The term “private finance” is often misunderstood in the context of investment in social and public housing. For many, it is taken to mean the involvement of equity funds, investment trusts, or other types of funding vehicles favoured by active private investors. This could be, for example, in the context of meeting objectives around ESG targets.
However, this is not the case in practice.
When examining the sources of finance for new social housing developments in Europe today, it appears that the majority of projects are funded through “private finance”. However, a closer analysis shows that while funds may not come from the state, much of the so-called “private” capital for investment is in fact heavily supported, incentivised, or guaranteed by public funds or institutions. In other words, the term “private” requires significant qualification.
In reality, nominally private sources of finance that are so essential in many countries in Europe often flow from institutions that are private in name only. One of the best examples is the Caisse des Dépôts (CDC), which at the end of August 2025 had €610 billion of “private” funds to potentially invest, with the origin of these funds being primarily the savings of private households in France. The CDC is a private institution, using private financing. However, it is highly constrained in its lending activities and is in reality a publicly-owned institution that invests in social housing (€10.5bn for new construction and €3bn for renovations in 2024), in addition to other vital public infrastructure and developments.
Very similar “private” financiers of public housing can be found across Europe, such as MuniFin in Finland—which provides 95% of the funding for the typical new social housing development—or the Nederlandse Waterschapsbank (NWB Bank) in the Netherlands, which raises capital on private bond markets and then lends it at low rates of interest to Dutch social housing providers. The Dutch providers in turn benefit from their own sectoral guarantee fund—Waarborgfonds Sociale Woningbouw (WSW)—which pools risk amongst the country’s housing associations, and helps to de-risk the lending of NWB Bank; helping to ensure low rates of interest for social housing development.
In conclusion, it is not common in Europe for truly “private” finance to directly invest in social housing, at least in part due to the better lending conditions social providers can benefit from elsewhere. Rather, many Member States have established specialised “private” financial intermediaries to gather capital from diverse sources—including private investors via bond markets—and then allocate that capital to social housing providers who are in need of it. This is a very favourable situation for the social housing providers, as it means that they do not have to go through the process of raising capital themselves from non-governmental sources, which could be costly both in terms of the time and additional expertise and staff costs required. At the same time, social housing providers may benefit from pooling of risk across the entire sector and (in many cases) implicit government guarantees of the financial intermediaries, which means that they can borrow at far more favourable terms than what would be possible if each individual social housing provider was required to raise debt and assume all associated risks themselves.
This is, therefore, the model that will be discussed in the European Responsible Housing Finance Working Group, as the optimal approach to leveraging in private investment to the social housing sector.
The five models presented in this collection of factsheets illustrate that the optimal use of private finance for social and affordable housing in Europe relies on carefully designed institutional mechanisms rather than on the direct involvement of profit-driven private investors. Despite their diverse institutional forms, the cases of the CDC, MuniFin, NWB Bank, the Danish Landsbyggefonden, and the German Bausparkassen share a number of fundamental characteristics: they mobilise large pools of private capital, they channel this capital towards the housing sector under conditions shaped by public oversight, and they reduce risks for both lenders and borrowers through guarantees, regulation, and solidarity mechanisms.
Taken together, these examples highlight that what is often labelled as “private finance” is in practice embedded in frameworks of public responsibility. The resulting structures provide long-term stability, low-cost financing, and predictable conditions for social housing providers, ensuring that financial flows are aligned with broader social goals rather than with short-term returns. They also demonstrate the critical role of governments and public authorities in setting up the institutional and regulatory conditions that make such financing possible.
As housing needs continue to grow across Europe, these models provide valuable lessons on how to combine the efficiency of capital markets with the safeguards of public interest. By replicating and adapting these approaches, Member States can ensure that private finance serves as a reliable and sustainable tool in addressing the challenge of affordable housing provision.
Read the full factsheet below.