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Housing in the scope of the latest Country-Specific Recommendations

5 Member States in the loop

Brussels, 19 May 2015 | Published in Economy

The European Commission addresses housing related CSRs to 5 Member States this time. No significant changes since the last semester. A Housing Europe Analysis.

On May 13th  2015, the European Commission has published the country-specific recommendations for each Member State, along with an overarching Communication on how to strengthen and sustain the recovery, and how the streamlined European Semester is implemented.
As "Housing & Private Debt" are among the assessment criteria for the financial sector, Housing Europe highlights the housing-related CSRs addressed to 5 countries along and presents an analysis compared to the previous semester accompanied by a first reaction from its member organisations.    

The Housing Europe Analysis & Position

Despite announced changes in the European Semester structure and focus, not much has changed in the country specific recommendations concerning housing.

The most significant change is that no country this year has received recommendations on energy efficiency of buildings/residential sector, contrary to last year when they addressed the issue in Belgium, Estonia, Hungary, Lithuania and Latvia. This is basically due to the new focus and prioritisation on the ‘key issues of macro-economic and social relevance that require action by Member States in the near term’: this has meant that the overall number of recommendations has been reduced significantly, and notably the ones related to energy and the environment have been left out. The EC nevertheless stresses that it doesn’t mean they have lost in importance, as they are taken up via other policy processes (e.g. in the context of the Energy Union).

Besides the abovementioned change, this year’s recommendations most relevant to housing providers basically echo the 2014 CSRs. Our first reaction is that once again the Commission has understood the importance of addressing the issue of housing shortages and mortgage indebtedness, but still does not grasp the stabilising and counter-cyclical role of public, cooperative and social housing.

United Kingdom: ‘Take further steps to boost supply in the housing sector, including by implementing the reforms of the national planning policy framework.’

Sweden:Address the rise in household debt by adjusting fiscal incentives, in particular by gradually limiting the tax deductibility of mortgage interest payments or by increasing recurrent property taxes, and by increasing the pace of mortgage amortisation.  To alleviate the structural under-supply of housing, foster competition in the construction sector, streamline the planning and appeals procedures for construction and revise the rent-setting system to allow more market-oriented rent levels.

Netherlands:Accelerate the decrease in mortgage interest tax deductibility so that tax incentives to invest in unproductive assets are reduced.  Provide for a more market-oriented pricing mechanism in the rental market and further relate rents to household income in the social housing sector.

This is of course only a piece of the puzzle, as these housing-related recommendations should be seen within the wider framework of the CSRs. For instance, the Commission is calling on France to ‘Identify savings opportunities across all sub-sectors of general government, including on social security and local government. Take steps to limit the rise in local authorities’ administrative expenditure.’ Will this have an impact on housing allowances and on the way local authorities contribute to financing the HLM sector? Ireland should ‘Finalise durable restructuring so lutions for a vast majority of mortgages in arrears by end-2015’. This is a very good initiative per se, but what about the fact that lack of affordable rental housing contributes to pushing households towards home ownership even when they cannot afford it?

Issues such as the increase in homelessness and the worsening housing conditions in some countries as a consequence of the crisis are not at all tackled in the CSRs, and overall the general issue of poverty and inequality is treated quite narrowly and only for very few countries.

Interestingly though, a number of CSRs refer to the need to improve active labour market measures, the healthcare systems, as well as provision of childcare and education: the availability of good quality and affordable housing should be recognized as having a positive impact on all these aspects, as increasingly supported through evidence from a number of studies.

Housing Europe Members' reactions

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The National Housing Federation (NHF), UK

The National Housing Federation shares the view of the EC that there is a shortage of homes in the UK housing market and we are supportive of policies that aim to increase the supply of new homes, in particular affordable homes. In addition to increasing the supply of new homes, we also believe that there is a continuing need for regenerating existing homes and making them fit for today’s and future housing requirements.

The Dutch Federation of Housing Associations AEDES

It is surprising that the Commission, contrary to last year’s CSRs, does not ask the Dutch government anymore to monitor the effects of the housing reforms on affordability and accessibility - especially because our members notice those two issues are more and more under pressure. This would support the general comment about less attention for increasing poverty and inequality.

The Swedish Association of Public Housing Companies SABO

The Commission recommends that Sweden focuses on private debt, and proposes changes to the tax system to address this.

"The European Commission has drawn attention to a problem that SABO, the Swedish Property Federation and the Swedish Union of Tenants have been aware of for some time. A tax reform for Swedish rental properties is required so that they are not placed at a disadvantage. It is currently around SEK 3,000 more expensive per month to live in a rental property compared with a tenant-owner apartment or owner-occupied home", explains Kurt Eliasson, CEO of SABO.

According to the Commission, Sweden needs to promote competition in the construction sector and speed up planning procedures. "I share the view of the Commission, and in the past year our work to force construction prices down has been realised in many municipalities through SABO's Kombohus. Furthermore, there is currently a high level of political awareness about the lack of competition and the need to reduce prices in the construction industry to eliminate the housing shortage in Sweden", says Kurt Eliasson.

The Commission also considers that Sweden needs to reform its rent setting system. "SABO, the Swedish Property Federation and the Swedish Union of Tenants have promised to respond positively to the trust we have gained in negotiating rents. I am convinced that we can all keep our collective pledge. For example, SABO is working to further increase support for our member companies in respect of rent issues", comments Kurt Eliasson.