The economic crisis is making it increasingly difficult for social housing corporations to stick to their objectives. While their subsidies are being cut, they are entitled to increase rents. The lower middle class is one of the main victims, concludes Darinka Czischke.

For her PhD research, Czischke carried out a comparative study of social housing corporations in England and the Netherlands. Both countries have a relatively large social rental sector - 21 and 31 percent respectively - but their character is very different. Social housing in England is reserved for the poorest section of the population, those who are unable to afford regular housing, whereas in the Netherlands, it is available to a much wider income group.

During the period studied by Czischke (2008 to 2012), the governments in both countries tightened up the regulations for social housing corporations. Their subsidies were cut drastically and they were instructed to concentrate more on the groups in the lowest income bracket. This coincided with a period in which more and more households were getting into difficulties due to unemployment or benefit cuts.

The housing corporations were able to ride the storm, partly because they were authorised to impose substantial increases in the rents they charged. But what do these non-profit housing corporations do with the money they rake in? Is it invested in new housing stock? “An organisation needs to make tough decisions if it wants to develop new, innovative business strategies”, says Czischke. “But we know very little about the processes by which these decisions are made. My research focused on unravelling this decision-making process, to find out what steers housing corporations in a particular direction.”

The way that administrators react to the power game played out between state, market and community differs per corporation, she says. However, the corporations in her study all felt compelled to make tough decisions under the pressures exerted from all these directions. Take, for example, the decision on whether to develop more housing, despite the drop in government funding (direct or indirect) and the high-risk conditions of borrowing on the open market. 

Should you invest in affordable housing for the new groups which are getting into trouble, or should you focus on existing groups? In practice, administrators sometimes chose the second strategy, thinking it 'safer'. This is bad news for middle income households, particularly those that are facing a drop in earnings due to the crisis. “Recent developments mean that they are rapidly becoming the latest vulnerable group on the housing market”, concludes Czischke. If they are no longer entitled to affordable social housing, will the private sector cater to their needs? Or will they only be able to keep a roof over their heads by buying a house – assuming this is even possible given the new tougher mortgage regulations imposed by the banks. So it is time that social housing corporations took a long, hard look at their basic values. “A social housing corporation that has lost sight of its basic values has lost all sense of direction.” 

Published: October 2014