''Copenhagen policymakers and researchers have increasingly used data to better understand the impacts of policies in order to adjust for outcomes on both a micro and macro scale. We talked to Curt Liliegreen from the Housing Economics Knowledge Center at Realdania, who shared research and outcomes that have demonstrated Copenhagen’s ability to respond to broader housing issues with practical and data-informed solutions. For example, when population data distributed by the socioeconomic neighborhood index showed increasing displacement and segregation patterns by income, local government leaders pursued policy changes to reinstate smaller units as a naturally affordable housing solution by reducing the minimum residential unit size from 90 square meters to 50 square meters. This allowed the housing development sector to more nimbly provide for a missing housing solution in a quickly growing city.
Social Housing
Denmark’s history of equitable housing policy goes back over 100 years. In 1919, by broad political consensus, Denmark established a national public social housing system that is open to all. Unlike public housing in the United States, social housing is not restricted to low-income households in Denmark; it is available to anyone. Nonprofit housing organizations develop and own the buildings, and residents influence their living conditions through a system of tenant democracy. Nonprofit housing development is an integral part of Danish welfare policy and is therefore highly regulated in terms of financing, design, construction and management (which includes waiting lists for housing units). By Danish law, each municipality is eligible to reserve up to 25% of its social housing stock for communities such as refugees, unemployed people and people with disabilities. Social housing accounts for about 20% of the housing stock in Copenhagen. Market-rate rentals and homes make up 43%, and private co-ops, which we’ll dive into later, represent another significant portion.
Capital for building social housing comes from a national funding institution known as the Landsbyggefonden (National Building Fund or Revolving Renovation Fund). This independent institution is governed by a board of directors with oversight of nonprofit housing development organizations. The fund’s level and areas of investments are agreed upon every four years by the Danish Parliament. As social housing projects repay their loans, the Landsbyggefonden receives more capital, which allows for a sustainable funding cycle for construction costs and a consistent funding mechanism for ongoing large-scale maintenance and renovations of social housing properties.
Lesson 1. Vastly simplify financing for affordable housing.
In the United States, developers must rely on a patchwork system to identify and pursue financing for projects. This system already includes substantial public money for affordable housing. Denmark’s system of nonprofit housing development uses simplified mechanisms to secure financing, and has established a system of loan repayment under a revolving fund. A key takeaway for the Bay Area is to move toward a system of housing where certain types of housing are not expected to generate a return so much as sustain a revolving fund. One important step toward this goal is to place land and buildings in public or nonprofit ownership to encourage long-term housing affordability. By empowering a new regional housing finance agency to acquire, manage and dispose of land and property, the region can enact effective policies that maintain affordable housing under a simplified and revolving fund that can be supplemented by public and philanthropic institutions.
Lesson 2. Diversify tenant and owner incomes within buildings.
Existing social housing and co-op models in Denmark offer lessons on income diversity within buildings. Affordable housing policy in the Bay Area often skews toward encouraging 100% affordable projects, where all of the units are subsidized for low-income households. But this approach fails to account for the difficulties in scaling up housing development. The Bay Area needs to produce a significant number of units in order to address its housing shortage — and it cannot meet this goal when developers are challenged to build projects that must be almost entirely covered by government subsidies. Having a diversity of incomes within buildings allows for more flexible ways of meeting repayment terms, and it has wider social benefits. Research continues to find that upward mobility tends to reflect socio-economic proximity. Raj Chetty’s findings, including the Opportunity Atlas, show the importance of what he calls “cross-class interaction,” or interaction in childhood with people from different socio-economic groups.
Lesson 3. Continue pursuing co-operative housing policies, and set price controls to protect affordability.
Laws establishing tenants’ right to purchase their units have led to a substantial and comparatively affordable housing option in Denmark, where purchasing a stake in a co-op essentially represents a step in between renting and home ownership. Regulations on selling prices and tenant co-op management provide guardrails against market forces in cities like Copenhagen. These models, and their challenges in implementation, inform next steps for Bay Area cities, where jurisdictions such as San Francisco and San José have begun to make headway in furthering co-operative housing policies, such as the Community Opportunity to Purchase Act (COPA) and Tenancy In Common (TIC). However, the Bay Area can also enact price controls on subsidized nonprofit co-ops that can be structured and regulated between ownership transitions. This would solve for the patterns of exclusion in the current Danish co-op housing model, where tenants often sell their unit to a friend or other well-connected buyer.
Lesson. 4 Consider other income policies that complement affordable housing.
Denmark’s national housing policies have led to a social housing system that is not income restricted, and the country has the benefit of over a century of implementing equitable housing construction and management. But the system’s success is also in part due to a nation-wide network of safety nets that provide for broader social benefits. Denmark’s welfare state policies provide free universal access to healthcare, sick leave, education, transportation and unemployment benefits. In fact, university students are paid to attend school. Additionally, Denmark’s labor market model operates under a system where pay and working conditions are established by collective-bargaining agreements between trade unions and employer organizations. As a result, (except for a few emerging labor markets) much of the country’s workers earn livable wages. Denmark’s income policies contribute to a housing system where fewer people need additional income supports and subsidies because they already have access to a wide spectrum of social benefits. Income policies matter when developing and enacting housing policy''.
SPUR
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