 37.2 21.0 38.7 4.0 20.5 6.3 40.0 11.9 37.5 55.5 25.3
50.8 43.1 56.2 58.0 27.9 1.9 74.3 3.7 (1998) 31.8 22.8 54.0 13.9 2.1(2001) 36.5 11.4 6.7(1999) 0.6 (1997) 78.8 1.5(1997) 0.3(1998) 3.9 32.3 40.4 64.3 36.8
36.3 7.1 100.8 32.7 43.8 32.2 51.3 29.3 11.4 70.1 18.7 28.9 12.6 98.4 8.3 6.6 9.6 58.6 56.7 83.2
Source: European Mortgage Federation (2007) Hypostat. Brussels: EMF.; Catte P, Girouard N, Price R, and Andre C (2004) Housing Markets, Wealth and the Business Cycle, Economics Department Working Paper No. 194, OECD: Paris.
appear to be. Seeing themselves compelled by the chal lenge of globalisation to make welfare and tax savings, one target for savings has been social housing. So, one view of national housing strategies promoting homeownership is that they reflect a wider context in which processes of globalisation are forcing policy-makers to pursue policies that involve cutting taxation and social spending. But the view that globalisation is an irresistible force is contestable, both theoretically and empirically. For exam ple, some forms of investment have been attracted to regimes in which there is high taxation, high social spend ing as well as strong labour rights. Likewise, in terms of housing outcomes, the impact of globalisation can be seen to have been quite different in different regions, for example, between Western and Eastern advanced econo mies, while, with respect to social housing, the reality is that some countries have maintained high production levels. This does not mean that globalisation is not associated with convergence tendencies, nor that governments are unconstrained by international competitiveness, but rather that any convergence is indeterminate. On this view – the ‘weak’ model of globalisation – governments are not without choices; they do not have to rush
headlong down the retrenchment path. The lesson for the politics of tenure is that the continuation and indeed strengthening of pro-owning policies, whether or not tied to antisocial housing policies, may not be inevitable. Divergence Models This recognition that globalisation does not necessarily constitute an inexorable and irresistible force leading to convergence in national housing policies is an appropriate point at which to consider, more fully, theories of diver gence. An empirical basis for this is also provided in Table 1. Notwithstanding the general tendency for homeownership sectors to increase in size, wide differ ences in the orientation towards homeownership remain. For example, among the East Asian economies, Singapore has over 90% of its households in homeownership, whereas in Hong Kong it is 56%. Among European coun tries, the differences are even wider. Hungary with a 92% homeownership rate is clearly at one end of the spectrum with Germany and Sweden at the other with about 40%. And although it is not shown by Table 1, it is also relevant to note that social housing has been present in large numbers not only in Europe but also in some coun tries beyond it, most notably Hong Kong. Examination of Table 2 similarly shows considerable cross-country variation in the scale of mortgage lending, being particularly high in Denmark and the Netherlands and low even in some Western European countries such as France and Italy. Furthermore, there is not even a strong correlation between the size of homeownership sectors and mortgage activity, reflecting – as will be identified later in the article – different housing system models. The significance of at least some of these differences was recognised in Jim Kemeny’s seminal work in which he identified a group of English-speaking countries – Australia, Canada, New Zealand, and the United States – which he labelled home-owning societies and a second group of European mainland countries – Germany, the Netherlands, and Sweden – which he identified as costrental societies. As the labels implied, the first group of countries had policies and tenure outcomes that focused on homeownership, while the second had housing policies and tenure outcomes in which cost-rental housing played a significant role. In subsequent publications (e.g., Kemeny, 1995), he introduced the concept of dualist regimes to countries whose housing policies discriminated against cost renting, and unitary whose housing policies put cost renting on an equal footing with market renting. Kemeny’s thesis was that differences between these sets of countries were not simply a matter of their respec tive stages of industrial development, but were deeply rooted in their social structures. In his view, Australia could be characterised as having evolved a high degree
Housing Policy Trends
of privatism, which reflected a relatively undeveloped welfare state, as well as low residential densities, which themselves derived from privatised dwelling types and housing tenure, a reliance on private transport, and a gender division of labour in which women often took ‘female’ roles.. By contrast, Swedish society had devel oped a high degree of collectivism, based on the growth of a well-developed welfare state, collective transport sys tem that functioned well with the prevailing high-density urban form, the dominance of rental and cooperative flats, and, common gender roles based on public childcare that facilitated predominantly wage-labour roles for women. Thus, on notions such as politics, social structure, and ideology and arguing their significance in understanding divergence, Kemeny established a counterpoint to highlevel theories – for example, the logic of industrialism and globalisation – of the inevitability of convergence. With some broad similarities in approach, but directed more broadly at welfare systems, the work of Esping Andersen (1990) has nevertheless been influential in informing housing research. His identification of three worlds of welfare – Liberal (the United States, Canada, Australia, and the United Kingdom), Conservative Corporatism (Germany and France) and social democratic (Sweden and Denmark) – have been widely applied in order to analyse and interpret housing policy and outcomes. But just as in respect of welfare in general, it has been recognised that the identification of three worlds is not sufficient to capture the diversity of housing systems across all economically advanced countries. One important addi tion has been the recognition of a Southern European model (Spain, Portugal, Greece, and Italy) in which the family has had a special importance in ensuring the welfare of its members and for whom, housing, in the form of homeownership, has taken on a role both as providing physical shelter and an emotional foundation of the family; homeownership is not, as in Anglo-Saxon countries, typi cally a financial asset but an emotional bedrock, part of the family project. A further feature of the Southern European model is that house buying is frequently financed directly from family resources rather than through a mortgage product supplied by a financial institution. So, some of these countries, for example, Italy and Greece, have quite small mortgage markets (Table 2). The East Asian economies – Japan, Korea, Taiwan, Singapore, Malaysia, and Hong Kong – have been indenti fied as another significant grouping. In these countries, welfare has generally been subordinated to the requirement for economic growth. Consequently, there has not been the development of welfare systems based on storing social insurance principles, but rather ones based on self-reliance and family responsibilities. In this framework, the provision of decent housing has been necessary in order to maintain a productive workforce, but it has not been a means or object of redistribution. Moreover, homeownership has frequently
603
been viewed as a financial asset on which the family could found its own welfare networks. In addition to these groupings, the housing policy approaches in developing countries can also be seen to constitute their own grouping. The initial attempts by countries in the developing world to tackle problems of housing mainly date back to the years immediately after the end of the Second World War. Often, these attempts were heavily influenced by the European countries that were or had been their colonial masters and involved the importation of European approaches. The notion that the state should take a pivotal role in housing provision, setting standards, and providing subsidies became the norm. But, by the late 1950s and 1960s, for many devel oping countries the external influence switched to the United States, and to international agencies particularly the United Nations, The World Bank, and, later, the International Monetary Fund (IMF). More or less in all developing countries, mirroring the developments in the developed countries, there was a recognition that housing should not be treated as a basic right of citizenship but as a commodity to be produced and exchanged through the market. This generally meant the dismantling of public institutions formerly involved in construction and man agement of public housing, the selling of former public housing and a shift towards public involvement with an enabling role, promoting the functioning of land, con struction, housing, and financial markets. Whereas portrayed in these very broad terms the experience of the developing countries appears similar to those in the developed world, there are also significant differences. Notable in countries such as India, Brazil, Mexico, China, and some in Africa, for example, is the increasing concentration of poverty in the rapidly expanding urban areas. Urban slums, frequently in the form of shanty towns, are not consistently functioning as staging posts through which recent migrants slowly become absorbed into formal urban economies. While individual homeownership, albeit of low-quality physical structures, is widespread, an important focus of housing policy in many developing countries lies with assisting the poor to get access to finance and achieving the secur ity of tenure that underlies this form of housing. Overall, then, whereas it is possible to view the last few decades as being characterised by increasing convergence in housing policies and outcomes around a homeownership norm, there is also empirical evidence supporting the identification of a number of quite different models.
Future Trends in Housing Policy What can be said about future housing policy trends, particularly whether they seem likely to converge or diverge? Writing in the midst of the so-called credit
604
Housing Policy Trends
crunch, which appears to mark a structural break in global economic development, it seems appropriate to consider what the possible consequences for housing policy in the advanced economies might be. That is one of the aims of this final section. But before embarking on that task, recognition is given to the impact on housing policy developments of a process which transcends the precrisis and crisis periods, namely that of demographic ageing.
The Housing Consequences of Demographic Ageing The ageing of the populations of the advanced economies is part of a worldwide trend, over the course of perhaps a century and through which there has been a shift from high rates of fertility and mortality to low rates of fertility and mortality. This demographic transition is resulting in an ageing of populations or ‘age dependency’, in which the share of populations accounted for by older people can be expected to grow to a level where in most advanced economies by 2050 those over the age of 65 years will constitute between 25% and 35% of the population totals, and those over 80 years between 10% and 15%. One of the big questions facing the future for both welfare and housing policy concerns the likely impact of this changing balance. In Castles’ (2004) view, ‘‘the logic of the argument is transparent.’’ On the one hand, pen sions and cash benefits to older people combined with health and social care constitute the two largest pro grammes in most of the larger economies, accounting for about two-thirds of total social spending. On the other hand, the proportion of older people in those same econo mies is growing, so that there will be increasing upwards pressure on the costs of these elements of social spending. In these circumstances, and given the twin pressures of globalisation and the fiscal implications that arise from a rise in age-dependency ratios, it seems likely that govern ment spending on those welfare areas not directed at older people will be most vulnerable to cuts. While Castles (2004) provides empirical evidence refuting the inevitability of such trends, it can be said, at a high level of generalisation, that the cuts in spending on social housing provision for young people and families which have characterised the housing systems of advanced economies in recent decades, nevertheless fol low this logic. Moreover, the general tendency for governments to promote homeownership as a form of asset-based welfare, seeing housing equity as a source of income to meet the needs of older people, can also be seen as a response to the fiscal strains of funding state pensions. Given the continuation of demographic ageing processes, therefore, the continued support for homeownership would also seem a credible possibility.
The Housing Consequences of the Credit Crunch At the time of writing, both the extent and future course of the current economic circumstances – often referred to as the credit crunch – are unclear, and so necessarily is its impact on housing policies in the advanced economies. The obvious starting point for thinking about possible futures is the recognition that the credit crisis, whatever the other causes, was a consequence of developments in homeownership markets. The expansion of liquidity, itself founded on expansion of the US deficit and Asian, particularly Chinese, surpluses, was accompanied by fall ing interest rates, rising asset prices, and increasing levels of household indebtedness. The development in the United States in particular of sub-prime mortgages and of mortgage-backed securities which in a global financial market were sold on to banks operating in many coun tries, both increased and spread the risk. Once households began to default on mortgages while the extent of bad debts, hidden in the mortgage-backed securities, became untraceable, suspicion fell on banks everywhere. The combination of default and repossession along with greater reluctance to lend to house buyers led to falling house prices everywhere. Moreover, the financial and housing market crisis was followed by a more general economic crisis with rising levels of unemployment and even higher levels of mortgage default. So, what will be the consequences for housing policy developments in the near future? On one view, it could mark the end of the trend towards ever higher levels of homeownership. With fewer people able to enter homeownership and falling house prices revealing the fragile basis of housing markets, households come to the view that homeownership is a less reliable basis for their futures. Drawing a parallel with the impact of the Asian financial crisis at the end of the 1990s, which was followed by reforms in the East Asian economies characterised by increasing reliance on Western-style social insurancebased welfare, one view is that in Western countries there could be a reassertion of their traditional approaches. Moreover, referring back to the Harloe the sis, it is also possible that this will be exactly one of those historical periods when part of the solution to the system crisis is seen to be mass social housing. Such a view of the dampening of the promotion of homeownership is complicated, however, by the impact of the credit crunch on public finances. To varying extents, the governments of the more advanced economies have implemented rescue plans for banking sectors and other parts of their economies. These rescue plans, combined with increased demand for social spending associated with rising levels of unemployment, and lower tax receipts associated with depressed rates of economic growth, will have nationally differential consequences for the ability of
Housing Policy Trends
605
governments to spend on social housing developments, or indeed other (nonrescue) subsidies for the housing sector. In such circumstances, some, but not necessarily all, gov ernments may continue to encourage homeownership if only by failing to promote other housing opportunities.
Kemeny J (1995) From Public Housing to the Social Market: Rental Policy Strategies in Comparative Perspective. London: Routledge. Kemeny J and Lowe S (1998) Schools of comparative housing research: From convergence to divergence. Housing Studies 13: 161–176.
See also: Globalisation; Home Ownership: Economic Benefits; Privatisation of Housing: Implications for Well-Being.
Further Reading
References Burns L and Grebler L (1977) The Housing of Nations: Analysis and Policy in a Comparative Framework. London: Macmillan. Castles FG (2004) The Future of the Welfare State. Oxford, UK: Oxford University Press. Esping Andersen G (1990) The Three Worlds of Welfare Capitalism. Princeton, NJ: Princeton University Press. Harloe M (1995) The People’s Home: Social Rented Housing in Europe and America. Oxford, UK: Blackwell.
Agus R, Doling J, and Lee D (eds.) (2002) Housing Policy Systems in South East Asia. Basingstoke, UK: Palgrave. Allen J, Barlow J, Leal J, Maloutas L, and Padovani L (2004) Housing and Welfare in Southern Europe. Oxford, UK: Blackwell. Angel S (2000) Housing Policy Matters: A Global Analysis. Oxford, UK: Oxford University Press. Doling J (1997) Comparative Housing Policy: Government and Housing in Advanced Industrialized Countries. Basingstoke, UK: Macmillan. Kemeny J (1981) The Myth of Home Ownership: Public Versus Private Choices in Housing Tenure. London: Routledge. Lowe S and Tsenkova S (eds.) (2003) Housing Change in Eastern and Central Europe: Integration and Fragmentation. Basingstoke, UK: Ashgate. Ronald R (2008) The Ideology of Home Ownership: Homeowner Societies and the Role of Housing. Basingstoke, UK: Palgrave Macmillan.
Introduction The aim of this article is to present the development of housing policy, principally but not exclusively, in the economically more advanced countries of the world. These make up three broad groupings: the New World, English-speaking Western countries of North America and Australasia; the Old World, particularly Western Europe and the more advanced of the Eastern European countries; and East Asia including Japan, Korea, Taiwan, Singapore, Hong Kong, and Malaysia. Given the large numbers of countries, their wide geographical coverage and in the case of many the long historical period during which they have been industrialised, the presentation of developments will necessarily be fairly general. Indeed, for the earliest years, perhaps 150 or more years ago, when rapid industrialisation and urbanisation provided an impetus to state housing policies, the coverage will be painted with a very broad brush, glossing over the differences and exceptions to highlight general tenden cies. Rather, there is detail about trends only with respect to recent decades. Both past developments and possible future directions of housing policy are discussed within a framework that focuses on tendencies towards convergence and tenden cies towards divergence. In other words, the aim is to identify not only the main policy developments and trends, but also the extent to which they can be inter preted as a narrowing of the differences between countries – are they becoming more similar – or a widen ing of the differences – are they becoming less similar. Such an emphasis requires that policy developments are considered against a number of theoretical perspectives that provide understandings of the origins of and influ ences on housing policy: why do governments have housing policies, what determines the content and aim of housing policies, and to what extent are these similar across countries – thus leading to convergence – or dif ferent – thus leading to divergence. For the purposes of achieving these aims, the article, following this introductory section, is arranged in four sections. The first section provides a broad understanding of the meaning of convergence and divergence in policy systems with some indications of their theoretical under pinnings and of how they might be recognised empirically. The second section presents the broad development of housing policies in the now advanced economies during
596
the period of their initial moves towards industrialisation up to the present era, or at least up to the start of the current economic difficulties. For each of them, the tim ing of their economic take-off differed, as did the speed and nature of the economic, social, and political changes. But all developed state housing policies. Moreover, not only did they develop housing policies but also, at a high level of generalisation, there are at least some indications that they have tended to follow a similar trajectory char acterised by an initial period of increasing state intervention followed by a second period of some with drawal of the state with more reliance on market mechanisms. So, the (very) broad picture is: stage 1, growing reliance on the state: stage 2, growing reliance on the market. An important question, then, concerns why, as a response to the challenges of industrialisation and subsequent economic development, was there this degree of similarity, or convergence, in the field of housing? The third, and somewhat more detailed, section focuses on housing developments over the last three or four decades. Here there have also been some across country similarities, for example, in the continuation of an active state role in housing combined with important moves towards privatisation and deregulation of housing finance markets. While these trends can be characterised in many countries by a common and increasing impor tance placed on homeownership, there have also been some marked differences. In other words, there is evi dence of both convergence and divergence, so that part of the aim of this section is to provide an understanding of the contrary processes. The fourth, final, and brief section provides some speculation about future developments and the likelihood of convergence or divergence in the context of two macro processes: the changes in demographic structures result ing from the ageing of populations; and the restructuring of financial markets and other changes taking place as a direct result of the global, economic hiatus occurring from 2008.
Understanding Convergence and Divergence The terms ‘convergence’ and ‘divergence’ have long been part of the vocabulary of those engaged in the compara tive study of housing policy, indeed of policies across a
POLICY (Overview)
Housing Policy Trends
broad range of areas. They have come to be frequently adopted as, to use Michael Oxley’s phrase, ‘‘a sort of theoretical string’’ that helps to tie the comparative story together, the general term that encapsulates and sum marises the developments in the myriad of housing policies under review. Meaning and Empirical Indicators While the literal and everyday meanings of the two terms are perhaps simple and clear, the scientific meanings are arguably less so. One view, espoused by Kemeny and Lowe (1998), is that convergence refers to analysis in which it is taken, more or less for granted, that housing systems everywhere have been moulded by the same influences. Further, they recognise that underlying such analysis may be explanations of why those influences have led to similar outcomes, and thereby acknowledge that convergence refers to a process, or processes, operat ing over time such that housing policies in different countries are somehow moving towards a common point or model. Empirically and theoretically this dynamic might be recognised through a narrowing of differences that might take the form of either common policy developments, such as the reduction of mortgage interest relief on hous ing loans or the deregulation of financial sectors, or narrowing of statistical differences, such as in the propor tion of national housing stocks accounted for by social housing. The latter has been the basis of a number of studies in which the statistical variance of a number of indicators of housing systems over successive decades has been computed in order to test whether convergence had taken place. But, convergence might be recognised in a slightly different way: each country being at a different point or stage on a common trajectory. Thus, if housing policy was a direct reflection or consequence of the stage of eco nomic development, then countries, depending on their economic position, might be spaced widely apart but heading in the same direction, and in that sense conver ging. However, it is also possible, if the relationship between economic development and housing policy was nonlinear (say little investment in social housing at low and high levels of economic development, but consider able investment at medium levels of economic development), that over some periods national housing policies would statistically get further apart. In such cir cumstances, convergence might be happening but it might not be confirmed empirically as a reduction in statistical differences. Divergence, in contrast, refers to differences in hous ing policy. This can have two distinct meanings. The one is that all countries are somehow unique and particular, and that with different social and economic
597
circumstances, their policy responses would adapt to those different circumstances. Kemeny and Lowe (1998) argue that divergence might also be seen as classes or types of housing policy. This could be interpreted as a notion that while not all housing systems are essentially the same and proceeding in the same direction, it is possible to identify groupings of countries in which hous ing systems were different from those in other groupings and proceeding differently to those in other groupings, but the same as, and proceeding in the same direction as, countries in the same group. On this basis, then, it is possible to recognise three categories of Oxley’s string that ties comparative research together: particularism in which everywhere is considered unique and different; convergence in which everywhere is the same; and divergence in which there are groupings that are different from other groupings, but, within any one grouping, everywhere is the same. Theoretical Foundations It is possible, in turn, to attach different theoretical per spectives to each of the three categories. Kemeny and Lowe (1989) argue that particularistic approaches have tended simply to juxtapose information about different countries generally without positing explanatory frame works that help an understanding of why there are similarities and differences. Given the tendency in such studies to present the fine detail of housing policies and outcomes – the precise dates, the precise actors, the pre cise percentages – their particularity is hard to resist. In their view, however, an often implicit framework in such studies is based on the notion that national governments act independently from one another, responding to dif ferent sets of circumstances effectively to determine the particular shape and direction of national housing systems. The convergence approach, in contrast, is generally based on one or more theoretical perspectives that emphasise a deterministic response to a common process, what might be called a universal law. These high-level theories stress the significance of the logic of capitalism or the logic of industrialism, or refer to the irresistible con sequences of demographic change or globalisation to provide an overarching template onto which may be mapped the development of national housing systems. It might also be said that these theories emphasise the importance of structure rather than agency. Divergence approaches, for their part, are usually based on theories that reject the notion of the inability of nations to resist the impact of structural or universal forces, emphasising rather their capacity to impose and negotiate other outcomes. Here, politics, ideology, geo graphy, and culture may all play a part in guiding and achieving choice. These middle-range theories inform the
598
Housing Policy Trends
now large body of research that has sought to establish typologies of policy models or regimes and that received considerable encouragement with the extensive literature on more general social welfare regimes. One outcome of this research has been the frequency of attempts, on the basis of their housing systems, to locate each of the advanced economies, with some other advanced econo mies, in one of a set of groupings.
Broad Trends in Housing Policy: From Industrialisation to the Credit Crisis This convergence–divergence background assists consid eration of the long-run policy trends. Here, one way of approaching an understanding of the trends in housing policy is through the utilisation of the notion of the ‘European Paradigm’. The value of this lies not in the fact of its Europeanness, as if European countries are somehow a model for everywhere else or even that the paradigm signifies a high degree of convergence, but simply that what we would now recognise as housing policy first developed in Europe and that this was a product of it being the birthplace of the industrial revolu tion and its associated urbanisation. The Broad Trajectory of Housing Policy The European paradigm, therefore, starts with the transi tion from feudal or preindustrial societies to industrial ones. In the late eighteenth and early nineteenth centu ries, in a number of Western and central European countries, manufacturing enterprises were set up, mainly in urban areas that expanded with the influx of labour from rural areas. This rapid expansion of the new indus trial towns and cities and the growth of a new, urban labour force was also part of the development of socio– economic–political systems based on free markets. But this also coincided with the sanitary reform movement which itself was born out of the epidemic diseases, prin cipally cholera and typhoid, that flourished in the types of housing development that characterised the period. The free markets in land and urban development resulted, for the great mass of the new urban working classes in Europe, in housing that was built at high densities to low standards of construction and amenities frequently without adequate sanitary facilities or supplies of fresh water, and crowded onto sites that were adjacent to noisy and polluting factories. It was against this background that European govern ments, particularly from the last quarter of the nineteenth century began to place constraints on the operation of the urban housing market. While the details differed, the general approach was similar: governments introduced legislation to control overcrowding at least in the sense,
if not in the number of people that then lived in each dwelling, of a maximum density of development, that is, the number of dwellings per unit of area, as well as such matters as construction standards and public health pro visions including sanitation facilities. In essence, these were constraints, or regulations, imposed on the supply side of the market, and intended to bring about a mini mum quality or standard of the housing stock and an associated raising of the quality of housing consumed. Moving into the early parts of the twentieth century, particularly coinciding with the time of the First World War (1914–18), there were further, and also widely com mon, interventions. The first involved controls over landlord–tenant relationships. Legislation in France in 1914, Britain in 1915, Denmark in 1916, and Germany and the Netherlands in 1917 took two main forms: the capping of rents so that these were lower than those that would be set by the usual market mechanism; and security of tenure. Together, these had the immediate effect of protecting tenants against high housing costs that might exceed their reasonable ability to pay out of the prevailing level of wages enjoyed by working families, alongside protection against eviction. The second intervention also came out of a recogni tion that even a market subject to some regulations about minimum standards resulted in dysfunctional outcomes. European governments began to accept that if housing for the urban worker was to be of a politically and socially acceptable level, it would be necessary for even greater intervention, in the form of what has come to be known as social housing, supported by government subsidies to supply, often in the form of finance provided at an interest rate below the prevailing market rate, and made available to public bodies as well as to housing cooperatives and associations of the not-for-profit sector. Again, as a general pattern in the European countries, support for the principle and practice of social housing expanded in the conditions prevailing in the aftermath of the First World War when generally there was a combi nation of housing shortage resulting from a lack of investment during and before the war years and the influx of the returning soldiers. But, such support expanded much further after the Second World War (1939–45), when the shortage of housing was even greater because added to the underinvestment and population movements that had characterised the First World War, was a third factor, the very high levels of destruction of housing stock as a direct consequence of the war effort. It was in these early, postwar years that the support for social housing was particularly large. Once, after some decades, the housing shortages had largely been overcome; however, European government attention typically turned from questions of quantity to those of quality. This has translated into two, broad policy approaches. The first was the demolition of old dwellings,
Housing Policy Trends
frequently built to low standards and in poor physical condition, along with the provision of new housing built to higher amenity and construction standards. In Western Europe, this occurred particularly in the 1960s and early 1970s. The second policy approach developed even more widely in the post-1970 period and took the form of the promotion of homeownership, a form of housing tenure that has been widely perceived as offering, in comparison to the position of tenants – whether of private or social landlords – distinctive financial and ontological advan tages to households. According to the European paradigm, therefore, there has been a typical, historical trajectory of state interven tion in housing. This has been characterised as a progression through a number of distinct phases or stages. The first involved government efforts to ensure that the rapidly expanding number of urban workers had some where to live, followed by a second stage in which there were attempts to provide more than the minimum level of space, with the third stage developed when the shortages had been largely overcome and governments turned to a concern with quality, and fourthly, once quality had been widely achieved governments reverting once again to market-based housing solutions, frequently homeownership solutions. Looking at this trajectory as a continuous progression, rather than as discrete stages, it can be described as having an inverted U shape. At first, countries have very low levels of intervention, in terms of regulation and finan cing, their governments leaving housing largely to the market. Gradually, over time, there are more and more interventions as governments place more restrictions on the operation of the market and then begin to intervene heavily through subsidies and even direct provision in the form of social housing. Eventually, some point is reached where the basic quantity and quality needs of the bulk of the population are met, and governments begin to draw back from intervention, again relying heavily on market solutions, particularly those supporting homeownership.
Explaining the Common Trajectory Leaving aside the issue of how representative this para digm is, even of European countries – that issue will be taken up later in the article – the question considered here is how can this apparent convergence be explained? Why is it that advanced economies consistently have intro duced housing policies and why has housing policy consistently proceeded in the same general direction? One view is that policies addressing housing issues, like policies addressing more general welfare concerns, are an integral part of the process of modernisation, which in turn is indicated by the transition from feudal to industrial societies. The point here is that countries
599
have housing policies simply because it is part of the path of modernisation. Another view, providing a more explicit explanation, is that interventions in housing, again like interventions in general welfare, are driven by the logic of industrialism. The argument here is that as countries undergo a process of industrialisation and as they then develop to more and more economically advanced levels, with higher and higher gross domestic products (GDPs), they face similar problems and opportunities. Thus, at an early stage of industrialisation, as workers are drawn into towns and cities where manufacturing plant is located, countries face new, but common, housing problems: overcrowding and unhealthy living environments. As industrialisation advances further, in order to compete with other manu facturers and other countries, it has, universally, become increasingly important that workers are productive and this in part demands that they are fit and healthy, so requiring – among other things – decent homes that keep them fit and healthy. Logic of industrialism explana tions therefore envisage that at each step along the path of economic development, sets of problems and opportu nities arise that are common to all countries and some of these require housing policy solutions. One version of this – though with an emphasis on resource allocation rather than directly on policy – was developed some years ago in a study by Burns and Grebler (1977) in which they used data for the period 1963–70 covering a total of 39 countries which ranged from those at low levels of economic development – Kenya, Bolivia, and the Philippines – to those at the highest – in Western Europe as well as Japan and the United States. Fitting a regression model, they established an inverted U-shape relationship such that countries at low levels of GDP per capita typically had low total expenditure on housing, while countries at medium levels had high total expenditure on housing and those at the very highest levels, again, had only low levels of expen diture. This version thus fits broadly with the observation underlying the European paradigm and McGuire’s stages. In addition, it indicates that the European paradigm may hold more widely, not only describing the European experience but also locating it in a more general process of economic development. In other words, suggesting a global paradigm. Another version of convergence, which might more accurately be labelled a logic of capitalism explanation, is provided by Harloe (1995). Among other things, this suggests that the European paradigm is really European and not global, at least in so far as the development of mass social housing is concerned, since this has been largely specific to Western European countries. The basis of Harloe’s view is that capitalism requires states to organise themselves around the pursuit of surplus value and, among other things, this means the extension of
600
Housing Policy Trends
private ownership and commodification, such that gener ally wherever there was an opportunity to extract surplus value private markets would be established. On this view, state welfare systems – including some housing policies – provided outside the market would be set up only as a compromise, forced on capitalism by the particular circumstances arising at historical points in time. From this, Harloe argues that social housing was initiated in many European countries prior to the First World War only as it became apparent that pure, com modified forms of housing were not capable of meeting the needs of poor people, nor of ensuring their fitness and healthiness as workers. But, it was small-scale or residual social housing with only a minimal impact on the princi ple of private market solutions. From this, he further argues that the shift from residual social housing to mass social housing, which occurred after each of the two world wars, was the consequence of extraordinary and tempor ary conditions. These were periods of system-wide crisis in which mass social housing was seen as part of the solution. In the first period, the aftermath of the First World War, the common Western-European-wide pro blem was to reestablish the status quo in the maintenance of the system of liberal capitalism. In the second period, from 1945 until the start of the 1970s, the challenge was the reconstruction and restructuring of national econo mies. In both periods, to different degrees in different countries, mass social housing was seen as part of the solution, but once the crises, the extraordinary conditions, were resolved, social housing returned to its normal, residual role. One of the implications of this position is, therefore, that periods of mass social housing would occur only in countries which experienced system-wide crises to which it would be seen as part of the solution. So, countries like the United States, Australia, and New Zealand which did not face similar circumstances after the two world wars, or some of the countries of East Asia, for example, Korea and Taiwan, that have achieved rapid economic growth, industrialisation, and urbanisation only in the last few decades, have not developed large social housing sectors. They may – and indeed have – developed policies that regulate aspects of private housing markets and provide subsidies, so have some features of the European para digm, but they have not adopted all the features.
Increasing the Role of Homeownership: Convergence and Divergence Having set out the general pattern of housing policy development over the entire period from the beginnings of industrialisation to the present day, the attention paid in this section is focused on the last few decades, roughly from the mid-1970s until the start of the current credit
crunch. During this period, the single most consistent development over most economically advanced countries has been the growth of homeownership. Whereas the recognition of this consistency provides a vehicle for examining the convergence processes of globalisation, the intention is also to stress differences around the com mon pattern, so enabling the examination of divergence processes. Policy Trends: The General Pattern The general pattern of housing policy developments over recent decades, then, has involved some retrenchment of state intervention with a reversion to the market and particularly homeownership (Table 1). In European countries, and indeed elsewhere, a raft of policies have been involved. Some have been directed specifically at making homeownership more attractive to households, in the case of many countries explicitly for those with low incomes. These interventions, many of which have also been adopted in countries outside Europe, include tax breaks on housing-related invest ments, such as relief from tax on imputed rental value of owner-occupied housing and reductions on loan interest. The policy support for homeownership has been accompanied by a general move towards the deregulation of financial markets that have resulted in increased lend ing to the housing sector. In some countries, for example, Australia and the US, deregulation has a history of several decades. In Western European countries, mortgage loans as a proportion of GDP have expanded considerably even over the last decade. More recently, the same general trend has been apparent in the European transition coun tries, where following the collapse of the Soviet Union market-based housing mortgage systems have been devel oped: The result in most economically advanced countries has been a large increase in the amount of residential mortgage debt as a proportion of national GDP (Table 2). Other policies have been aimed at reducing the supply of, and demand for, nonmarket forms of housing often involving the privatisation of social housing stock. In fact, even if the numbers involved are not always large, most EU member states now allow the sale of social housing. The selling off of social housing has even extended to non-European countries, such as the United States, where there was only a small stock anyway. In the East European countries that had come under the control of the Soviet Union, the privatisation of former state housing has been particularly large, a result not only of the distinct change in their political systems, often with the enthusiastic embrace of private markets, but also the decision to sell them at relatively low prices. The outcome has been that social housing has largely disappeared from most of the transition countries.
Housing Policy Trends
601
Table 1 The postwar growth of homeownership: percent share of total stock by (approximate) year
Country
1960 (%)
1970 (%)
1980 (%)
1990 (%)
2002 (%)
Australia Canada United States Austria Belgium Czech Republic Denmark France Finland Germany Greece Hungary Ireland Italy Lithuania Netherlands Norway Portugal Slovenia Spain Sweden United Kingdom Hong Kong Japan Singapore Taiwan
– – – 38 50 – 43 41 57 – – – – 45 – 29 – – – – 36 42 – – – –
– 60 64 41 55 – 49 45 59 – – – 71 50 – 35 53 – – 64 35 49 – – – –
71 62 66 48 59 – 52 51 61 – 70 – 76 59 – 42 59 57 – 73 41 56 – 60 59 74
72 63 64 55 67 – 51 54 67 38 77 – 81 67 – 44 59 58 68 76 42 68 42 61 88 81
70 65 68 56 71 47 51 55 58 42 83 92 77 80 84 53 77 64 82 85 42 69 56 62 93 85
Sources: Catte P, Girouard N, Price R, and Andre C (2004) Housing Markets, Wealth and the Business Cycle, Economics Department Working Paper No. 194, OECD: Paris; Scanlon K and Whitehead C (2004) International Trends in Housing Tenure and Mortgage Finance. London: Council of Mortgage Lenders; National Board of Housing, Building and Planning (2004) Housing Statistics in the EU 2004. Karlskrona, Sweden: Boverket; UNECE (2006) Guidelines on Social Housing: Principles and Examples. United Nations, New York and Geneva; Lu H-c and Chen M (2006) Cultural norms and tenure choice? Investigating the high homeownership rate in Taiwan. www.fin.ntu.tw/-conference/conference 2006/powerpoint/academic7/7-1.ppt (accessed 25 July 2011).
The overall effect of these and other pro-owning poli cies, in Europe and elsewhere, has been continuous increase in the size of homeownership sectors. Table 1 shows this to be the case in almost all the countries included. Notwithstanding some gaps in the data, in only a few countries, for example, Australia, Finland, and Ireland, are there exceptions to this general pattern, and even then the decreases have been small, just a few percentage points. Moreover, in some countries, the increases have been particularly large, for example, in Italy from 45% in 1960 to 80% in 2002 and in Singapore from 59% in 1980 to 93% in 2002. Globalisation and Neoliberalism How can this convergence towards homeownership be accounted for? One view, widely held, is that such moves towards pro-ownership policy regimes, particu larly as they characterise the older EU member states, are part of a general restructuring of welfare systems brought about by the imperatives of globalisation.
Specifically, the desire of governments to want to hold on to jobs, leads them to adopt business-friendly policies characterised by low taxation, low social overheads regimes as well as flexible labour markets in which work ers have fewer rights vis-a`-vis their employers. This ‘strong’ version of globalisation is thus one in which, in comparison to the past, nation-states have less autonomy over social programmes. In this context, the pressure to reduce expenditure on social housing and to encourage homeownership becomes compelling. Insofar as social housing has mainly met the needs of lower (including the unemployed) income groups, providing them with an amount and quality of housing that exceeds the ability to pay from their own resources, there may be a perception of a heavy call on taxation to meet either production and/or consumption subsidies. Moreover, the more unemployment rises – with most economically advanced states experiencing rising unemployment in some years in recent decades – the more the income of the poorest groups in society drops and the greater the subsidies and the redistribution may
602
Housing Policy Trends
Table 2 Residential mortgage debt as percent GDP
Australia Canada New Zealand United States Belgium Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Netherlands Poland Slovenia Slovakia Spain Sweden United Kingdom Japan
1992 (%)
2002 (%)
2006 (%)
24.2 42.7 32.6 45.3 19.9 63.9 37.2 21.0 38.7 4.0 20.5 6.3 40.0 11.9 37.5 55.5 25.3
50.8 43.1 56.2 58.0 27.9 1.9 74.3 3.7 (1998) 31.8 22.8 54.0 13.9 2.1(2001) 36.5 11.4 6.7(1999) 0.6 (1997) 78.8 1.5(1997) 0.3(1998) 3.9 32.3 40.4 64.3 36.8
36.3 7.1 100.8 32.7 43.8 32.2 51.3 29.3 11.4 70.1 18.7 28.9 12.6 98.4 8.3 6.6 9.6 58.6 56.7 83.2
Source: European Mortgage Federation (2007) Hypostat. Brussels: EMF.; Catte P, Girouard N, Price R, and Andre C (2004) Housing Markets, Wealth and the Business Cycle, Economics Department Working Paper No. 194, OECD: Paris.
appear to be. Seeing themselves compelled by the chal lenge of globalisation to make welfare and tax savings, one target for savings has been social housing. So, one view of national housing strategies promoting homeownership is that they reflect a wider context in which processes of globalisation are forcing policy-makers to pursue policies that involve cutting taxation and social spending. But the view that globalisation is an irresistible force is contestable, both theoretically and empirically. For exam ple, some forms of investment have been attracted to regimes in which there is high taxation, high social spend ing as well as strong labour rights. Likewise, in terms of housing outcomes, the impact of globalisation can be seen to have been quite different in different regions, for example, between Western and Eastern advanced econo mies, while, with respect to social housing, the reality is that some countries have maintained high production levels. This does not mean that globalisation is not associated with convergence tendencies, nor that governments are unconstrained by international competitiveness, but rather that any convergence is indeterminate. On this view – the ‘weak’ model of globalisation – governments are not without choices; they do not have to rush
headlong down the retrenchment path. The lesson for the politics of tenure is that the continuation and indeed strengthening of pro-owning policies, whether or not tied to antisocial housing policies, may not be inevitable. Divergence Models This recognition that globalisation does not necessarily constitute an inexorable and irresistible force leading to convergence in national housing policies is an appropriate point at which to consider, more fully, theories of diver gence. An empirical basis for this is also provided in Table 1. Notwithstanding the general tendency for homeownership sectors to increase in size, wide differ ences in the orientation towards homeownership remain. For example, among the East Asian economies, Singapore has over 90% of its households in homeownership, whereas in Hong Kong it is 56%. Among European coun tries, the differences are even wider. Hungary with a 92% homeownership rate is clearly at one end of the spectrum with Germany and Sweden at the other with about 40%. And although it is not shown by Table 1, it is also relevant to note that social housing has been present in large numbers not only in Europe but also in some coun tries beyond it, most notably Hong Kong. Examination of Table 2 similarly shows considerable cross-country variation in the scale of mortgage lending, being particularly high in Denmark and the Netherlands and low even in some Western European countries such as France and Italy. Furthermore, there is not even a strong correlation between the size of homeownership sectors and mortgage activity, reflecting – as will be identified later in the article – different housing system models. The significance of at least some of these differences was recognised in Jim Kemeny’s seminal work in which he identified a group of English-speaking countries – Australia, Canada, New Zealand, and the United States – which he labelled home-owning societies and a second group of European mainland countries – Germany, the Netherlands, and Sweden – which he identified as costrental societies. As the labels implied, the first group of countries had policies and tenure outcomes that focused on homeownership, while the second had housing policies and tenure outcomes in which cost-rental housing played a significant role. In subsequent publications (e.g., Kemeny, 1995), he introduced the concept of dualist regimes to countries whose housing policies discriminated against cost renting, and unitary whose housing policies put cost renting on an equal footing with market renting. Kemeny’s thesis was that differences between these sets of countries were not simply a matter of their respec tive stages of industrial development, but were deeply rooted in their social structures. In his view, Australia could be characterised as having evolved a high degree
Housing Policy Trends
of privatism, which reflected a relatively undeveloped welfare state, as well as low residential densities, which themselves derived from privatised dwelling types and housing tenure, a reliance on private transport, and a gender division of labour in which women often took ‘female’ roles.. By contrast, Swedish society had devel oped a high degree of collectivism, based on the growth of a well-developed welfare state, collective transport sys tem that functioned well with the prevailing high-density urban form, the dominance of rental and cooperative flats, and, common gender roles based on public childcare that facilitated predominantly wage-labour roles for women. Thus, on notions such as politics, social structure, and ideology and arguing their significance in understanding divergence, Kemeny established a counterpoint to highlevel theories – for example, the logic of industrialism and globalisation – of the inevitability of convergence. With some broad similarities in approach, but directed more broadly at welfare systems, the work of Esping Andersen (1990) has nevertheless been influential in informing housing research. His identification of three worlds of welfare – Liberal (the United States, Canada, Australia, and the United Kingdom), Conservative Corporatism (Germany and France) and social democratic (Sweden and Denmark) – have been widely applied in order to analyse and interpret housing policy and outcomes. But just as in respect of welfare in general, it has been recognised that the identification of three worlds is not sufficient to capture the diversity of housing systems across all economically advanced countries. One important addi tion has been the recognition of a Southern European model (Spain, Portugal, Greece, and Italy) in which the family has had a special importance in ensuring the welfare of its members and for whom, housing, in the form of homeownership, has taken on a role both as providing physical shelter and an emotional foundation of the family; homeownership is not, as in Anglo-Saxon countries, typi cally a financial asset but an emotional bedrock, part of the family project. A further feature of the Southern European model is that house buying is frequently financed directly from family resources rather than through a mortgage product supplied by a financial institution. So, some of these countries, for example, Italy and Greece, have quite small mortgage markets (Table 2). The East Asian economies – Japan, Korea, Taiwan, Singapore, Malaysia, and Hong Kong – have been indenti fied as another significant grouping. In these countries, welfare has generally been subordinated to the requirement for economic growth. Consequently, there has not been the development of welfare systems based on storing social insurance principles, but rather ones based on self-reliance and family responsibilities. In this framework, the provision of decent housing has been necessary in order to maintain a productive workforce, but it has not been a means or object of redistribution. Moreover, homeownership has frequently
603
been viewed as a financial asset on which the family could found its own welfare networks. In addition to these groupings, the housing policy approaches in developing countries can also be seen to constitute their own grouping. The initial attempts by countries in the developing world to tackle problems of housing mainly date back to the years immediately after the end of the Second World War. Often, these attempts were heavily influenced by the European countries that were or had been their colonial masters and involved the importation of European approaches. The notion that the state should take a pivotal role in housing provision, setting standards, and providing subsidies became the norm. But, by the late 1950s and 1960s, for many devel oping countries the external influence switched to the United States, and to international agencies particularly the United Nations, The World Bank, and, later, the International Monetary Fund (IMF). More or less in all developing countries, mirroring the developments in the developed countries, there was a recognition that housing should not be treated as a basic right of citizenship but as a commodity to be produced and exchanged through the market. This generally meant the dismantling of public institutions formerly involved in construction and man agement of public housing, the selling of former public housing and a shift towards public involvement with an enabling role, promoting the functioning of land, con struction, housing, and financial markets. Whereas portrayed in these very broad terms the experience of the developing countries appears similar to those in the developed world, there are also significant differences. Notable in countries such as India, Brazil, Mexico, China, and some in Africa, for example, is the increasing concentration of poverty in the rapidly expanding urban areas. Urban slums, frequently in the form of shanty towns, are not consistently functioning as staging posts through which recent migrants slowly become absorbed into formal urban economies. While individual homeownership, albeit of low-quality physical structures, is widespread, an important focus of housing policy in many developing countries lies with assisting the poor to get access to finance and achieving the secur ity of tenure that underlies this form of housing. Overall, then, whereas it is possible to view the last few decades as being characterised by increasing convergence in housing policies and outcomes around a homeownership norm, there is also empirical evidence supporting the identification of a number of quite different models.
Future Trends in Housing Policy What can be said about future housing policy trends, particularly whether they seem likely to converge or diverge? Writing in the midst of the so-called credit
604
Housing Policy Trends
crunch, which appears to mark a structural break in global economic development, it seems appropriate to consider what the possible consequences for housing policy in the advanced economies might be. That is one of the aims of this final section. But before embarking on that task, recognition is given to the impact on housing policy developments of a process which transcends the precrisis and crisis periods, namely that of demographic ageing.
The Housing Consequences of Demographic Ageing The ageing of the populations of the advanced economies is part of a worldwide trend, over the course of perhaps a century and through which there has been a shift from high rates of fertility and mortality to low rates of fertility and mortality. This demographic transition is resulting in an ageing of populations or ‘age dependency’, in which the share of populations accounted for by older people can be expected to grow to a level where in most advanced economies by 2050 those over the age of 65 years will constitute between 25% and 35% of the population totals, and those over 80 years between 10% and 15%. One of the big questions facing the future for both welfare and housing policy concerns the likely impact of this changing balance. In Castles’ (2004) view, ‘‘the logic of the argument is transparent.’’ On the one hand, pen sions and cash benefits to older people combined with health and social care constitute the two largest pro grammes in most of the larger economies, accounting for about two-thirds of total social spending. On the other hand, the proportion of older people in those same econo mies is growing, so that there will be increasing upwards pressure on the costs of these elements of social spending. In these circumstances, and given the twin pressures of globalisation and the fiscal implications that arise from a rise in age-dependency ratios, it seems likely that govern ment spending on those welfare areas not directed at older people will be most vulnerable to cuts. While Castles (2004) provides empirical evidence refuting the inevitability of such trends, it can be said, at a high level of generalisation, that the cuts in spending on social housing provision for young people and families which have characterised the housing systems of advanced economies in recent decades, nevertheless fol low this logic. Moreover, the general tendency for governments to promote homeownership as a form of asset-based welfare, seeing housing equity as a source of income to meet the needs of older people, can also be seen as a response to the fiscal strains of funding state pensions. Given the continuation of demographic ageing processes, therefore, the continued support for homeownership would also seem a credible possibility.
The Housing Consequences of the Credit Crunch At the time of writing, both the extent and future course of the current economic circumstances – often referred to as the credit crunch – are unclear, and so necessarily is its impact on housing policies in the advanced economies. The obvious starting point for thinking about possible futures is the recognition that the credit crisis, whatever the other causes, was a consequence of developments in homeownership markets. The expansion of liquidity, itself founded on expansion of the US deficit and Asian, particularly Chinese, surpluses, was accompanied by fall ing interest rates, rising asset prices, and increasing levels of household indebtedness. The development in the United States in particular of sub-prime mortgages and of mortgage-backed securities which in a global financial market were sold on to banks operating in many coun tries, both increased and spread the risk. Once households began to default on mortgages while the extent of bad debts, hidden in the mortgage-backed securities, became untraceable, suspicion fell on banks everywhere. The combination of default and repossession along with greater reluctance to lend to house buyers led to falling house prices everywhere. Moreover, the financial and housing market crisis was followed by a more general economic crisis with rising levels of unemployment and even higher levels of mortgage default. So, what will be the consequences for housing policy developments in the near future? On one view, it could mark the end of the trend towards ever higher levels of homeownership. With fewer people able to enter homeownership and falling house prices revealing the fragile basis of housing markets, households come to the view that homeownership is a less reliable basis for their futures. Drawing a parallel with the impact of the Asian financial crisis at the end of the 1990s, which was followed by reforms in the East Asian economies characterised by increasing reliance on Western-style social insurancebased welfare, one view is that in Western countries there could be a reassertion of their traditional approaches. Moreover, referring back to the Harloe the sis, it is also possible that this will be exactly one of those historical periods when part of the solution to the system crisis is seen to be mass social housing. Such a view of the dampening of the promotion of homeownership is complicated, however, by the impact of the credit crunch on public finances. To varying extents, the governments of the more advanced economies have implemented rescue plans for banking sectors and other parts of their economies. These rescue plans, combined with increased demand for social spending associated with rising levels of unemployment, and lower tax receipts associated with depressed rates of economic growth, will have nationally differential consequences for the ability of
Housing Policy Trends
605
governments to spend on social housing developments, or indeed other (nonrescue) subsidies for the housing sector. In such circumstances, some, but not necessarily all, gov ernments may continue to encourage homeownership if only by failing to promote other housing opportunities.
Kemeny J (1995) From Public Housing to the Social Market: Rental Policy Strategies in Comparative Perspective. London: Routledge. Kemeny J and Lowe S (1998) Schools of comparative housing research: From convergence to divergence. Housing Studies 13: 161–176.
See also: Globalisation; Home Ownership: Economic Benefits; Privatisation of Housing: Implications for Well-Being.
Further Reading
References Burns L and Grebler L (1977) The Housing of Nations: Analysis and Policy in a Comparative Framework. London: Macmillan. Castles FG (2004) The Future of the Welfare State. Oxford, UK: Oxford University Press. Esping Andersen G (1990) The Three Worlds of Welfare Capitalism. Princeton, NJ: Princeton University Press. Harloe M (1995) The People’s Home: Social Rented Housing in Europe and America. Oxford, UK: Blackwell.
Agus R, Doling J, and Lee D (eds.) (2002) Housing Policy Systems in South East Asia. Basingstoke, UK: Palgrave. Allen J, Barlow J, Leal J, Maloutas L, and Padovani L (2004) Housing and Welfare in Southern Europe. Oxford, UK: Blackwell. Angel S (2000) Housing Policy Matters: A Global Analysis. Oxford, UK: Oxford University Press. Doling J (1997) Comparative Housing Policy: Government and Housing in Advanced Industrialized Countries. Basingstoke, UK: Macmillan. Kemeny J (1981) The Myth of Home Ownership: Public Versus Private Choices in Housing Tenure. London: Routledge. Lowe S and Tsenkova S (eds.) (2003) Housing Change in Eastern and Central Europe: Integration and Fragmentation. Basingstoke, UK: Ashgate. Ronald R (2008) The Ideology of Home Ownership: Homeowner Societies and the Role of Housing. Basingstoke, UK: Palgrave Macmillan.