A recent article from me for the Architectural Record on the renovation of the Spangen social housing complex in Rotterdam, Netherlands by Molenaar & Co and Hebly Theunissen Architects. Unfortunately this kind of high-end renovation of social housing will probably be something of the past.
To give you some further background information:
In December 2013 the Dutch government approved a 1.7 billion Euro tax to be levied until 2017 on the housing corporations. This money is diverted from social tenants to cover the government’s budget deficit. It is of course ironic that the rise of the deficit has in large part been caused by bailing out the banks in 2008 (Fortis and ABN Amro to the amount of 16.8 billion Euros, total cost of this aid eventually ballooned to 30 billion Euros. ING received 10 billion Euros and transferred 21.6 billion Euros of U.S. mortgage assets to the Dutch state (data from Bloomberg).These are the same banks which were part of the real estate bubble and took on inordinate amounts of risk.
To add insult to injury, it was again Labour (PvdA) who was part of this disastrous vote. A similar policy was of course followed in the UK when Thatcher sold off the council housing with the ‘Right to buy’ policy. From then on the rent of corporations largely went to servicing the deficit, creating a downward spiral of neglect of the estates. James Meek’s article in the London Review of Books of January 8 clearly describes the disastrous consequences of these failed policies.
It remains to be seen if the Netherlands will continue to follow a similar path and one would hope the tax gets lifted after 2017. As these things go, however, I am not too optimistic. This renovation was partly financed by selling off some of the apartments. The corporation Woonstad built a mere 450 new socially rented units in 2012, against the sale of 716 units in the same year. According to their own admission, they have had to let go of 80 people and will pass on a rent increase to their tenants to be able to pay the new tax.
The last sentence of the article, before editing read:
Furthermore, in December 2013 a law was passed which levies a tax of 1.7 billion Euros on the assets of the housing corporations until 2017. This tax will be reflected in higher rents for social tenants and is likely to bring building of social housing to a close, a new reality that makes a mockery of the spirit of responsible governance and collectivity in which Spangen was originally conceived.
Postscript: A day after writing this post I came across an interesting quote in the book “Hugh Maaskant – Architect of Progress” by Michelle Provoost. Hugh Maaskant was a modernist architect, and mainly active during the reconstruction period immediately after WWII. In the book attention is given to the socio-political context of that era:
“The industrialization project began in 1949, when the first Marshall Plan funds were received from the United States. The first ‘Memorandum Concerning the Industrialization of the Netherlands’ was issued that same year, to be followed by eight further industrialization memoranda. This policy reflected the characteristics of the Roman Catholic-social democrat government coalition of the reconstruction period: a policy of planned wages and prices coupled with a social housing policy predicated on low rents, in order to keep labour costs low for business.”
What is interesting in this description is that the government, in spite of the austerity of the post war years, was quite keen to strike a balance between economic and social interests, and opted for a model which now reads as a planned economy. Socially rented accommodation was seen as an effective way to keep wage demands down and the subsidies towards housing were thus understood as a subsidy which would create a favorable business climate. In other words, subsidizing housing helps the population and helps business.
If we now fast forward to the 1.7 billion Euro housing corporation tax, and the fact that this tax can be tied to the bank bail-outs and the economic crisis which followed, we see the application of an austerity doctrine which will only lead to a further contraction of the economy and will lead to additional social costs (externalities) which will again have to be picked up by the taxpayer. Firstly, the bank bail-outs will have the effect of the continuation of a model which is based on rising debt and an unrealistic rise of house prices. The real estate crash has brought the building of new stock to a standstill, which means that demand will continue to outweigh supply. Secondly, the taxpayer subsidy towards the banks will do nothing towards real economic growth. As we have seen, the banks have hoarded the money to balance their books, and have done little to pump the money back into the real economy. Finally, the tax will have to be paid by people who have already had to endure a large drop in their real wages over a few decades of sustained neo-liberal policies. (they are in no position to deal with a year-on-year rent increase of 4%). Sooner or later this will translate in wage demands from people who hold jobs or, – worse still -, increased pressure on social services, which will lead to an increase in – you guessed it -, the government deficit.
Would it not be better to return to a model in which social housing subsidies are used to construct more affordable stock, aid the ailing construction industry, and kick start economic recovery, as opposed to cause a further increase in income inequality and continued support for the financial industry which has created this situation to begin with?