German housing policy - Chinese housing policy Visit of Ms Dr. Wang Jing, Mr. PHD Zhang Lilong Chinese Academy of Social Sciences Institut Darmstadt Wohnen und, Umwelt, 07.10.2014 Darmstadt
Welcome! 你 们 好! Rechtsanwältin Iris Behr Dr. Christian von Malottki, Dipl.-Ing. MSc. Institut Wohnen und Umwelt GmbH
Brief portrait of IWU German extra-university research institution founded as non-profit private limited company in 1971 Shareholders: State of Hesse and the City of Darmstadt IWU employs around 40 people, more than half of them scientific staff from different disciplines Realisation of about 30-40 basic and applied research projects per year Research areas: housing, energy efficiency and integrated sustainable development Institutional funding of the shareholders and third-party funding by local authorities, housing companies, housing policy organisation, NGOs, Federal government, EU View of the new IWU building refurbished with passive house components
Three pillars of work Housing and socio-economic development Energy efficiency and CO 2 - neutral development Vielen Dank Background: für Ihre Aufmerksamkeit Background: In the building sector significant energy savings Background: Differentiated housing market due to demographic change and increasing individualisation of society, rising energy costs and a widening gap between the rich and the poor Solution: IWU contributes to transparency on the housing market by offering research and forecasts on supply and demand, market prices and housing vacancies. The main goal is to provide the federal states, cities and municipalities with concepts and recommendations on how to avoid segregation and how to adjust to housing demand patterns on the one hand, and recommendations for energy efficient building refurbishment on the other hand. can be achieved by physical and technical measures without reducing comfort and living standard. Solution: IWU develops a holistic strategy by analysing the conditions of decision making of different stakeholders in the building sector aiming at the development of concepts for improvements on all levels creating methods Martin and Vaché tools to support the implementation of energy reduction in Institut Wohnen everyday behaviour, und consulting Umwelt, and real Darmstadt estate business playing a role in developing technical solutions and supporting the introduction in the market. carrying out pilot projects examining these new technologies under real conditions related to their actual impact on energy efficiency and their benefit for the users (mostly occupants) of the buildings. Integrated sustainable development Sustainable development by understanding social, economic and ecologic needs as a combined task is linked to urban spaces and shaped by demographic, economic and ecologic changes in a special way. Cities are the driving forces behind social and economic growth and at the same time the central place for their surrounding region. They claim a disproportionately high amount of natural resources and produce up to 80 % of the world s CO 2 emissions. Solution IWU integrates the various dimensions of sustainable development in analyses, concepts and pilot projects. IWU develops and correlates solutions based on different scales from single buildings to urban districts and regions interacting with public and private players. In doing so, IWU combines strategies on efficiency, sufficiency and consistency.
Agenda for the following talk Guests presentation of situation and needs in China - expectations for the meeting Structure and evolution of the German housing market system Legal framework conditions of German housing policy Subsidies in the German housing policy 5
Structure of the German housing market Evolution of the German housing market system Ownership structure Financing and affordability 6
-600000-400000 0-200000 0 20 200000 40 400000 60 600000 800000 80 1000000 100 1200000 120 B delta Fertigstellung Housing starts per 10.000 pop. Population growth rate Evolution of the German housing market system Historical Events Phase 1 War destruction Housing shortage Cost based social renting Repatriation of refugees Population growth Migrant worker immigration Phase 2 Demographic turn Social housing allowances large families 1950 1950 1951 1951 1952 1952 1953 1953 1954 1954 1955 1955 1956 1956 1957 1957 1958 1958 1959 1959 1960 1960 1961 1961 1962 1962 1963 1963 1964 1964 1965 1965 1966 1966 1967 1967 1968 1968 1969 1969 1970 1970 1971 1971 1972 1972 1973 1973 1974 1974 1975 1975 1976 1976 framework conditions Social housing law: supply stimulus in rental housing Step-by-step reduction ofrent regulation Introduction of market based rental housing Diversification of housing subsidies: ownership, Demand side subsidies Introduction of rental rehabilitation reguations 7
-600000-600000 -400000-400000 0 0-200000 -200000 0 0 20 20 200000 200000 40 40 400000 400000 60 600000 60 600000 800000 800000 80 80 1000000 1000000 100 1200000 100 1200000 120 120 Bevölkerung delta pro 10k Einwohner Fertigstellungen B delta delta B Fertigstellung Fertigstellung Housing starts per 10.000 pop. Housing starts per 10.000 pop. Population growth rate Population growth rate Evolution of the German housing market system Historical Events Phase 12 Demographic War destructionturn Suburbanisation Housing shortage Energy Repatriation crisis of refugees Cost based social renting Population growth Migrant worker immigration Phase 3 Unification West bound migration demand shock Adaption ofeast German housing stock Phase 2 Demographic turn Social housing allowances Social housing allowances large families 1967 1967 1968 1968 1969 1969 1970 1970 1971 1971 1972 1972 1973 1973 1974 1974 1975 1975 1976 1976 1977 1977 1978 1978 1979 1979 1980 1980 1981 1981 1982 1982 1983 1983 1984 1984 1985 1985 1986 1986 1987 1987 1988 1988 1989 1989 1990 1990 1991 1991 1992 1992 1993 1993 1994 1994 1995 1995 1996 1996 1997 1997 1998 1998 Demand side subsidies framework conditions Introduction of rental rehabilitation reguations Social housing law: supply stimulus in rental housing Cost based social renting Step-by-step reduction ofrent regulation Privatization, tightened efficiency control in social supply subsidies Introduction of market based rental housing 1950 1950 1950 1950 1951 1951 1951 1951 1952 1952 1952 1952 1953 1953 1953 1953 1954 1954 1954 1954 1955 1955 1955 1955 1956 1956 1956 1956 1957 1957 1957 1957 1958 1958 1958 1958 1959 1959 1959 1959 1960 1960 1960 1960 1961 1961 1961 1961 1962 1962 1962 1962 1963 1963 End of federal housing subsidies Diversification of housing subsidies: ownership, 1963 1963 1964 1964 1964 1964 1965 1965 1965 1965 1966 1966 1966 1966 End Demand of social sidehousing subsidies company statutes 1967 1967 1967 1967 1968 1968 1968 1968 1969 1969 1969 1969 Promototion and subsidies of owner-occupied housing 1970 1970 1970 1970 1971 1971 1971 1971 1972 1972 1972 1972 1973 1973 1974 1974 1975 1975 Urban reneval and low income housing supply 1976 1976 Introduction of rental rehabilitation reguations 1973 1973 1974 1974 1975 1975 1976 1976 8
-600000-600000 -400000-400000 0 0-200000 -200000 0 0 20 20 200000 200000 40 40 400000 400000 60 600000 60 600000 800000 800000 80 80 1000000 1000000 100 1200000 100 1200000 120 120 ng Einwohner k B delta delta B Fertigstellung Fertigstellung Housing starts per 10.000 pop. Housing starts per 10.000 pop. Population growth rate Population growth rate Evolution of the German housing market system Historical Events Phase 3 Phase 1 Unification War destruction West bound migration demand shock Housing shortage Adaption ofeast German housing Repatriation of refugees stock Cost based social renting Population growth Migrant worker immigration Phase 4 Increasing urban-rural disparities Shrinking and ageing population Job driven rural to urban migration Low income immigration Phase 2 Demographic turn Social housing allowances Social housing allowances large families 1981 1981 1982 1982 1983 1983 1984 1984 1985 1985 1986 1986 1987 1987 1988 1988 1989 1989 1990 1990 1991 1991 1992 1992 1993 1993 1994 1994 1995 1995 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2014 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 End of federal housing subsidies framework conditions 1950 1950 1950 1950 1951 1951 1951 1951 Social housing law: supply stimulus in rental End of social housing company statutes housing Cost based social renting Promototion and subsidies of owner-occupied Step-by-step reduction ofrent regulation housing 1952 1952 1952 1952 1953 1953 1953 1953 1954 1954 1954 1954 1955 1955 1955 1955 1956 1956 1956 1956 1957 1957 1957 1957 1958 1958 1958 1958 1959 1959 1960 1960 Urban reneval and low income housing supply programmes 1961 1961 1962 1962 1963 1963 Diversification of housing subsidies: ownership, Shift from supply to demand subsidies in low income housing provision Demand side subsidies 1964 1964 1965 1965 1966 1966 1967 1967 1968 1968 Tightening of short term rent control statutes 1969 1969 1970 1970 1971 1971 1972 1972 1973 1973 1974 1974 1975 1975 1976 1976 Introduction of market based rental housing 1959 1959 1960 1960 1961 1961 1962 1962 1963 1963 1964 1964 1965 1965 1966 1966 1967 1967 1968 1968 1969 1969 1970 1970 1971 1971 1972 1972 Introduction of rental rehabilitation reguations 1973 1973 1974 1974 1975 1975 1976 1976 9
Structure of the German housing market Residential property ownership 2011 (dwellings) Vacant dwellings, Rental dwellings - vacancy homes; 5,1% Rental dwellings - public sector; 6,7% Rental dwellings - cooperatives; 5,0% Rental dwellings - private landlords; 33,4% private companies; 7,2% Owner-occupied houses; 33,4% Owner-occupied dwellings; 9,2% 10
Structure of the German housing market Rental housing High share of rental housing (serves 45% of population): why? History (lack of private capital in postwar periods, subsidies, destruction of prewar housing stock) Institutional setting (stable social security system, public pension system reduces private wealth creation) Balanced legal and institutional regulation framework with soft rent control Advantages: rental market is middle class oriented: large and diverse supply, high quality Improves worker s interregional mobility decreases household exposure to single asset risk 11
Structure of the German housing market Rental housing Disadvantages: less incentives for savings lower household wealth high cost of housing Since 1990 increasing share of owner-occupation Good availability of private capital and lower capital costs lack of investments due to Martin low profitability Vaché of the rental sector necessity of Institut private Wohnen pension und planning Umwelt, Darmstadt Political incentive for wealth creation 12
Structure of the German housing market Housing finance Prevalence of fixed rate, long term mortgage financing Traditionally Vielen Dank relatively für high Ihre share Aufmerksamkeit of downpayment (30-50%) and regulated lending limits (60%) of value for first order loans Housing is a consumption good: Low liquidity ( buy and hold strategy prevails) and high transaction costs Speciality Bausparen instrument for interest risk hedging and downpayment savings 13
Structure of the German housing market Housing finance Why was there no housing bubble in Germany? Conservative financing Inelastic supply: increases price volatility, but decreases speculative overbuilding Low demand growth (strong decrease of households aged 25-40 But: increased bubble risk after 2008: surplus liquidity, high demand in urban areas due to cyclical undersupply 14
Structure of the German housing market Affordability housing cost burden rate low income household Vielen size Dank total für Ihre total Aufmerksamkeit no subsidies subsidies 1 28% 38% 35% 39% 2 21% 31% 29% 31% 3 20% 29% 27% 28% 4 18% 25% 24% 25% 5+ 20% 26% 25% 24% average 24% 35% 33% 35% housing area per capita Institut Wohnen und Umwelt, low Darmstadt income household size total total no subsidies subsidies 1 67 50 52 52 2 49 36 38 35 3 37 28 30 28 4 32 23 25 24 5+ 28 21 23 22 average 45 37 40 35 15
1980:1 1981:1 1982:1 1983:1 1984:1 1985:1 1986:1 1987:1 1988:1 1989:1 1990:1 1991:1 1992:1 1993:1 1994:1 1995:1 1996:1 1997:1 1998:1 1999:1 2000:1 2001:1 2002:1 2003:1 2004:1 2005:1 2006:1 2007:1 2008:1 2009:1 2010:1 2011:1 2012:1 2013:1 price to income ratio index 2010=100 Structure of the German housing market Affordability Comparison of price to income-ratios 1980-2013 200 180 160 140 120 100 80 60 40 DEU FRA ITA GBR DNK IRL NLD ESP EURO 20 0 Source: OECD 16
Structure of the German housing market Affordability Nominal prices in residential submarkets in Germany 1990-2012 17
Structure of the German housing market Affordability Price to disposable income ratio 1996-2012 in major cities (Prices for new 100 sq.mt-apartment) 18
Structure of the German housing market Land use and building regulation Land markets are private, but with large share of public land ownership Private building land is subject to strict zoning and building regulation codes that severely limit the right to build Land cost is high (150-500 /m 2 for low rise residential, up to 5.000 /m 2 for urban mid rise High land cost increases the need for compact urban structures, but socially acceptable upper density boundaries (max. FAR 1.6 in housing districts and 3.0 in CBD districts) are low compared to Asian standards Land supply elasticity is relatively low, development periods are long, therefore housing supply is subject to market cycles 19
Legal framework conditions of German housing policy Basic legal principles Housing policy s competences and activities: Federal authorities, State of Hesse and municipalities, i.e. local level Rental law and rent control mechanism Condominium law Cooperative law 20
Basic legal principals No constitutional (individual) right to housing but The Federal Republic of Germany is a democratic and social Vielen federal state Dank Social für welfare Ihre state Aufmerksamkeit principle (Basic Law + State Constitutions) freedom to build = basic right to individual property Market economy + freedom of contract Property imposes duties its use should also serve the public weal social obligation of private property (Basic Law) Principle of subsidiarity Right to regulate on their own responsibility all affairs of the local community (28 GG, 137 Hesse Constitution) Funding of state and municipal tasks: bearing the costs that arise from own responsibilities 21
Federal Authorities Federal Government s competences and fields of activities Survey on codes relevant for the housing sector Rental Law (Civil Code-BGB) Regulation on running costs Condominium Law and Cooperative (housing) law Law on energy saving dealing with new construction and modernisation (EnEV) Law on housing allowances Mortgage backed Institut securities Wohnen und law Umwelt, Darmstadt Land registers and title books for all plots of lands + encumbrances Tax law 22
Federal states e.g. State of Hesse competences and fields of activities (funding and control) Funding Social housing: financial funding of (new and existing) dwellings for defined target groups + fixed rents Control Charge on social rent in case of exceeding individual income no need to move but to pay market oriented rents Fehlsubventionierungsabgabe Prohibition of misuse of dwellings (e.g. conversion to offices, 2nd homes, hotels, leaving flats empty ) ZweckentfremdungsVO Rent setting restrictions for private flats: limitation of rent increases and establishment of rent ceilings (Civil Code) 23
Municipalities impact on housing policy Land markets Land use planning and zoning regulation Delivery of building permits for construction or demolition Sale of municipal land Social housing Political definition of target groups eligible for support Co-funding of (social) housing construction (loans, guarantees, land) Assessment and fixing of appropriate costs (housing + heat) for eligible households Cost of accomodation + Heating Duty to take care of homeless people staying in town Law enforcement Supervision of rent control restrictions and housing misuse 24
Rental contract law principals (Civil Code BGB ) Balancing the rights and duties of landlord + tenants: Rent regulation. E.g. by rental tables that reflect the market rents of the last 4 years ( 558 BGB) Rent caps in booming cities for private flats: limitation of 15 % for rent increases within 3 years 11 % p.a of modernisation investment costs to be carried by the tenants ( 559 BGB) No right to give notice in order to increase the rents listed reasons and time periods for giving notice Running costs: definition of running costs and allocation to tenants, mayor consumption based running costs: heat, hot + cold water, waste disposal 25
Condominium law principles Individual flat property Common ownership of staircases, roofs, heating systems, plot of land Obligatory association of condominium owners Financial obligation to contribute to the maintenance, improvement of the common property Obligatory management of the common property Appointment of a condo-manager Rules for the management of the common property (annual meeting, financial planning, decision taking, voting rules) Tricky: majority votes for major changes of common property required 26
Housing cooperative law principles Establishment of undivided property of everything belonging to the estate of the cooperative (e.g. flat, staircases, roofs, heating systems, Vielen plot Dank of land) für Ihre Aufmerksamkeit Coop-members are owner of a share of the estate Limited liability of the members (shares) Legal entity in its own rights and duties: obligatory managing director + supervisory board General assembly: association of all coop-members Mandatory supervision of the coop s activities Coop members use flat and pay a rent No chance for individual profit, increases in value stay with the coop 27
Subsidies in the German housing policy Object and Subject Orientation - Overwiew Object oriented subsidies Public housing companies Private Homebuyer Subsidies Social Rent Subsidies (social housing) Subject Oriented Subsidies 28
Housing Policy Instruments Object oriented = Subsidies for brick and mortar Subject oriented (Social Housing) = Subsidies for poor households ( Wohngeld, Kosten der Unterkunft ) Supply side effects Cheaper No price increase at the supply side Location and quality are market decisions (Homeowner subsidies) The households decide about Cheap, but problematic how to spend the money distribution effect (Public Housing Companies) social rate of return The German housing allowance system shifted from object to subject orientation Assumption:In close marktes object oriented subsidies are more effiecient, in relaxed market conditions the subject oriented ones. 29
Object Oriented Subsidies: Public Housing Companies (in black) Vacant dwellings, Vielen Dank cooperatives; für Ihre companies; Aufmerksamkeit vacancy homes; Rental dwellings - public sector; Rental dwellings - 5,0% Rental dwellings - private 7,2% 5,1% 6,7% Rental dwellings - private landlords; 33,4% Owneroccupied houses; 33,4% Owneroccupied dwellings; 9,2% 30
Object Oriented Subsidies: Public Housing Companies Public housing companies stem from housing for industrial workers creating of separate institutions with taxation advantages in the 1920 s Abolition of the taxation advantages, transition to normal publically owned companies in the 1990 s 2000 s: Some cities sold their housing companies (Dresden) to investment funds, Referendum in Freiburg against selling Discussion about Institut social Wohnen rate und of Umwelt, return Darmstadt of publically owned housing companies vs. Inefficient capital lockup New tendence: Cooperation contracts between municipalities and companies about rate of returns and social targets (i.e. construction of new rental housing) 31
Object Oriented Subsidies: Public Housing Companies Public housing companies and social housing are in Germany - not the same thing! 32
Object oriented subsidies: Private Homebuyer Subsidies Since 2007 competence of the 16 states Target group: Specially families Credit with reduced interest rates from a statal bank for houseowners Traditionally only for newly built houses, recently also for purchasing an existing dwelling Further subsidies for ecologial building and the renovation of existing dwellings for elderly people 33
Object oriented subsidies: Social Rent Subsidies (Social Housing) 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 15.231 12.059 10.400 9.255 7.985 7.327 7.134 6.715 6.546 6.409 6.192 6.013 5.614 5.593 5.715 5.586 5.517 5.435 5.369 Since 2007 competence of the 16 states Target group: Traditionally 14000 families, recently students and elderly people 12000 Credits with reeduced interest rates by statal banks 10000 As a compensation the landlord 8000 must let the dwellings to lowincome-households Institut for a Wohnen defined und Umwelt, Darmstadt 6000 period Actually, the number of these dwellings is declining Social housing is mainly carried out by publically owned companies 16000 4000 2000 0 Social housing in Darmstadt 34
Object Oriented Subsidies: Munich-Model First component: Contract between owner of land for building and the municipality: The landlord has to achieve a certain level of social housing and must finance the social infrastructure May increase land prices even further Possibility to skim land development benefits for social infrastructure Only functional in cities with high and rising land prices Second component: The private developer lets or sells the dwellings as social housing for different income groups. 35
Subject Oriented Subsidies Kosten der Unterkunft ( cost of accommodation ): Allowance for all households with a income below the minimal standard Full reimbursement of rents (and interests) up to the limit of adequacy Legislation by the federal state, payment by the counties, determination of the limit of adequacy by the counties Wohngeld ( housing money ): Allowance for all households with a income slightly above the minimal standard Only partial payment Institut Wohnen depending und from Umwelt, income Darmstadt and rent level Legislation by the federal state, payment by the federal state and the 16 states Together 16 billion per year (object oriented subsidies ca. 1 billion ) 36
Thank you for your attention Rechtsanwältin Iris Behr Dr. Christian von Malottki, Dipl.-Ing.-MSc. Institut Wohnen und Umwelt GmbH www.iwu.de