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How to guarantee affordable housing

The state of North Rhine-Westphalia (NRW) in Germany invests while setting quotas in Cologne and in Münster

Düsseldorf, 28 August 2014 | Social, Economy

1000 affordable homes in Cologne and 300 in Münster have to be built every year until 2017 according to the agreement reached between the local authorities of the two cities and the Ministry for Building, Housing and City Development of North Rhine-Westphalia.

The largest German federal state, in terms of population, builds thus upon a model that guarantees access to decent housing to as many people as possible in two university cities where there is a high demand for affordable rental housing. 

In a meeting that took place in Düsseldorf on Wednesday, August 27, the Building Minister, Michael Groschek, the Cologne Mazor, Jürgen Roters and the City Director of Münster agreed upon a total budget that will be made available to both cities within the following three years, so that they can better serve their mission to provide social housing. In particular, 75 million Euro will be given yearly to the city of Cologne, whereas 25 will be granted to Münster.

In addition to the annual building provision a quota has been set for both cities concerning housing construction.  Both cities have committed themselves to make at least 30% of the urban land available for the new social buildings that will be subsidized by the state of NRW. These sites are supposed to be offered to Housing cooperatives and the housing reserved areas should be prepared for construction.

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Minister Groschek underlined that:

“This multiannual programme is a clear sign to investors who can rely on a concrete framework”.

The budgetary package consists of a total of 3.2 billion Euros that will be made available in the form of subsidy loans to support the provision of social housing in the years 2014-2017.

Another interesting condition that both cities have accepted is that they will have to review their housing policies concerning “Socially fair use of space”, “development of building land” and “social housing” in an open dialogue with the local housing market actors.

The Hamburg Model

However, the model followed in NRW is not new. Initially such a scheme has been successfully implemented in Hamburg and therefore it is known in Germany as the "Hamburg model". Real Estate Expert, Matthias Voss, explains in the "Immobilien Zeitung" (Real Estate Paper) the advantages of the "Hamburg model": It combines susidies from both the Federal Republic and the different Federal States, removing thus pressure from the housing markets. On the other hand investors may make profit, since they can finance their investment, making use of the stable yields and of an overall rather safe framework. All in all, the "Hamburg model" is a secure, sustainable and therefore attractive scheme for real estate investors.

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