Part 3: The Economics of Housing As a Human Right- How Social Housing Can Solve The Affordable Housing Crisis by Using Public Resources for the Common Good

The major question for the District is how to expand affordable housing production across all neighborhoods while also pumping resources and investment into underserved communities by implementing economic development policies in these areas that benefit current residents. Last year, Councilwoman Janeese Lewis George proposed the Green New Deal for Housing Amendment Act of 2022 (Green New Deal For Housing) aimed at accomplishing this goal. This legislation was recently reintroduced in 2023. The Green New Deal for Housing would essentially create a public sector development arm to use government resources to meet the housing needs of all Washingtonians. If enacted, the Green New Deal for Housing would create an Office of Social Housing tasked with developing District owned, permanently affordable, mixed income housing which pays for itself. This approach, strong government intervention to produce deeply affordable housing across income spectrums, would mark a radical departure from the District’s current inefficient trickle-down market-based approach. This legislation essentially calls for the District to use its public resources and the powers of the local government to promote the common good.

How Social Housing Works

There are different models of social housing that exist both domestically and internationally. The social housing model put forth by the Green New Deal legislation is most closely associated with the model in Vienna Austria and is very simple at its core.

First, the government looks at housing as infrastructure and uses public resources to build a system of high quality mixed-income rental housing that rationally and efficiently meets the needs of its citizens. For the District, this means localized investment in the production of thousands of units of deeply affordable mixed-income rental housing through a social housing model.

Second, there is no private developer, which means the profit motive is eliminated. The elimination of the profit motive allows social housing to operate with maximum economic efficiency while providing 100% affordability. When apartment buildings do not have to generate profit for a private corporation, the building can sustain lower rents. Since social housing is owned by the government and does not need to generate profits, 100% of your rent is used productively to cover the building’s maintenance and pay down construction costs.

Finally, in a social housing system, buildings contain a mix of incomes. The rents of the tenants with higher incomes offset the lower rents paid by people who earn less. This is called rent cross subsidization. Along with tenant rents, social housing can offer space for ground floor retail. These commercial rents will also be applied to cover monthly operating expenses and paying off construction loans. This allows the building to remain completely affordable to everyone while providing affordable housing to the people who need it the most, low-income workers. As such, social housing creates publicly-owned, self-sustaining, permanently-affordable rental housing.

Social Housing Case-Studies - Vienna Austria

Vienna is often pointed to as one of the most successful housing models in the world. There are many driving factors that make the Vienna model successful, but Viennese officials most commonly attribute its success to the government’s fundamental commitment to the notion that housing is a human right. This commitment drives the Viennese housing policy and has created a social housing system that can be accessed by a broad sector of their people. Vienna has a population of approximately 1.9 million which makes it the largest city in Austria. Of this total population, a whopping 60% live in social housing with nearly half of the total housing market made up of city owned apartments or cooperative units. The City of Vienna itself directly owns 220,000 housing units which are homes to about 500,000 residents. In addition to these units owned directly by the municipality, Vienna has fostered the building of an additional 200,000 government subsidized apartments for a total of 420,000 units of social housing. The Viennese model is income limited but these restrictions are so liberal that 75% of the population qualifies to live in social housing. Broad participation in the program has removed any stigma of accessing social housing and has made the program widely popular among its residents.

A Public Option to drive down costs

The core value of “housing as a human right” creates a culture of government intervention to bring down housing costs. The Vienna model aims to create a surplus of affordable housing in order to exert downward pressure on rents. This creates a “public option” for renters against which the private market must compete. As a result, renters in Austria only spend on average 21% of their household income in rent.

Public Resources for the Public Good

The Vienna model is also characterized by its aversion to privatization and its focus on using public land to build more social housing. The history of social housing in Vienna dates back to 1922 when the municipal government made the decision to invest in safe, affordable municipal housing for all residents who wanted it. In 1923, the Vienna City Council adopted its first housing construction program which envisioned the creation of 25,000 social housing apartments over a 5 year period. Nearly 100 years later, this number has reached 220,000 units of municipally owned housing. Over that timeframe, there have been numerous attempts to pressure the Viennese government to privatize this housing stock; this pressure was most intense in the 1980’s and 1990’s. Vienna refused to privatize, a decision which was embraced by its population since so many residents live in the social housing units. This refusal to privatize is what gives Vienna so much leverage over housing prices today. The quantity of the housing stock, combined with the government’s commitment to high quality standards, gives residents a true public option. Had the government privatized, the stock would have dwindled and the private market would have exploited the lack of a government competitor to drive up housing costs, as has happened across Western Europe and the United States.

Land and Money

The government in Vienna realizes that in order to continue to produce social housing the availability of land is just as important as money. The municipality uses a fund to acquire land and develop new projects. Further, legislation has been adopted to keep real estate values low. According to the law, whenever spaces are converted into residential areas, two thirds of the total housing must be allocated for social housing. Furthermore, there is a price limit at which the property must be sold which enables social housing to be financed and produced. The idea is to generate available land for social housing at a price which makes the production possible.

Social Housing as Economic Development- The “Soft Urban Renewal” Approach

The Vienna model takes a holistic approach to neighborhood planning. Public housing in the United States, and throughout many other parts of Western Europe, is income restricted and generally built outside of the city or isolated within the city. The Viennese chose not to income- restrict their housing but instead to integrate it. As such, Vienna is not defined by isolated neighborhoods of concentrated deep poverty.

In 1974, Vienna founded its first urban renewal office and developed a strategy of “soft urban renewal.” The renewal program began in earnest in 1984 and focused on the rehabilitation of privately-owned substandard housing in parts of the city with a higher percentage of people with low-incomes. The city affirmatively decided against demolition and the displacement of people living in these communities and instead subsidized the rehabilitation of existing buildings. The city also used this process to procure land in these areas for the production of social housing units. In return for rehabilitation subsidies, the privately-owned units became rent controlled. The result was the rehabilitation of the housing stock, the strengthening of the social housing system through the production of new units, the expansion of rent control, and the keeping of communities intact. This soft urban renewal approach is ongoing, and today one out of every five dwellings in Vienna is located in a building that is already being renovated or will be refurbished in the near future. This program revitalized and injected capital into underdeveloped areas while keeping residents in place. It also expanded rent control throughout the city. Today only 7.4% of all housing stock in Vienna is for-profit rental without rent restrictions.

The Viennese also emphasized broader social infrastructure improvements within their “soft urban renewal” program. This includes open spaces, kindergarten centers, public schools etc. Housing is never developed without developing this social infrastructure as well, which means that all residents benefit from government investment. This holistic approach to development which focuses on building social housing all over the city while investing in social infrastructure has made Vienna extremely interconnected, promotes income equality, and has substantially minimized pockets of economic segregation.

Financing and Maintenance of Social Housing in Vienna

In 2022 Vienna will spend $392 million on its social housing program. This will produce around 7,000 new units of affordable housing. Along with the production of these new units, that money will also be used to refurbish 5,000 units of municipally-owned social housing.

Production, Preservation and Land Value

From a production standpoint it is easy to see that the Vienna housing model is more efficient at creating affordable housing than the DC model. From 2015 through 2022, DC has invested $1.4 billion to create around 9,000 units of affordable housing. In addition, the DC Housing Authority claims it needs $2.2 billion over the next 17 years to keep its public housing stock, which consists of only 8,000 units, viable for its residents. As noted above, DC’s housing policy is fatally flawed because its reliance on the private market invites speculation and drives up land values and costs. This not only makes it more expensive to produce affordable housing, it means that current affordable units will inevitably be lost due to these speculative patterns.

The Vienna model works because its end goal is the creation of housing as a human right and its policies are aligned with meeting that goal. These policies are rooted in the understanding that strong government intervention, outside of the private market, is needed to create an affordable alternative to the private market. As such, the foundation of the Viennese model is rooted in its system of social housing and the city’s commitment to building up this social housing stock. Further, Vienna’s refusal to privatize has given the Viennese a bulwark of 420,000 units of social housing to compete with the private market and drive down costs.

Moreover, the Vienna model operates with maximum economic efficiency because operating costs for the municipally-owned housing are defrayed by the rents that the broad middle and working-class residents pay. Very low-income residents who cannot afford to pay amounts to cover the operating costs of the building have their rents subsidized. These government subsidies stay inside the social housing network and serve as an extra layer of financing for the social housing stock. The Viennese also understand that to continue to produce housing, they need land at sustainable prices. This means that public lands are used to build social housing, and legislation was passed aimed at keeping land values reasonably priced. Taken together, these policies represent a coordinated strategy aimed at promoting inclusive economic development that centers a housing system that is affordable and attainable for everyone. All this has made social housing part of the social fabric of Vienna.

Although Vienna’s model is arguably the world’s most famous example of social housing, the concept is becoming increasingly popular in the United States. Our next article in this series will point to domestic examples of social housing and then examine how the concept could be implemented in Washington DC.