The Rolls Royce and the Mini cooper Limited Profit Housing in Switzerland and Austria

1. The Rolls Royce and the Mini cooper Limited Profit Housing in Switzerland and Austria Julie Lawson, OTB DelftENHR Comparative Housing Policy Working Group, Istanbul October 23-24 2008

2. Introduction Austria’s and Switzerland’s housing systems are similar in many respects: • Both are strongly orientated towards the delivery of rental housing • Share a tradition in municipal social housing. • Host an active municipal, limited profit social and co-operative sector. • Despite trends elsewhere, both continue to focus on supply rather than demand side support. • Yet both increasingly depend on private investment to finance Limited Profit Housing. • Each have designed successful but different bond instruments during the 1990s to channel funds into the sector. One important difference, the market share of Limited Profit and Municipal housing is far more significant in Austria than Switzerland.

3. Just another case description? • Beyond empirical description • Revisit debates in comparative housing research • Attempt to provide a more strategic explanation • Consider both the policy implications and theoretical puzzles raised by the comparison

4. Purpose and structure • Argue for the careful justification of ontology, causality and epistemology. • Compare historical developments two similarly orientated housing systems and postulate key relationships integral to the provision of limited profit housing. • Explain what is different about the two systems and why these differences have influenced the position of limited profit housing on the housing markets of Austria and Switzerland. • Contribute to the discussion concerning path dependency and housing regimes.

5. Section 1 The choice of housing ontology and epistemology “Debates and indeed misunderstandings in comparative housing research often arise because housing systems can be perceived and therefore analysed from a range of positions”

6. Various streams in housing research • Postmodernism and multiple realities • Political, cultural and economic meaning of housing action • Social construction of housing knowledge and institutions • Econometric models • State market mixes • Chain of provision • Housing as a system of economic and institutional relations • Spatial differences • Social relations and structures of housing provision

7. Choices • Nature of change, singular or multiple • Level of analysis – experiences, events, relationships • Causal factors • Universality • Direction • Role of time and space

8. The nature of causality in theoretical work applied to housing ‘Roots’ of causality • Human agency, chaos theory and random choice • Rational choice theory, personal utility and public choice models • Risk and trust in social transactions • The influence of multiple agents upon housing provision • The relationship between structure and agency • The influence of tenure, as a causal power, in social structures • The mediated role of the state • The political-economy of state, capital and civil society • Labour and gender relations • Generative mechanisms • Crises, coherence, social regulation and modes of capital accumulation • Phases of economic and welfare development

9. Where to look for causality? • Can emerge from the realm of dominant ideologies, such as ideas concerning the benefits of home ownership and the solidarity of co-operative housing, as what is considered rational in context can have causal effects. • Can be generated by actual material conditions, such as the presence of high rise building technologies or indeed the absence of appropriate investment. • Can also be embedded in long established and powerful social relationships such as those between rates of profit flowing from investment in private rental housing.

10. Section 2The development of limited profit housing • How should we perceive different housing systems and account for their differences? • First a narrative

11. Limited Profit Housing in Austria • Economic liberalism, industrialisation, urban housing shortages and poor rental housing conditions • Electoral reform, rise of social democracy and municipal socialism • Territorial and fiscal control of key resources, utopian housing projects • Fascism and subordination of local state, destruction of housing stock • Rebuilding using institutions introduced and remnants of the past

12. Limited Profit Housing in Austria (cont.) • Reinstatement of Vienna and acceleration of housing programs, with dedicated federal housing funds and land banking • Shift towards renewal in 1970s, by 1990s housing a vehicle for new agendas, social inclusion, sustainability, energy efficiency • Devolution and transfer of funds to provinces • 1993 additional sources of funds via bonds instrument and Housing Banks

13. Austrian Limited Profit Housing

14. Limited Profit Housing in Switzerland • Poor rental housing conditions under industrialisation late 19th century amidst reformist political climate • Role of the co-operative movement and municipalities • Role of city governments, pension funds and public utilities • City loans to co-operatives, municipal shareholding • Responsive to market scarcity

15. Limited Profit Housing- Switzerland (cont.) • Private landlordism dominates, co-operatives contribute to alleviate scarcity • Government steps in when adequate finance is not available, later narrowed to LP builders • National programmes sporadic, supply subsidies now limited • Co-operative financing arrangements within sector and govt guarantee ensure modest flow of funds

16. Limited Profit Housing in Switzerland

17. professional movements in architecture and design the interplay between market dynamics and key state institutions the role of a benevolent state, using housing supply as a countercyclical economic tool the responsiveness of supply to demographic developments financial, market and political position of social housing amidst broader developments of Austria’s conservative welfare regime the relationship between national and local regulation amidst a tradition of corporatism and modes of development evaluating recent non-profit housing developments outlining policy concerns and developments Explaining the low rate of home ownership and the nature of the rental market historical narratives on the Swiss housing system the role and relationships between municipal, cantonal and Federal state roles and related policy regimes Section 3 Explanations for developments Austria Switzerland

18. Applying proposed approach • Critical realist ontology • Comparative historical analysis • Abstraction and contingent definition of key relations • Build on existing work, refine explanations • Policy implications • Theoretical puzzles to be solved

19. Municipalities integral to the planning, provision of development sites Amidst freehold property rights, most populous city of Vienna holds a historically strong market position via Land Fund Municipalities integral to the planning, provision of development sites Amidst freehold property rights, most populous cities of Zurich and Geneva hold a modest market position Contingently defined system of property rights Austria Switzerland

20. Consistently significant supply subsidies supported across political-corporate spectrum LP housing finance mechanism and tax privileges sustained by financial sector Favourable financing position of LPHA gives competitive market advantage Tightly regulated cost rent limited profit associations, promotes affordable supply Sporadic supply subsidies legitimised in times of relative housing crises LP housing finance mechanism external to financial sector, tax exemptions Liberal cost rent regulation sustaining profitability of private landlords LPH supply insufficient to address demands, in a market dominated by private RH, although more prominent in urban areas where political support is greatest Contingently defined circulation of finance Austria Switzerland

21. Mainstream housing choice Broad access, wide choice, some targeted Tight cost rent regulation Modest demand assistance Marginal housing choice Broad access, narrow choice, some targeted Liberal cost rent regulation Minimal demand assistance Contingently defined mode of consumption Austria Switzerland

22. Section 4 Summary and explanation Summary of Key differences: • Strong vs weak market position of municipal land developers • Long term vs sporadic supply side intervention by national governments • Main stream vs marginal housing choice as a housing tenure Explanation in brief: • Variable capacity of city governments to intervene in land markets, stemming from past practice and market crises • Variable support for assistance to supply, stemming from corporatist alliance and familial welfare regime, liberal landlordism, urban rural and direct democracy divide governing redistributive issues • Variable availability of private investment for rental housing, stemming from rent regulation and severe market interruptions

23. Summary and explanation (cont.) Policy issues • comprehensive vs. reactive strategies • Appropriate governance structures • social housing a safety net vs. mainstream option • Demand vs. supply side strategies amidst inelastic markets • strong vs. liberal cost rent cost capped regulation – site of intervention • tax privileged protected circuit bonds vs. state guaranteed capital market loans • EU or nationally defined social tasks, residualisation and inclusion Theoretical puzzles • Role of meta theory in case study explanation • Process of generalisation and prediction from individual explanations • Increasing the complexity of housing theory, beyond convergence divergence and welfare state theory • Path dependence the role of crises and adaptation • Comparison of strongly and weakly integrated rental housing markets • Complexity of state structures and their path dependent role in promoting housing strategies

24. Thank you Comments and questions? Julie Lawson j.lawson@tudelft.nl