In a recent report, the United Nations Special Rapporteur on the Right to Housing (“the Rapporteur”), Ms Raquel Rolnik called for a paradigm shift from the financialization of housing to a human rights-based approach. In the report, she builds on a previous one where she had highlighted how the deregulation, liberalization and globalization of housing finance have had major implications for housing and urban development, eventually leading to a global affordability and housing crisis.
Further evidence of the global affordability crisis is featured in the report. Affordability is one of the standards set by the authoritative body that interprets the obligations on economic and social rights, the Committee on Economic, Social and Cultural Rights. The Rapporteur explains that millions of empty or under occupied units coexist with a situation in which the poor are disproportionately affected by the growing costs of housing.
The tendency for market-based housing finance, which profits lenders through the payment of interest, to be the preferred housing choice governments support has been happening at the expense of other forms of tenure.
Although more lax lending policies were intended to enable access to credit for low-income households, in a private market-led scenario they are extremely discriminatory: the poorer the credit taker, the higher the interest he/she has to pay.
The report explains that due to these policies national housing systems have become exposed to the turbulence of global finance, raising levels of debt and concentrating risks among individual households. It report establishes a powerful contrast. On the one hand, countries that adopted an open system of mortgages, based on subprime loans, easily granted credit and the securitization of mortgages, which have seen a serious crisis since 2008. On the other hand, countries that have adapted a more balanced housing policy, by encouraging a variety of tenure forms, such as Austria, Germany, and Switzerland, have suffered little from the recent property crises.
According to the report, “A major component of the shift to demand-side housing policies has been the promotion of Government subsidies for privately produced residential units, mobilizing public resources and directing them to individual potential buyers with the idea of reducing Government intervention.”
Some of these policies are extremely costly to the public treasury while, at the same time, benefitting generally the most affluent sectors. Therefore they are very regressive and discriminatory against the lowest-income households. Examples of these policies are the subsidies tied to savings programmes, interest-rate or interest-payment subsidies and tax subsidies and exemptions tied to mortgage payments or real estate taxation. A telling statistic in this regard is that in the United States the top 20 per cent of households earning over USD 100,000 per annum gain 75 per cent of the tax relief on mortgage payments.
Other by-products of the policies to encourage individual homeownership through such policies were the increases in land and housing prices that resulted in segregation and exclusion for lowest-income earners while, in turn, remaining publicly-subsidized housing developments tended to migrate to locations where infrastructure and services, habitability and cultural adequacy are lacking. The obligation to guarantee the right to housing is not limited to a roof, but includes access to proper infrastructure to guarantee an adequate standard of living, the Rapporteur reminds.
The report calls for a wider array of forms of tenure. It states that both demand- and supply-side subsidies for the private rental sector are more cost effective and less costly then subsidies for homeownership and are therefore more compatible with the obligation of States to make use of the maximum available resources in order to ensure the progressive realization of the right to adequate housing.
These supply- and demand-based policies, aimed at encouraging the small scale private rental sector and increasing rent affordability for low-income households, are a more effective use of public resources than governments’ focus on increasing individual homeownership. They entail a different form of taxation, direct or indirect subsidies, and regulation, as well as good practices in State policies towards the informal rental sector.
Other forms of tenure that the State could promote to offer solutions to low-income households are common property regimes, and a section of the report is devoted to discussion of community land trusts and housing cooperative systems.
The report makes it abundantly clear that promoting adequate housing for all is not a matter of whether States should intervene, as they already do everywhere. It says that “the division between the various forms of tenure and housing policies is not a “natural” or necessary choice but rather influenced by State intervention and regulation of the housing sector through the use of its available resources as well as through legislation and policies, including fiscal, taxation and subsidy measures.”
Thus, the relevant question is: will State interventions be guided by the interest of the financial sector or by the human rights framework? Tools exist for States to do the latter. Citizens have a right to demand that they be used.