Affordable housing policy has become an integral part of housing policy in a number of countries around the world and in Europe as a response to rising housing prices and a growing section of society which increasingly finds it difficult to have suitable housing for themselves and their families, both in terms of price and quality. The concept of affordable housing is open and flexible, and can include not only price and quality considerations, but also support for specific target groups, environmental integration aspects, and short-term housing. The needs of housing and the specifics of the market will be unique to each country, so the definition of the term availability will also differ.
The aim of this study is to promote the development of a sustainable institutional model for the development of affordable rental housing in Latvia. In the case of Latvia, the authors choose to conceptualize the issue of accessibility, mainly in the context of rental housing. Full text of the study in Latvian language is available here.
The problems of Latvia’s housing policy, highlighted by the OECD report, the available statistics on the topic and independent interviews and survey conducted by PROVIDUS, confirm the need to find long-term solutions to several problems:
- Firstly, there is a need for a new and high-quality housing fund, which would reduce the overcrowding of housing and promote universal access to housing for all income groups.
- Secondly, there is a need to formulate a new role for the public sector in housing policy. The current model, based on state support for high-income groups and municipal support for low-income groups, has created a stratified and static housing market as well as a low-quality housing fund. However, in the context of affordable housing, the role of the public sector is growing significantly due to the need to create a new housing segment. Mortgage guarantees and benefits for the poor are insufficient instruments if the priority is to create a sustainable housing policy.
- Thirdly, there is a need to develop a strategy for homelessness and short-term housing policy. There is a need to be aware of the different housing needs and to provide flexible solutions for short-term housing policies as well.
Affordable housing policies must be sustainable and democratically controlled in order to meet the needs of different people, both in terms of price and housing profile. Therefore, in the opinion of the authors, affordable housing should be in the rental segment, as the alternative – privately owned housing – currently incurs incalculable costs in public funding and, as mentioned above, tends to be an effective solution only for financially stable households. In addition, foreign experience also shows that rental housing, which is in line with the solvency of society, plays a fundamentally central role in the policy of affordable housing.
In the study, the authors offer an extensive analysis of Latvia’s housing policy problems, using both quantitative and qualitative data. At the end of the study, three different institutional models for the construction and management of affordable rental housing are outlined, weighing the benefits and risks of each possible solution. These models cannot be considered to be comprehensive, but they show different approaches that the state and municipalities can use to address the lack of affordable housing in their area. It is also important to emphasize that housing policy as a whole is a combination of complex measures, which includes not only the construction of rental housing, but also housing benefits, guarantees and subsidies for the purchase of housing, urban planning, setting quality standards, and so on. However, in this study, the authors choose to focus only on the construction aspect of affordable rental housing.
One of the most important arguments of the study is the need to combine the provision of affordable rental housing for the “middle class” in Latvia with a homelessness or short-term housing policy. There is a need to develop a model that takes into account different social risk groups: the structurally poor (the population that is unlikely to improve their income situation through employment) and the temporarily vulnerable (the middle-income population, without savings that may suffer from the labor market). fluctuations, ex-prisoners, victims of violence, etc.). The construction and management of new housing is not the only solution to meet the housing needs of these groups, however, given Latvia’s aging, low-quality housing stock and inactive, inaccessible rental market, new housing is an essential precondition for a modern and socially responsible housing policy.
The study considers three different models for the construction and management of affordable rental housing. The Slovenian model envisages the establishment of a separate municipal housing agency, which manages and owns a significant part of the municipal housing stock. In Austria, affordable rental housing is provided by the strictly regulated private sector, or for-profit organizations that invest their profits in the construction of new housing. Estonia, on the other hand, has used public-private partnerships to provide low-cost rental housing for certain social groups.
In conclusion, the authors of the study provide a general summary of the benefits and risks of each model to facilitate a qualitative and data-based discussion on the construction of affordable rental housing in Latvia, which should become an integral part of the national housing policy strategy.
Summary and conclusions of the study:
The lack of a national housing policy strategy has led to a significant stratum of the population owning housing as well as a minimal private rental market. The opportunities for residents to rent an apartment at affordable and relatively low prices are very low, as the current policy is based on the implementation of market principles and the correspondingly limited role of the public sector in covering the rental housing segment. Both the interviewed representatives of local governments and the representatives of non-governmental organizations clearly indicated that there are problems with the availability of housing for various groups of persons. The need to build new housing and renovate the existing housing stock, as well as to create needs-based solutions for housing-related social services, was highlighted.
In the opinion of the authors, in addition to the general lack of strategy and political settings, Latvia has not adopted a targeted housing policy based on an assessment of the needs of various social risk groups. Although municipalities provide housing benefits to the poorest households in society, this is not considered to be full-fledged and comprehensive social support. For example, the European Commission regularly points out in its annual semester reports the need to develop a homelessness policy strategy that includes solutions for short-term housing.
The low quality of housing is especially evident in the overcrowding rates and in the old housing stock, the housing stock is not being renewed fast enough. To date, state support programs (ALTUM support) have been targeted mainly at high-income and middle-income groups, with municipalities providing support only to the lowest income groups.
According to OECD experts, the social rental housing stock is relatively small in relation to the total housing stock and is not renewed and replenished fast enough. The housing market was also found to be inactive despite a high number of private owners.
The study identified the following challenges facing municipalities:
- Low capacity of municipalities in the construction of new housing.
- Insufficient and unsuitable housing stock.
- Affordable housing is an essential precondition for attracting people.
The current political and economic framework prevents municipalities from actively building the new rental housing needed to provide accommodation for young professionals moving to another place of work and residence. Even for people who are guaranteed housing as a social service, the solution often offered is of poor quality or insufficient.
There are currently no non-governmental organizations in Latvia, which aims to be actively involved in the development of low-rent housing. At the same time, there are a number of associations and foundations that indirectly provide housing-related services and could take on such functions in the future.
Examining the experience of non-governmental organizations, it was found that NGOs face the following challenges:
- Lack of finance and expertise;
- Shortcomings of homelessness and short-term housing policies;
- Insufficient support for NGOs in the field of housing management.
It should be noted that the representatives of local governments had not yet considered the possible role of the civil sector in housing policy, which was also reflected in the expert questionnaire conducted last autumn: respondents mostly see the private sector as the main developer of housing. However, as already indicated, the capacity of the private (profit) sector to serve lower solvency groups is only possible with serious and guaranteed public sector support, which also involves risks. The role of NGOs in housing policy should be developed and strengthened not only legally but also by providing appropriate financial solutions to enable the sector to develop. As the experience of other countries shows, the civic sector or non-profit organizations can also play an important role in implementing public housing policies (e.g. the Austrian experience). However, the situation in Latvia, where the non-profit sector is not developed for such actions, the task of which would be to offer affordable rental housing, the availability of housing is and will depend on the forms of public sector support.
It is reasonable to conclude that the current state policy has not been able to provide high-quality and affordable housing, and the insights from the interviews show that the existing institutions (municipalities, private sector) are not able to effectively meet the long-term housing needs of the population.
A new institutional approach would also make it possible to formulate homelessness and short-term housing policies that address the challenges of different associations in providing housing-related services. The advantage of non-governmental organizations is their operating logic, which is not based on the principle of profit. However, as concluded above, the capacity of NGOs in Latvia is not sufficiently developed to take a leading role in the development and renovation of affordable rental housing. The role of this sector needs to be strengthened, especially in management functions, but in the near future there is a need for a solution that can take on the development of affordable rental housing now.
The authors believe that there is a need to develop a new institutional approach to affordable rental housing policy, which is not based on a profit imperative and is secured against potential corruption risks.
Affordable housing is defined in monetary terms, stipulating that household expenditure on housing may not exceed 30% of the monthly budget. However, such a view may not be complete in the Latvian context, given the significant size of the informal economy. In addition, as mentioned in the document, the determining problem in Latvia is the poor quality of housing and not the population’s expenditure on housing. Therefore, it is rather necessary to formulate affordable housing, taking into account the needs of different social groups.
In addition to affordable housing policies, it must be borne in mind that housing can be a social service. In this way, it is possible to create a policy for homelessness and short-term housing, the function of which is to create an airbag for certain social risk groups for a short time, ensuring the possibility to rent or buy a basic home in the long run. In the policy of affordable housing, it is important to involve non-governmental organizations that provide various housing-related services in order to ensure the suitability of housing for different social groups.
The study identified three different institutional models from abroad that have already formulated the principles of affordable housing policy in national legislation. The Estonian solution envisages a public-private partnership, which has so far been the preferred institutional model in Latvia. Such a solution is effective in the short term, ensuring the construction of new housing relatively quickly, without anticipating short-term fiscal risks. However, the long-term benefits of such an approach are questionable. As the Estonian experience shows, the municipality still makes fiscal commitments that are not always transparent, and in the case of Tallinn, the apartments built are not available to tenants for an indefinite period (leases are fixed).
The Austrian experience shows that affordable housing can be provided by the private sector, which is not dominated by a profit imperative. This solution has several advantages: the ability of the private sector to create new solutions quickly and flexibly is maintained, attracting the best professionals and at the same time involving the relevant target group in decision-making. However, the creation of such a sector is a long-term project. To date, there is no non-governmental organization or social enterprise in Latvia that has created such competence and could implement, monitor and manage housing construction projects.
In Slovenia, the solution for the municipality of Ljubljana was to set up a municipally owned housing agency to provide the construction of rental housing and to meet the housing needs of the municipality’s residents. The main advantages of this approach are the fact that the housing built remains the property of the municipal agency, which provides the necessary long-term view of the policy. The private sector is still being involved in the housing construction phase, thus avoiding increased competition between the private sector and municipal corporations. Corruption risks can be addressed through appropriate financial and good governance laws. The municipality can also develop cooperation with the non-governmental sector in meeting the housing needs of various social risk groups. Although fiscal liabilities are increasing, they are transparent and predictable, bearing in mind that the current situation in global financial markets is more than favorable for such investments. However, an important precondition for the implementation of such an institutional model is a nationally coordinated housing policy strategy that legitimizes such institutions and provides the necessary financial support.
In order to solve the problems of housing availability in Latvia, especially by offering affordable rental housing, the following needs to be done:
- Develop a national housing policy strategy as a basis for a high-quality, sustainable and long-term housing policy.
- Solutions must be created that address the needs of different groups of people by offering both permanent rental housing and short-term housing.
- It is important to be aware that local governments have an important role to play in meeting rental housing needs, as they are the ones where people seek help when they need housing and the legal framework obliges them to allocate housing to certain groups of people.
- A permanent fund should be established to raise / accumulate funds both for the construction of new rental housing and for the maintenance of the existing housing stock (for example, the Housing Fund of the Republic of Slovenia was established in 1991 to act as a central body for housing policy).
- The advantages and disadvantages of each institutional model proposed in the study should be thoroughly evaluated, choosing the solution that best suits the situation and opportunities in Latvia.
In the opinion of the authors, the Slovenian model is the most appropriate solution to Latvia’s housing policy problems. As the challenge of affordable housing policy is to ensure that people have access to affordable and affordable housing, the public sector needs to control the cost of the service, which can best be done if the housing is owned by the public sector. Such a solution can be developed immediately by creating the necessary financial and legal instruments to enable municipalities to set up the institutions best placed to carry out this task (for example, in Slovenia, they are housing agencies). The Slovenian institutional model also retains the responsibility of the public sector for the quality and suitability of the housing built for different social groups, and municipalities retain the possibility to revise the criteria for access to affordable housing in response to changes in socio-economic indicators. In order for this model to be implemented in Latvia, it is necessary to carry out explanatory and consultative work together with local governments, with an in-depth identification of needs and opportunities.