1. InterAmerica Development Bank
Adding to Rental Supply: Review of International Rental and Social Housing Policies and Programs
IDB International Symposium
Mexico City, July 12-13, 2016
STEVE POMEROY
FOCUS CONSULTING INC. &
CARLETON UNIVERSITY CENTRE FOR URBAN RESEARCH AND EDUCATION (CURE), OTTAWA, CANADA
Steve Pomeroy

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Outline
Some context
Comparative trends in rental housing
Overview of recent research examining rental programs and policies across six countries
Steve Pomeroy Focus Consulting Inc.
Steve Pomeroy

3. Steve Pomeroy Focus Consulting Inc.
Context
“A well-operating private rental sector is now seen as a necessity for post industrial economies worldwide as households have become less ‘traditional’, mobility and migration have grown and the labour market increasingly requires a flexible workforce”
{Scanlon and Whitehead 2010}
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4. Concept of Housing as a System
Three main parts of the Housing system
Ownership
Traditional detached/attached homes
Condominiums (owned apts)
Private Rental Sector
Social Rented Sector
Distribution in Canada

5. Canada residential construction dominated by ownership (freehold and condominium)
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6. Rental Housing Production

7. Rental Policies in Canada
Social Rental
Series of public funded supply programs 1949 through 1994 – loans to cover 100% cost plus ongoing operating subsidy to support operations while keeping rents low (30% income)
Some small Housing Allowance programs at provincial level (sub-national)
All federal funded funding ended 1994 (until 2001)
Since 2001 modest scale capital grant program to facilitate production of “affordable rental” – but no more ongoing subsidy
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8. Rental Policies in Canada
Market Rental
Mortgage insurance to cover rental loans from 1964
Series of public funded stimulus programs mainly 1974 through 1985
Favourable tax treatment of rental investment until 1993 (and temporary tax initiative )
No incentives of stimulus policies since 1985
Some new initiatives (low rate finance) now under consideration
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9. International Experience
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10. Rental includes private and social
Definition of “social” not necessarily consistent
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11. Political-Economy Influences
Explanations for the formation of distinct welfare states and housing systems respectively
Esping-Andersen’s ‘The Three Worlds of Welfare Capitalism’
Kemeny’s classification of dualist/unitary housing markets
These influences are reflected in the relative scale and form of each countries private and social rental sectors
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12. Trend in OECD Rental Sector (Post war-1990’s)
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13. Trend in OECD Rental Sector 1990’s to 2012 (private only)
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14. Trend in OECD Rental Sector 1990’s to 2012
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15. Trend in OECD Rental Sector 1990’s to 2012 (private only)
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16. Trend in OECD Rental Sector 1990’s to 2012 (private only)
All countries have well established long term regulatory and legal frameworks
Why did many decline, some remain stable some increase?
Were these trends underpinned by regulatory reform or where they due to other factors?
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17. How has regulation changed
Australia, Canada, US have tended toward deregulation (varies by sub-national)
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Source: Univ Cambridge 2012

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Forms of regulation
Enacted via formal legislation either at national or sub-national level
Initial rent setting (market, administrative, comparables including influence of social)
Rent increases (market based, inflation indexed, administrative)
Minimum length of lease (and post lease treatment), fixed vs. indefinite;
The landlord’s ability to repossess the property during the lease;
The landlord’s ability to sell the property or transfer it to another tenure (during lease period); and
The landlord’s ability to enforce the lease if contract is broken
Generally higher levels of restriction on rent setting and landlord options create disincentive, but lessen tenant security of tenure
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19. Why has rental declined?
Decline in most countries (except UK and US)
Combination of reasons, but primary cause is a strong policy favouritism for homeownership combined with favourable market conditions (lending augmented by increasing income/affluence) and consumer preference for ownership
Other factors are:
Demographics – renters typically young or old
Planning and zoning regulation
Tax policy – treatment of rental income
Access to Financing (especially for rental development)
Attraction of alternate property/other investment (condo, equity markets)
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20. Summary (legal and regulatory)
Regulation matters - But alone it is insufficient
Balance (landlord vs. tenant) and stability (vs. frequent revision) are critical
External factors exert strong independent influence, so must treat housing as a system and monitor interactions between sectors and policies that impact other (social/ownership) sector (e.g. favourable lending and tax treatment of owners)
May need to augment sound regulatory framework with incentives and stimulus (Public policy initiatives and funding)
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21. Recent comparative research on social and private programs and incentives
Review of recent (post 2008 GFC) policies to support/stimulate either social or private rental
Six countries: Australia, England, Germany Ireland, NZ, US
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22. Recent comparative research on social and private programs and incentives
Key findings
Very minimal supply response to persisting affordability issues.
Some new supply – but not targeted to low income and very modest in scale
Trend is toward person/household subsidies, in various forms of housing allowance.
(Separation of supply and affordability assistance)
Expanding practice of asset renewal, redevelopment and leverage.
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23. Recent comparative research on social and private programs and incentives
Key findings
Evolution in form of investors (North America) from large scale “purpose built” to small scale investors
Blurring of the lines between social and private
Emergence of “hybrid” organizations and forms of provision – mixing public objectives and market discipline
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24. Recent comparative research on social and private programs and incentives
Typology of five types of approach:
A. Direct measures
Initiative to encourage or facilitate market rent supply
Initiative to encourage or facilitate affordable supply
Mechanisms to support asset rationalization and leverage
B. Indirect measures
Tax, regulatory (or loan) mechanisms
Demand based revenue subsidy (to support leverage of private finance)
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25. Policies and Programs Reviewed
A. Initiatives to encourage or facilitate market rent supply (no conditions on rents or tenant eligibility)
A1. Western Australia Affordable Housing Strategy:
A2. England: Build to Rent Fund
B. Initiatives to encourage or facilitate affordable rental supply (explicit affordable targeting conditions)
B1. Australia: National Rental Affordability Scheme (NRAS)
B2, Australia Social Housing Initiative (SHI)
B3. England: Affordable Homes Programme (AHP)
B4. Ireland: Capital Subsidy Program
B5. Ireland: Social Housing Strategy 2020
B6. New Zealand: Social Housing Reform
B7. US Low Income Housing Tax Credit (LIHTC)
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26. Policies and programs
C. Mechanisms to support asset rationalization and leverage
C1. England: Redevelopment Schemes/Estate Regeneration Programme
C.2 United States: Rental Assistance Demonstration (RAD)
C.3 United States: HopeVI/Choice Neighborhoods Program
D. Indirect measures - Tax, regulatory (or loan) mechanisms
D1. Australian tax policy to encourage rental investment
D2 Germany: Rental system incentives
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27. Policies and programs
D. Indirect measures - Tax, regulatory (or loan) mechanisms
D1. Australian tax policy to encourage rental investment
D2 Germany: Rental system incentives
E. Indirect measures - Demand based revenue subsidy (to support leverage of private finance)
E1. Germany: Rental Accommodation Allowance (Wohngeld)
E2. Ireland: Rental Assistance
E3. New Zealand Income Related Rent Subsidy (IRRS)
E4. Australia: Commonwealth Rent Assistance (CRA)
E5. US: Section 8 Housing Choice Vouchers
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28. Case of South Africa
Post apartheid efforts to create a private and social market
Purposeful approach to building a strong community based Non-Profit sector
Strategic use of social housing investment in redevelop zones (labour market support)
Limited number of strong competent “social housing institutions” (SHI) 5,000 each)
Currently 30,000 homes; aspire to 200,000 by 2030
Funding model designed to enable sector self sufficiency (currently being recalibrated)
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29. Key Lessons and Insights
If primary policy objective is quantity, use supply incentives (financing, tax or subsidy)
Caution required with affordability criteria (which can undermine supply objective)
Demand-based subsidies less effective in stimulating supply (need existing rental stock)
But demand-based (rental allowance) can help to manage affordability issues and can create a form of revenue guarantee to enable financing
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30. Key Lessons and Insights
Critical to invest in building a competent professional community based sector to deliver and operate social housing(capacity building investment, e.g. South Africa)
Need a sustainable funding model that nurtures increasing self reliance for reinvestment
Need organizational scale
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31. Thank you!
Additional background reports available at
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