Recently I met with the Ministry of Interior and Kingdom Relations. The discussion revolved around changes in the social housing industry and what roles will change starting July 1st. The department within the Ministry focuses on the entire housing market including owner occupied housing, social housing and the private market. Both Roger and Simone work with the social housing policy and the new rules that will soon start. The reason for the changes within the social housing market is at least two fold.
The changes comes after the decision of the EU that Dutch social housing sector received benefits that put it at an unfair advantage over private real estate developers and managers. The EU ruled on this because the social housing sector could access a low interest fund backed by the government. The private market could not access the fund and social housing companies were using money from it to build on the private market. Because of this factor, it is seen as State Aid and negatively affecting competition on the market. The social housing industry accessing cheap money and land was one issue.
Outside of the EU ruling, the Dutch social housing sector experienced other issues over the course of the 1990s and 2000’s. The building sector experienced a boom in the 90’s which led to large profits and the net worth of the social housing industry to increase to around 200 billion euro. This growth coupled with the lack of proper checks and balances led to speculation, inefficiencies and in some cases fraud. The professionalization of the industry did not keep up with the growth and it became evident in 2008 that problems existed. As one MP said ‘It was a poisonous cocktail of over-ambitious directors, failing regulation, a lack of clear boundaries and self-regulation,’. Strange cases came to light like the social housing corporation that spent over 250 million euro on fixing the SS Rotterdam, a former ocean liner, as a project of urban renewal. The project went over budget by 220 million euro and spent money on what could have been new social housing units. A social housing corporation boss driving a Maserati as a company car is another example. All of this combined with other problems meant new regulations needed to come into place to affect real change.
Changes are a-coming:
The EU ruled that the Dutch social housing system should focus only on those with a social disadvantage. Almost 40% of all Dutch live in social housing. It is obvious that 40% of the Dutch population is not socially disadvantaged. That means the industry needs to re-focus on serving lower income residents under €33,000 a year. Housing developed with funds guaranteed by the social housing fund will need to be for families in that price range. The EU and Dutch government did agree that social housing companies could build housing for families in the €33,000-€38,000 range for five years.
The change in law affects what, how and when a social housing company can develop social housing. The social housing corporation can no longer act as an independent player. The corporation must work in conjunction with both the tenants and the municipalities. The housing corporations will need to develop social housing as negotiated and agreed upon with the municipalities and tenant rights groups. It is triangle that is now in affect and it provides more clarity on what will be developed and what the needs of the city and residents are. Municipalities will develop five year plan on housing needs. The needs outlined become the priorities for both development and remodeling. This all takes place starting July 1st of 2015. The technical expertise needed to make comprehensive housing plans may not be on staff at some municipalities. On top of that, the tenants may not have the expertise or knowledge needed to make ultra informed decisions about what is needed and how a plan should move forward. Woonband is a company that organizes and trains tenants. Part of their work will be to help professionalize the tenants over the upcoming years. The ministry itself will also work to help the municipalities and tenants to implement this new system. Time will tell how long it takes for the tenants and municipalities to grow the needed knowledge and expertise to successfully create and implement meaningful housing plans.
The July 1st changes also mean that the social housing corporations can only limit the building activity to housing. The majority of the development will now focus on only low income social housing. The change in law does not preclude the social housing corporations from developing other sorts of housing. However; social housing corporations must participate in the open market when developing housing that is not for socially disadvantaged and find sources of funding other than the social housing fund. Additionally, any housing outside of new units for socially disadvantaged must only be developed by corporations if the municipality asks for this and every other private developing opportunity exhausted. That means the only way a social housing company is going to take on a non social housing project is if no other private developer wants to take a project on. Any proposed project like this still must make a profit before the social housing corporation can take it on.
Inspections of the industry will also change. Before inspections of finances and housing inspections were in departments. All of the inspections will now be placed under the finance department because bad finances can often go hand in hand with poor housing decisions or governance. Housing corporations will need to focus on core business principles like building and managing social housing. The inspections will ensure both the finances and operations are sound. A new idea called “Fit and Proper’’ will examine Executive Directors of housing corporations behavior. A similar tactic is used in the banking sector. The idea is to look at a leader not only from the operational standpoint but whether or not she or he can take criticism or heed advice or ideals from other people. Leaders who are seen to have issues could lose their jobs. The industry also put limits on leaders of social housing companies of eight years. They receive two four year terms.
The changes implemented are designed to ensure the long term protection of both the social housing industry and the population in general. While ideals like monitoring executives of housing corporations, tighter inspections and a renewed focus on socially disadvantaged families is promising, it remains to be seen how things will work out long term. Empowering municipalities and tenants is a promising step however; the lack of knowledge in these groups could present problems at first. The housing corporations understand the industry well and concern must be given that the corporations do not dictate the entire conversation. There is no doubt their knowledge is important but the new system is supposed to create a partnership. That ideal should not be lost. The fit and proper test is a good idea to check the stability of leadership but it should not be over relied upon. A test every few years can not be the only indicator of a leader’s ability to make sound judgments on a day to day basis. A carful analysis of these changes will be an important tool in ensuring the social housing industry is safe, secure and strong in the future.