This chapter appraises the practical delivery of housing for need through its removal from the circuits of commodity exchange. It explores the direct social provision of forms of cost-rental, municipal housing and socialised homeownership around the world. Charting the shift from need to affordability in the decimation of decommodified housing, it investigates the subsequent escalation of housing costs and resulting crisis of inequality, not affordability. The chapter critically examines the strategies of affordable housing provision that maintain demand without reducing prices. Just like any other commodity, so-called affordable housing creates value and surplus value in production to realise value as money in exchange. It is a regressive strategy, benefiting first those with ability to pay, and channelling subsidies to profit landlords, landowners, developers, and real estate commercial interests.
Housing for Nothing
The universal need for housing is a goal that all societies are required to address. The achievement of that goal is a matter for the organisation of the labour and resources available, and a combination of two elements, “the material provided by nature, and labour” (Marx, 1990: 133). Housing can be directly provided for need or it can be supplied as a commodity for exchange. Housing directly provided for need is the product of concrete useful labour carried out with a definite aim, the distribution of the use values of home. Housing supplied as a commodity for exchange is the product of abstract labour-time or wage labour sold as a value exchangeable for money. An economy in which housing is produced as a commodity is directed towards the accumulation of value and not the distribution of use values. In this specific organisation of labour and resources, the fulfilment of housing need depends on ability to pay the price of a commodity. Access to housing is inextricably tied to the unequal distribution of wealth and income.
In volume one of Capital (1990), Marx makes a clear distinction between the direct production of goods for use and the distribution of goods as commodities. He takes the example of self-provisioning, which is globally the most common collective means of satisfying housing need (Shrestha et al., 2021). When the labour required to provide housing is carried out by families and friends the goal of meeting housing need is addressed directly through co-operative mutual aid. The land for housing may be inherited from family, or it may be occupied outside of property relations, and the materials for housing taken from the land. Nothing is bought or sold and the need for housing is addressed without having to pay a price. Let us imagine, Marx says (1990: 171): “an association of free men and women, working with the means of production held in common, and expending their many different forms of labour-power in full self-awareness as one single social labour force.” This is an image of the direct social production of housing for need. In an ideal administered system housing would be produced and allocated to households to ensure that everyone has a decent home. The standard of housing required to meet all diverse needs would be agreed, and a separate policy decision will determine how much, if anything, people should contribute (Whitehead 1991: 874). To provide housing directly, through collective human endeavour outside of the commodity exchange market is to deliver what is valued, and what is needed, without the exchange of labour for money and money for housing (Vail, 2010). It is, in effect, to decommodify housing.
The measure of an effective welfare state in Gøsta Esping-Andersen’s iconic classification is the extent to which it decommodifies basic goods and services. In The Three Worlds of Welfare Capitalism, Esping-Andersen (1990: 37) explains, decommodification “refers to the degree to which individuals, or families, can uphold a socially acceptable standard of living independently of market participation.” When the satisfaction of human needs depends on the purchase of commodities, the value of labour and the unequal distribution of wealth become determinants of life or death. Survival itself hangs on the exchange of labour-time for commodities. When the distribution of basic goods is decommodified, and the satisfaction of human needs no longer rests on the purchase of commodities, dependency on income and labour market position is broken. Welfare state regimes that decommodify the provision of housing for need can have, then, a revolutionary effect on income stratification and inequality.
The direct provision of housing for need, irrespective of price or ability to pay, was a central pillar of the welfare states of western Europe and an acknowledged entitlement in the socialist central and eastern European countries after World War II, as it was in the People’s Republic of China from 1949, and as it had been in the Union of Soviet Socialist Republics since 1918 (Poggio and Whitehead, 2017:2). The model of decommodified housing was forged in the class struggles, rent strikes and political action of social movements before, during, and after the 1914-1918 World War, in conflicts sparked by the rent gouging of landlords and real estate profiteers. It flourished and bloomed in the post-war welfare settlement into multiple forms of social provision, providing access to property rights free from market dependency to immeasurably flourish the lives of working-class households (Boughton, 2018). Municipal, social, or public housing, by whatever name it was known, spurred a collective surge of optimism. It provided a living standard that drastically destabilised the exploitative class relations of production for commodity exchange (Blackwell and Bengtsson, 2023). The social democratic welfare states of Europe and the socialist countries demonstrated a commitment to the provision of decent housing for all that reflected the hard-fought gains of the labour and tenants’ movements. The social provision of housing was offered as a universal right, without needs or means-testing. The satisfaction of housing need was not defined in paternalist terms or imposed as an administrative assessment of a basic standard (Bengtsson, 2001). The explicit aim of these regimes was to promote an equality of the highest standards. All the differing use values of housing were to be provided as a range of decommodified goods and services to undermine the inequality of the commodity market.
Housing for Need
In contemporary Austria, Denmark, France and Finland, price does not determine access to housing. In the cost-rental sector, housing is socially provided for need. Rents are set at no more than the historic costs of building, plus ongoing management and maintenance, with no profits or return on equity allowed. Any question of affordability is a matter for a separate policy decision, with redistributive transfers addressing residual income inequality. Cost-rental housing can be municipal, public, or social housing. Municipal housing is open to everyone in Sweden and social housing is universally available in Denmark. Access is determined by time on a waiting list. Minimal income limits operate in Austria, Finland, and France to prioritise distribution on need but enable access for the majority of households (Kadi and Lilius, 2024). Cost-rental housing is decommodified because its distribution is not mediated by price or determined by ability to pay a market valuation. Its supply, however, may still depend on the market exchange of land, materials, and labour in construction. A cost-rent will cover repairs and maintenance, building insurance, the wages of housing management staff and their overheads, and include compensation for lost rent. It will not include any return on capital or profit to the landlord, but a component of the cost-rent may be allotted to pay the market valuation of the land, which will include an uplift on value pocketed by the owner of the land. The rent will also go to pay off the capital borrowed to build the property at its market valuation, which will include interest on the loan, and the profit taken by the construction contractors, and building supplies merchants.
The ingenuity of the cost-rental model is in the way in which the provision of housing can be detached from market valuation so that rents do not pay the profit charged in construction, the interest on capital, and uplift on land value. Public land is provided without cost, or private land is purchased at existing use value, investment loans issued by state banks are offered at minimal terms of interest, and secured against reserves, while construction costs can be regulated by supply-side subsidies or carried out by municipal and non-profit direct labour organisations. The most successful, and long-lasting models of cost-rental provision are those that have the support of all layers of governance and civil society and are rooted in a commitment to the universal right to housing (Blackwell and Bengtsson, 2023). In Denmark, where the sector provides 17 percent of all homes, the construction of new cost-rental housing by not-for-profit housing associations is financed by mortgage-credit institutions and supplemented by tenants’ deposits and municipal grant (Nielsen and Haagerup, 2017). The state decides the types of mortgage loans to be used, and the Danish mortgage system is uniquely based on a match-funding, or balancing principle, which effectively limits market risk. The National Building Fund, a private self-governing, but state regulated institution, funded by tenants’ rents, acts as guarantor for the loans, supported by municipal base capital and state guarantees (Rogaczewska, 2017). In Austria, where 22 per cent of housing is decommodified, just over a third of construction and land acquisition costs are funded from long-term public loans, while special purpose bonds provide subsidised bank loans at low interest rates. The cost-rental sector in France accounts for 17 per cent of housing stock and is provided by both publicly and privately owned Habitation à Loyer Modéré companies acting on a non-profit basis under the control of the Ministry of Housing and Finance. The savings of French households invested in the universally available Livret A tax-free fixed interest national savings accounts finance new cost-rental construction (CECODHAS, 2013).
Unitary Housing
In the typology established by the theorist Jim Kemeny (1995: 15), cost-rental provision is integral to the concept of a unitary housing system. In a unitary housing system, the distinctions in outcomes between non-profit and profit tenures and between renting and homeownership are minimised. Cost-rental housing is encouraged to compete directly with profit renting to bring about a reduction in costs and improved quality across the rental sector. Kemeny contrasted the unitary housing system, where cost-rental was an option for all households, with the dualist regimes who maintain a segregated non-profit rental sector as a safety-net for those who cannot meet their housing needs in the commodity market. Central to Kemeny’s understanding of the unitary housing system was the economic advantage enjoyed by cost-rental over profit-seeking landlords. Profit landlords charge a rent that covers the market costs of supplying and maintaining housing and provides them with a return on their investment. Cost-rental providers do not require a return on their equity, so they are able to charge lower rents, while their costs reduce as the debt on the properties is paid off. If the cost-rental sector offers a wide range of quality housing stock in terms of age, location, and dwelling-size, and is an accessible alternative to profit housing, it will attract more renters and force profit landlords to lower their prices and improve their standards in order to remain competitive. “This is the main channel through which the non-profit sector is able to act as a dampener on the general level of rents,” (Kemeny, Kersloot, and Thalmann, 2005: 857). The competitive effect of cost-rental brings about low costs, high quality, and security of tenure across the rental sector without the requirement of government regulation. As the cost-rental sector expands, attracting and keeping better-off households, it will exert pressure on costs in the homeownership market, flattening out the wild price swings of boom and bust. In the absence of large tax biases in favour of homeownership, the cost-rental sector may then start “to squeeze out demand for owner occupation” (Kemeny, 1995: 48).
The competitive edge that cost-rental housing enjoys over profit renting is expressed in Kemeny’s concept of maturation, which describes the stage when historic debts are paid off, and the cost-rental income begins to accrue a surplus over the costs of management and maintenance. At that point of maturity, rents can be pooled across all cost-rental properties to subsidise a steady supply of new housing. This is a long-term process and depends on the age and size of the cost-rental sector. It has taken more than half a century for cost-rental housing providers in Europe to even approach this maturation stage. What happens at the point of maturation can be illustrated in the case of council housing in England, which was essentially a nationally pooled cost-rental system with local variations. From 1945 to 1980 municipal councils built between 100,000 to 200,000 new decommodified homes every year and, by the 1970s, council housing accommodated 30 per cent of households in every city, town, and village (Whitehead, 1990). The profit rental sector, which inadequately housed 80 per cent of English households in the early 1900s, declined to around 10 per cent of stock as a result of council housing’s growth to maturation. By the early 2000s council housing in England was declared self-financing by government because it was generating a surplus over historic debt. The historic debt, valued at £19m, would have been paid off twenty years before, if Margaret Thatcher’s government had not stripped £37 billion (USD $49bn) out of council housing rent accounts through the privatisation of stock (House of Commons Council Housing Group, 2010). As Kemeny said, all political attacks on public, municipal or social housing as a so-called subsidised tenure are motivated by a desire to conceal the competitive advantage the socialised housing sector enjoys over profit rental. “The neglect of the study of maturation in non-profit renting in housing research and the widespread ignorance about its importance in keeping rents low is ideologically important in minimising the political support for non-profit renting,” (Kemeny, Kersloot, and Thalmann, 2005: 861).
Kemeny’s thesis that cost-rental housing can compete effectively with profit renting is validated in the case of Austria and in Sweden where rent-setting in the municipal housing sector has helped shape a unitary rental market. Rent pooling is not a universal feature of cost-rental, however, and in Denmark rents are determined according to the historic costs of individual blocks of properties and cannot be pooled to lower the price of new build. This approach ensures that there are always sufficient funds for building maintenance and refurbishment, and the impact on rents of investment decisions is a matter delegated to tenant democracy in individual neighbourhoods. Tenants moving into new housing, however, may be confronted with higher cost rents because of increased construction prices and higher land values. In Austria, limited rent pooling is allowed to reduce the capital costs of new projects, and this has helped to dampen prices in profit rental and maintain housing costs across tenures at a comparatively low level (Mundt, 2018; Mundt and Amann, 2010). In France and Finland housing providers are legally allowed to aggregate costs and pool rents to subsidise new supply from older homes now mortgage-free (CECODHAS, 2013). Until recently, municipal housing in Sweden redistributed the surplus from older mortgage-free properties to subsidise new construction. Historic cost-based rent regulation was replaced in Sweden by negotiated rents determined by use value which vary according to the quality and facilities offered, although they are still primarily determined by the age of building (Berger, Jonsson, and Turner, 1994; Lind, 2017). Use value rents are agreed in negotiation between the tenants’ unions and municipal housing companies and are used in determining the rents in the private rental sector, meaning there is a unitary regime for all rental housing (Kemeny, 1993).
Cost renting can reproduce housing as a use value and magnify that production in competitive advantage over profit rental, while directly supplying homes for need, without the extraction of profit in commodity exchange. To attain the stage at which the process of maturation may occur, the cost-rental sector requires considerable capital investment in stock and revenue subsidies to keep rents competitively low; a factor that Kemeny does not emphasise (Harloe, 1995). When combined with a supply of land at cost and capital at low interest, cost-rental provides a model of decommodified housing that can effectively challenge inequality, enhance democracy, and bring about collective empowerment.
Democracy in the Home
The model of decommodified housing that emerged in the north-west European welfare states was intended to do more than just provide cost-rental homes. It was expected to radically undermine the inequality generated by commodity markets, to promote co-operation over competition, and encourage reciprocity and solidarity in the place of individualism and self-interest (Smith, 2005). Decommodification does not just make us less dependent on selling our labour on the commodity market. It is about the potential for self-fulfilment. In cost-rental housing this means providing opportunities for personal development that are realised collectively and are rooted in financial security (Room, 2000). Cost-rental housing took land out of private ownership and dedicated it as a common resource to raise the living standards of labour, converting forgone exchange value into the economic base for collective aspiration and optimism. Radical new possibilities were fostered in the democratic spaces of cost-rental. The social movements that led the struggle for decommodified housing were animated by a passionate concern for the associational relations of community and the demand for a more democratic and participatory society (Somerville, 2016). They were motivated by a desire to extend “democracy into the very nature of welfare provision” (Bolger et al 1981: 26). Shared experience and shared class interests encouraged in cost-rental “the positive practice of neighbourhood”: the idea of community (Williams, 1958: 326), “a concept of home spilling out of the individual household and its dwelling and projecting itself on to neighbours, streets” (Cox, 1981: 433). This collective ethic of care conveyed in the writings of welfare state theorists Richard Titmuss and T.H. Marshall, was realised in the daily life of co-operative housing, in homes managed by democratic tenants’ organisations and in public housing by landlords held accountable as elected representatives (Grayson, 1997).
Concepts of participatory or direct democracy are deeply embedded in council housing in Britain; they are written into law in Finland, and realised in Danish tenant management, and in the negotiating strength of the Swedish tenants’ union, whose headquarters provides the global base of the International Union of Tenants (Czischke and Pittini, 2007). A tradition of collective action continues to be evidenced in British council housing and housing associations where local tenants’ associations and regional tenants’ federations are organised on the principle of direct democracy. Since 1994 council tenants have held a statutory Right to Manage, with voluntary management options extended to housing association tenants in 2008, while self-build housing co-operatives and co-operatively owned housing associations enable tenants to take local control (Bradley, 2014). Participatory democracy has been an essential concept in the Danish cost-rental sector since its inception in the early 1900s. The decision-making role assigned to residents in Denmark is unique in Europe (Hansen and Langergaard, 2017). Resident democracy is established in law and individual estates and apartment blocks are managed by an elected tenants’ committee who allocate and deliver the budget for repairs and investment, while residents annually decide the strategy for their housing department and have additional representation on the board of representatives of housing associations (Lilius and Nielsen, 2024). The tenants’ committees employ staff to carry out the day-to-day running of the estates and liaise with the housing associations on investment and environmental improvements, while they also take an active role in fostering communal activities (Jensen, 1998).
Co-operative housing offers the epitome of democracy in the home and has provided an antidote to the individualism of liberal ideology since the nineteenth century. Common to all forms of co-operative living is that residents live in democratically organised, self-governed, and collectively managed housing. Co-partnership housing in England provided the first model of shared equity in working-class mutual aid long before council housing (Birchall, 1995). In European countries co-operative housing delivers a sizeable proportion of all homes, with both rental co-operatives and collective homeownership (Sørvoll and Bengtsson, 2018). In Germany, a thriving cooperative housing sector serves 4.6 million residents, with construction and renovation funded through low-interest mortgages provided by a government-owned development bank (Caturianas, Lewandowski, Sokołowski, 2020). Most housing co-operatives are organised on non-profit principles with prices charged for new homes and management services reflecting only production costs. In Norway and Sweden, the co-operatives offered an inspiring model of socialised homeownership.
Socialised Ownership
Homeownership offers an effective form of decommodified housing when the mortgage debt is redeemed, or the construction loan paid off (Fahey and Norris, 2011). Until that time, buying a home can thrust a household into precarious dependence, not just on wage labour, but on the unnavigable circuits of interest-bearing capital. Strategies to shelter the financing of homeownership from the volatility of capital markets have been adopted to protect households from these unpredictable risks, and in many countries a model of socialised, and largely decommodified home ownership emerged (Moreno Zacarés, 2024a).
In Europe, the countries of Belgium, Finland, Norway, and Ireland made homeownership the primary goal of their housing programs by ensuring that the necessary credit flows were channelled through state banks at low rates of interest, offering mortgage insurance and additional housing assistance (Kholodilin, Kohl, and Müller, 2024). In Ireland, between the 1920s and 1970s, state mortgages and generous grants were made universally available for the purchase of existing and new housing, while state housebuilding programmes and state-funded housing co-operatives boosted supply. This socialised regime raised home ownership to a peak of 80 per cent of households, before subsidies were withdrawn and mortgage lending privatised in the 1980s (Norris, 2016). From 1945, Norway pursued the goal of “social home ownership”, providing low interest subsidised loans through state banks for individual households and housing co-operatives, coupled with strict price regulation of the second-hand housing market (Sandlie and Gulbrandsen, 2017: 52). The promotion of home ownership was not motivated by a fondness for individual property rights, but by anti-landlord sentiment, and the firm belief that people’s housing needs should be completely shielded from profit and commercial gain. Until the mid-1990s, the Norwegian State Housing Bank granted protected loans to individuals to buy any home that conformed to generous conditions on space size and cost limits and sponsored the construction through housing cooperatives of over one million single-family houses and apartments. Apartments in housing cooperatives were distributed according to waiting lists and both purchase and resale prices were controlled (Gulbrandsen, 2004). More than 200,000 homes were managed by cooperatives, organized in the Norwegian Association of Housing Cooperative Societies, making up 13 percent of the total housing stock of Norway (Cronberg, 1986).
Singapore attained a homeownership rate of more than 85 percent of the resident population by supplying low-interest credit from the state-owned Housing and Development Board. The city state continues to provide mortgage loans and mortgage insurance to purchasers of leasehold apartments from the Central Provident Fund (CPF), a mandatory pensions and savings scheme, and it partially decommodifies housing through the state ownership of land while regulating sub-letting and resale values (Phang, 2007). In Japan, from the 1950s, the Government Housing and Loan Corporation provided long-term, fixed-low-interest mortgages that quickly raised the level of homeownership to 60 per cent of all households (Hirayama, 2007). Specialised mortgage lenders, such as building societies, savings and loans and credit unions provided favourable conditions for the promotion of homeownership across East Asia and in the USA, and especially in Spain, Italy, and Greece, with debt secured against savings. Mortgage borrowing limits were determined by a proven track-record of savings while state loans, insurance, tax relief and generous tax exemptions lowered the cost of debt to aid the journey to decommodified homeownership.
The project of socialised home ownership dominated national housing policies until the 1980s. Security and stability in housing were considered more important than asset appreciation (Forrest, and Hirayama, 2015). In many countries it has only been in the last few decades that the wider financial sector has been allowed to enter the mortgage market (Aalbers, 2017). It was the desire of governments to turn homeownership into a source of privatised welfare that eventually brought about the end of this socialised project. The subsidies directed to the promotion of private ownership became then the means to realise and extract value rather than enable the distribution of decent homes for all.
Duelling with the Dualists
A policy bias towards private homeownership is associated with dualist housing systems, as Jim Kemeny (2001) called them. In dualist housing systems homeownership is hugely subsidised and the social housing sector is means-tested and stigmatised, maintained as a residual safety-net that is not a realistic option for most households to enter. In Kemeny’s terms, a dualist housing system exercises a centralised command economy to suppress the competitive power of non-profit renting while sheltering profit-seeking landlords with public transfers in the form of housing assistance. “I term the rental system that results from this a dualist rental system, since its distinguishing characteristic is the existence of parallel public and private rental systems subject to increasingly divergent forms of provision and conditions of tenure,” wrote Kemeny (1995: 50). Dualist systems sponsor an un-regulated or lightly regulated profit rental market, that offers little security of tenure, and whose purpose is to absorb the fallout from the volatility of market valuations and debt finance in home ownership. The inability of the profit rental market to provide decent quality housing within the means of most households pushes demand for homeownership which is, in any case, the preferred and most-privileged tenure in dualist systems.
Access to social rented housing in dualist systems is rationed by income limits that make ability to pay the determinant of housing outcomes. The use of a means-test to restrict access to the social housing sector is often accompanied by the operation of fixed-term tenancies and periodic income reviews to ensure it remains the most marginal layer of protection for vulnerable tenants. There may be further targeting of access to specific ethnic groups or communities on the grounds of disadvantage, but it is price and ability to pay that define the residual nature of the sector. Restricting access to low-income and impoverished households results in the process known as residualisation, in which social housing living conditions deteriorate, and the sector attracts irredeemable stigma. In some countries means-tested social housing will revert to market renting when the historic debt is paid off.
The dualist system of housing provision is traditionally associated with Australia, the United States, Canada, and Aotearoa-New Zealand but this model of price-determined housing has been aggressively exported. Jim Kemeny may have grievously underestimated the determination of dualist regimes to extinguish the competitive potential that he identified in decommodified housing. “Housing is property and in capitalist societies the defence of all forms of private property rights is deeply entrenched,” Michael Harloe (1995: 536), author of The People’s Home, reminds us. Dualist housing systems do not adopt strategies to decommodify housing. They stigmatise any housing provision that does not generate a profit by calling it subsidised social housing; subsidised not because it receives public subsidy, but because it is made available irrespective of ability to pay (Del Pero, et. al., 2016). Over time in these countries, it becomes difficult to distinguish between social and affordable housing. The origins of affordable housing, and of affordability as the prevailing definition of housing problems, lie in the dualist system and its imposition of price and profit as the mediators of housing need.
Affordability is Born (in Flames)
The dualist system in the United States was characterised at an early stage by a dynamic shift from public housebuilding to the supply of personal allowances to make housing as a commodity more affordable. In 1937 when the first public housing programme was enacted, the real estate industry lobbied fiercely for an alternative strategy of housing vouchers (Kazis, 2022). From 1937 to 1970 the public housing programme produced 1.3 million means-tested homes for households who could not afford market prices. Although nearly all the nation’s public housing projects provided decent and safe housing, opposition to the development programme was unrelenting, and characterised by overt racism which shaped public perception, and determined housing authority allocations. By the 1960s public housing was accommodating the poorest African American families. Budgets for repairs and investment were minimal and after 1968 no longer covered the costs of maintenance. In 1973 the Nixon administration froze all public housing programmes and, in a major switch in policy, directed funding to a new programme of personal housing allowances or housing vouchers (Krumholtz, 2013). The pursuit of affordability had begun.
Housing Choice Vouchers, as they came to be known, introduced affordability metrics into housing policy for the first time, reimbursing eligible households in profit rental housing for the difference between a fixed percentage of income and an administratively determined ‘fair market rent’ (Grigsby, 1990). Vouchers were never intended to cover the cost of the full rent, and they were never to be considered an entitlement. To qualify for housing support in the United States is to take your place in a long queue. The use of vouchers expanded in the Ford and Carter administrations and under Reagan they replaced supply-side subsidies for the construction of new affordable homes for mid-income families. The effect of housing allowances was to drive up rental prices creating a vicious circle of escalating housing costs (OECD, 2020). Demand-side subsidies were judged the most efficient means of targeting support for those unable to pay market price. As the price rose further, the case for housing vouchers became incontrovertible and the goal of addressing housing need was redefined categorically as a problem of affordability.
The problem of affordability was first voiced in housing policy discourse in Britain in the 1980s under Margaret Thatcher’s government, but the talk was about municipal council housing rents, and the growing need for housing allowances to pay them. Housing allowances or rent rebates were first applied to local council rent-setting in the 1930s in an early attempt to limit public housing to low-income families rehomed from slum clearance. Rent rebates became a central plank in the intended residualisation of council housing from the mid-1950s. When municipal rents were placed under central government control in the Housing Finance Act of 1972, and linked to market values, a national rent rebate subsidy was established, signalling the end of any notion of universal cost-rental housing (Whitehead, 1990). In 1988 this national rebate was retitled housing benefit, and eligibility was calculated on an affordability metric of residual income after housing costs. Housing benefit was made available to cover the cost of rent in the profit rental sector and in council housing. Council rents increased by 165 percent between 1980 and 1989 (Mulheirn, Browne, Tsoukalis, 2023), and these profit-generating charges siphoned off the surplus which, as Kemeny predicted, had been generated by a maturing cost-rental council housing sector. In 1980, under the Right to Buy, council tenants were proffered discounts of 50 percent, rising to 70 percent, as inducements to become homeowners, and over two million decommodified homes were privatised, never to be replaced (Malpass, 2005). Access to a secure tenancy became increasingly needs-tested. At the end of the 1980s, rent controls were removed and new six month assured shorthold tenancies effectively erased security of tenure in the profit rental sector. As a result, affordability became the new buzzword in Thatcher’s Britain (Maclennan and Williams, 1990).
The shift to demand-side housing allowances, first in the United States and then spreading from Britain across Europe, changed the direction of housing policy. The goal was no longer to supply decent homes to all irrespective of ability to pay. The new strategy was to direct public resources to discount the price of housing in the profit rental sector. Over the last two decades public investment in capital expenditure on social housing construction across the countries in the Organisation for Economic Co-operation and Development (OECD) plummeted to less than 0.01 per cent of Gross Domestic Product (GDP). In contrast, demand-side housing assistance, measured in terms of public expenditure on personal housing allowances, increased over the same period, rising to 0.31 per cent GDP (OECD, 2021). Overall public spending on housing has not reduced, but it is no longer addressed to meet housing needs. On the contrary, the recipients of public spending are the profit landlords, and the purpose of subsidy is to discount prices in housing commodity markets.
Risky Business
Homeowners were already addicted to inflationary prices when disquiet about housing affordability became a global phenomenon (Aalbers and Christophers, 2014). The representation of housing as an asset of augmenting value had transformed the market and displaced the existing cultures of familial self-provision and socialised ownership (Doling, and Ronald, 2010). The capital gains anticipated from ownership could be realised only by the expansion of credit and the exposure of home buyers to unprecedented levels of risk with the privatisation of mortgage lending and loan insurance (Moreno Zacarés, 2024b). Mortgage finance for homeownership was stripped of its socialised protection at an early stage in United States, and by the 1960s private insurance had almost driven federal mortgage insurance out of existence while mortgage-backed securities were being traded from the 1970s (Grigsby, 1990). Wider access to mortgage debt fuelled house price inflation and exposed borrowers to global interest rate shocks and the abrupt loss of unrealized housing wealth. Sheltered from risk by savings-backed loans and federal mortgage protection, home ownership had grown in the post-1945 period, coinciding with widespread increases in prosperity. In the new era characterised by the allure of capital accumulation, homeownership growth rates fell, inequality rocketed, and financial instability was magnified (Ryan-Collins, 2021). By the 1980s, affordability had become a recognised barrier to homeownership in the United States, with rising costs blamed for a two per cent fall in the number of owner-occupier households (Maclennan and Williams, 1990).
Soaring house prices were not a problem for everyone, and the gilded promise of capital gains was sufficiently appealing to cause other countries to abandon their socialised homeownership markets. The social homeownership regime in Norway could not withstand the corrupting allure of asset appreciation. Price controls on the resale of co-operative housing apartments were removed in the mid-1980s, and housing co-operatives could then convert into individually owned units. Ideals of decommodification and solidarity were jettisoned, and owner-occupation in Norway took on the privatised characteristic of the dualist housing systems. Mortgage loans from the State Housing Bank were then restricted only to households unable to secure credit from private financial institutions, profit rental was deregulated, and a small residual social rented sector was tasked with dealing with the consequences of predictably soaring housing costs (Sandlie and Gulbrandsen, 2017; Sørvoll and Bengtsson, 2018).
Homeownership in the United Kingdom was made a far riskier business when the hitherto closed circuit of housing credit was laid open to global capital markets in the 1980s. Until then, building societies had a near monopoly over mortgage provision, loans were made only on the security of retail savings, and the Building Societies Association kept interest rates low to protect borrowers. When controls on foreign exchange were lifted, banks expanded into the mortgage market and building societies were allowed to convert into banks following legislation in 1986 (Coakley, 1994). The overall effect was to increase the fragility of the housing finance system, but in the immediate aftermath of deregulation, the flood of easy credit contributed to a house price boom and the inexorable increase in the value of property stimulated the appetite of capital markets for further interest-bearing home loans. Both banks and building societies then took on dangerously elevated levels of debt with dwindling amounts of assets to secure their loans. Mortgage interest rates became more closely tied to wholesale money-market rates, a secondary market in mortgage securitisation developed, and new high-risk mortgage products were launched to enable equity release and fund an expansion of profit rental housing (Hamnett, 1994). With a house price boom in full swing, there were heightened concerns about access to mortgage credit for lower and middle-income households and about the widening gap between incomes and housing costs. Professor of Urban Studies Glen Bramley (1994) noted that the popularity of affordability as a housing policy construct rose on the crest of the house price wave that preceded it. The first affordable housing programmes in the United Kingdom were low-cost home ownership schemes aimed at priced-out would-be home buyers (Mullins and Murie, 2006). Affordability emerged as a policy construct in the United Kingdom concerned with the problems of accessing mortgage credit and not with an intensifying crisis of unmet housing need (Hulchanski, 1995).
Killing Cost-Rental
At the end of the 1980s, the dualist housing model, defined by its bias in favour of asset-accumulating homeownership, its unregulated profit rental sector, and means-tested social safety net, began to expand across Central and Eastern Europe and Asia. China privatised its public housing in 1990, converting 90 per cent of urban homes to ownership. Public housing in the former Soviet republics was transferred to former tenants at no cost, or for a nominal sum, providing a decommodified route into homeownership for over 80 per cent of residents (Gerber, Wang, and Zavisca, 2022). The percentage of households in public housing declined across the former socialist countries in Eastern Europe, with Poland experiencing the biggest drop in the relative size of stock (OECD, 2020). In nearly all the 38 member countries of the OECD, public and social housing was then restricted to low-income and vulnerable tenants (Poggio and Whitehead). All but a few OECD and non-OECD European countries now impose a maximum income limit on access. Most countries ceased all new development of social housing, switching instead to the demand-side subsidies of personal housing allowances. The loss of public housing in Germany has been the most extreme in Western countries, with a reduction of 76 percent of stock. In one decade, the federal government sold 2.6 m public housing units to private equity companies and investment trusts as well as to profit and non-profit landlords, a privatisation larger in scale than that of Thatcher’s Right to Buy (Soederberg, 2021). Australia and New Zealand, countries with already residual social housing sectors, also reduced their stock, while in the United States more than 300,000 homes were demolished in the HOPE VI federal cull of public housing. The minuscule number of social rented homes built each year in England is now less than the amount annually privatised or bulldozed (Williams and Perry, 2022).
Determined efforts were required to quash mature decommodified housing sectors that housed substantial populations. In Hong Kong, an effective public housing system continues to provide homes to more than half the resident population. This is despite the introduction of means-testing, coupled with surplus-generating rents to drive out sitting tenants above the income limit, while the allocation of state-owned land, plus public loans and tax credits, was dedicated to the task of nurturing a commodity market in private but increasingly unaffordable homeownership (Lau, 2007). The flourishing and universally available social housing sector in the Netherlands, home to 30 per cent of households, was sabotaged at the command of the unelected European Commission when the Dutch Association of Institutional Investors complained that the decommodified housing sector exercised an unfair advantage over profit-seeking housing providers. Dutch housing associations benefited from state loan guarantees and borrowing at low interest rates from a special purpose public bank. They could purchase public land for housebuilding at less than market value and get financial support from a Central Housing Fund to pay for major repairs and investment projects (Priemus and Gruis, 2011). In 2009, the European Commission ruled that access to Dutch social housing must be limited to households with the lowest incomes if housing associations were to continue receiving state aid. At that stage Dutch social housing “represented the largest and most distinctive non-profit housing sector in Europe” (Van Duijn and Ronald, 2018: 637). New legislation was imposed to confine 90 per cent of social rental allocations to households with an annual income below EUR 33,000 (around £27,000 or USD $34,000). Over the next two decades in the Netherlands, the profit rental sector expanded, home ownership was vigorously encouraged by the state and the newly means-tested social housing sector began its decline. Although more than half of the Dutch population remains eligible for social housing under the new income ceilings, increases in rents are calculated on the combined household income for each tenancy, a strategy that is slowly turning the sector into a safety-net for the lowest paid. This tale of woe continues with the European Commission again in the frame for imposing legislation on the Swedish municipal housing sector in 2011, responding once more to commercial property market lobbying. Unlike the Netherlands, Sweden did not abandon the universal entitlement to public housing, but it withdrew state support from the municipal housing companies, and they were required to operate as commercial businesses and pursue the same exchange values as the profit rental sector. Large scale privatisation of municipal housing had already taken hold in Sweden with apartments sold to tenant co-operatives, and even to private equity funds, resulting in worsening income segregation. Following the EU Commission ruling, use value rents in new urban municipal housing became as expensive as prices in the profit rental sector (Grander, 2024).
The dualist model in which decommodified housing is confined to a means-tested and residual role has been promoted extensively, so that even in countries that retain large social housing sectors, like Scotland, Wales, England and Northern Ireland, access has been severely limited, and rents are set with reference to market valuation. The extent to which these still-partially decommodified but needs-tested sectors exert any corrective or dampening effect on the housing commodity market is minimal. From the European universal model, the cost-rental and social housing sectors in Austria and Denmark have proved the most resilient. Legislation introduced in 2018, however, fuelled by racist and anti-immigrant caricatures, threatens the Danish social housing sector and its tenant democracy, by demolishing or selling off cost-rental homes and restricting access to social housing in urban neighbourhoods (Blackwell and Bengtsson, 2023).
Among the European countries, France and Austria continue to support the development of new cost-rental housing and the income-limits that prioritise distribution do not radically undermine universal accessibility but protect them from real estate industry vendettas backed by the European Commission. Iceland, Ireland, and South Korea appear to be turning against the tide and starting to develop social housing sectors (Kholodilin, Kohl, and Müller, 2024; Norris, 2014), while needs-tested council housing continues to be built in Scotland and in very limited numbers in England (Gibb, 2011; Morphet and Clifford, 2021). In South Africa, the decommodification of social homeownership has guaranteed the constitutional right to housing for millions of households, but the rationale for this affordable housing programme, the National Housing Subsidy Scheme, is based on the familiar notion that asset ownership paves a pathway to empowerment and economic advancement. A one-off state capital subsidy gifts eligible means-tested households with ownership of a newly built and fully serviced ‘Reconstruction and Development Programme’ house or apartment, but the gift is premised on the belief that the house can be valorised, and that a property title represents an asset that can be traded or collateralised for wealth creation (Lemanski, 2011). The majority of recipients find themselves locked into a segregated housing sector, living in often unsustainable locations, where resale prices reflect the scale of supply and isolation from facilities and employment. The extension of homeownership appears to have caused an expansion of the informal housing sector, as the only route to valorisation for owners is to illegally sub-let, rent out space for backyard dwellings or sell the property to alleviate the financial expenses consequent on formal residence (Rapelang, Nel, and Stewart, 2018). From 2009 China began a programme of building new public rental housing and homes for sale at below market prices to households conditional on income limits. These homes are built by local government in partnership with commercial property developers and the aim of public housing is now to support the private commodity market in housing rather than be an equal partner or a competitor (Chen, Jing, Man, et.al., 2013). Partially-decommodified housing continues to provide high quality, secure homes for more than 28 million households in Europe, and East and Southeast Asia, making up around 13 percent of all the world’s housing (Kallergis, Angel, Liu, et.al. 2018). It has not been destroyed; and it is showing signs of rejuvenation in some countries, but public authorities and non-profit providers are increasingly required to act as commercial developers, attracting capital from global bond markets. They charge surplus-generating rents to meet their debt payments, and cross-subsidise costs by building market price homes for private ownership. Social housing is rationed, reduced, and often residualised, and the imposition of income limits and means-testing is causing it to morph into the commodity form of affordable housing with rents and access determined by prices in the profit rental or homeownership sectors (Granath Hansson and Lundgren, 2019; Williams and Oxley, 2016). This is the outcome of a deliberate and internationally co-ordinated state strategy to ensure that access to housing can only be obtained by paying for it; by selling labour in exchange for money to buy housing in exchange for need (Aalbers, 2017).
Inequality not Affordability
The universal provision of cost-rental and socialised homeownership kept housing costs at a steady rate for decades without significant increases (Knoll, Schularick and Steger, 2017). In dualist housing regimes, by contrast, opportunities to acquire decent housing were condensed into a choice between paying for homeownership or paying for profit-rental and both came at the expense of continuously escalating prices. When access to a home depends entirely on ability to pay, the relation between the price of housing and the value of labour determines the ability of households to find shelter. The resulting crisis of unmet housing need appears predictably as a problem of affordability. But the problem is not a lack of affordable housing. The problem is that housing can be acquired only as a commodity at price. The long-run effect of this recommodification of housing has been to return Europe and the United States to a level of conspicuous wealth inequality not seen since 1910, the last time 90 percent of wealth was owned by just ten percent of the population (Smith, Clark, ViforJ, et al., 2022).
As decommodified housing was rolled up, and dualist welfare regimes rolled out, the cost of housing as a commodity surged in a wave of price appreciation that was global and sustained in its reach. Concerns about housing affordability spread far beyond the Western nations and in the decade from 2010 the ratio of housing costs to disposable income leaped up by 60 per cent (Bonnet, Bono, Chapelle, and Wasmer, 2014). In a sample of 200 cities, selected from eight world regions, 90 per cent were found to be unaffordable based on a rule of thumb definition where house prices are more than three times income. In Lagos, in Guangzhou, and in Cairo, housing costs are 12 times incomes. In some neighbourhoods of European cities, average house prices are 40 times income (Kallergis, Angel, Liu, et.al., 2018). Hong Kong, Sydney, and Vancouver have the most expensive housing in the world measured against local average wages (Condon, 2024). Housing costs increased in almost all the OECD countries between 2005 and 2019, with Colombia, Canada, Sweden, and Israel recording surges over 80 per cent. Rents also swelled in all but two OECD countries, more than doubling in Türkiye, Lithuania, Iceland, and Estonia. More than a third of renters in OECD countries now spend over 50 per cent of their disposable income on housing costs. Informal settlement housing is the only affordable solution for 15 per cent of global households but indoor sanitation is lacking in most informal housing in sub-Saharan Africa and elsewhere. This trade-off between price and decent homes illustrates the failure of affordability to adequately describe what is a catastrophic crisis of global housing need (OECD, 2021).
In the aftermath of the wave of family home foreclosures that resulted from the global financial crash of 2008, curbs on mortgage lending reduced the opportunities for homeowners and homebuyers to get credit but did nothing to discourage institutional investors who proceeded to buy up distressed assets and move their capital into residential property development and management. Real estate investment trusts allowed wealthy shareholders to benefit from increases in property value without the bother of managing properties themselves. Portfolios of property were traded on the stock exchange and speculative bets made on rental yield. A deluge of money flowed into residential property and the land beneath it, generating sky-rocketing house prices as real estate became the place to “grow, leverage and hide capital” (Mazzucato and Farha, 2023: 9). This flow of private investment radically transformed the housing market. The pattern of tenure rapidly began to change, and owner-occupation declined in relation to profit renting. Private equity companies bought up foreclosed single-family homes to let them as rental property, acquiring additional swathes of under-valued rented apartments in major cities, forcing up prices on the legal pretence of renovation, dispossessing existing tenants, and securitising the increased income stream in the same way as mortgage payments (Haffner, and Hulse, 2021). The outcome in Dickensian levels of inequality and accelerating spatial segregation is well-attested. Corporate landlords, developers, and institutional investors gentrify neighbourhoods, selling properties off-plan, marketed as short-term lets or left empty, rendering the remainder of housing stock increasingly unaffordable for residents (Farha, Freeman, and Gabarre de Sus, 2022; James, Daniel, Bentley, et al. 2024).
The imposition of commodity exchange as the only means of accessing housing has a devastating impact (Lee, Kemp, and Reina, 2022). The global effects of this crisis can be evidenced in the categories of housing need: 1.8 billion people are homeless or live in grossly inadequate housing often without access to water, sanitation, and electricity (Farha, Freeman and Gabarre de Sus, 2022); a minimum of 20 percent of low-income households in OECD countries suffer from overcrowding and lack of adequate facilities (OECD, 2021); families are daily forced to make bleak choices between paying for housing or meeting other basic needs, living under the threat of eviction and the violence of dispossession (Wetzstein, 2017). Dualist housing systems poured tax subsidies into the promotion of homeownership in the expectation of accumulating capital gains but face declining rates of owner-occupation, and a correspondingly expanding profit rental sector. Social class and income divisions now unequivocally determine housing options, with asset-based wealth monopolised through inter-generational transfers, and housing markets closed to new entrants without existing capital reserves (Forrest and Hirayama, 2015). The chief characteristic of the twenty-first century housing market is the growing proportion of households who own no property, and have no hope of ever acquiring it, because they pay most of their income in rent for barely adequate housing (Dewilde, 2018; Smith, Clark, ViforJ, et al., 2022).
This is a crisis of inequality not affordability. The decimation of decommodified housing has magnified the weight of class inequality and income stratification. Access to decent housing is now primarily determined by the ownership of wealth and the price paid for labour as a commodity. Those who gain the least from the sale of their labour have the most limited choice in the housing market. Housing as a use value can only be secured by purchasing housing as an exchange value (Forrest, and Williams, 1984). Strategies to mitigate the supposed affordability crisis by discounting the price of housing operate in a reverse relationship with the value of labour, meaning that the better-off benefit first, and they do so in descending order from financier to landowner to developer to builder to realtor to landlord to household. Affordability as a housing policy goal sustains rather than weakens the bond between income inequality and access to basic needs (Harloe, 1995). Affordable housing is a reversal of the priorities of housing need. The solution to a global crisis of housing need is to make housing available for all irrespective of ability to pay (Whitehead, 2007). Interpreting this as a crisis of affordability results not in strategies to subsidise income, but in policies to promote profits. Affordable housing is not affordable in relation to income. Affordability is a relation to price. And price is the problem.
Pricing Need
A crisis of housing need has been transmuted into a problem of price. Housing need is now presented as a proxy for demand in a market in which it is assumed that the supply of goods at price will equal demand at that price (Polanyi, 2001: 482). Since rising home prices are believed to stem from a mismatch in supply and demand, the primary solution on offer is to remove obstacles to perfect competition in housing construction and wait for supply and demand to have effect (Mazzucato and Farha, 2023). Accompanying this removal of impediments, affordable housing is also provided in many countries as a niche sub-sector of the real estate market. Affordable housing strategies take three forms: firstly, the subsidising of price in the profit rental sector through personal housing allowances; secondly, the use of tax credits, public loans or grants to incentivise the flow of private interest-bearing capital to profit and non-profit housing providers; and thirdly, the diversion of public land value to supplement the market sale or rental price of new homes constructed by profit housebuilders and real estate developers. Definitions of what is affordable reference the income of intended recipients and the market valuation of housing. Outside of these determinants, there is little consensus. In the European Union there is no official, legal or statutory definition of the term affordable housing (Caturianas, Lewandowski, Sokołowski, et. al., 2020), and in many countries affordable housing is used as a synonym for social housing and has entirely replaced that tenure (Rosenfeld, 2017). The definition provided by the OECD (2020: 4) is similarly vague: “Affordable housing, which refers to rental and owner-occupied dwellings that are made more affordable to households through a broad range of supply-and demand-side supports (including housing allowances or vouchers, subsidies or tax relief to first-time homeowners).” It might be more helpful to say what affordable housing is not. It is not decommodified housing; it is not cost-rental housing in which the rent is legally pegged to the cost of building and maintenance; it is not socialised home ownership where all finance is provided at stable and low interest rates; it is not housing that is universally available; it is not provided where need is greatest; it does not necessarily offer any security of tenure; it may not provide decent housing; it has no pretensions to encourage democracy, solidarity or reciprocity. It is, in short, the very opposite of the decommodified housing sector it is replacing.
This book is concerned with affordable housing, with its supply, financing, and exchange. Affordable housing is commodified housing. It may be distributed through administrative allocation, but it is means-tested; access is determined by the exchange value of labour and the exchange value of housing for sale or rent in the local market. The price paid in sale or rent for affordable housing is discounted on the market price of the home, and value transfers from a trinity of sources are applied to subsidise the exchange. In affordable housing, the discount to the occupier may be related to their income but the cost of their housing is always determined by market value. And as the idea of an affordability crisis becomes all pervasive, so the strategies for mitigating it appear as further causes of a crisis of housing need.
Affordability is a strategy to maintain demand without reducing prices. It is a regressive strategy, channelling public funds to profit landlords, landowners, and real estate interests. So-called affordable housing directs subsidies up the social scale of class and income, exasperating income inequality and spatial segregation, and paving the way for gentrification and displacement (Marom and Carmon, 2015). Having created glaring inequality in housing outcomes, it exasperates those inequalities by subsidising market prices, so that those with the ability to pay benefit first, and those who can least afford it sometimes end up paying even more. Affordable housing reproduces all the exploitative relations of the commodity market. Despite being a sector that can house the comparatively better-off, it is a marginal segment of real estate that assumes the stigmatised form of the social housing it has replaced. In place of social housing, however, it is increasingly reserved for households on median incomes to the exclusion of those most in need.The aim of affordability as a state housing strategy is to provide a minimal safety-net, a strictly controlled minority form of housing from which surplus-value is realised, without adjusting prices in the housing market or making any intervention in income distribution. Just like any other commodity, so-called affordable housing creates value and surplus value in production, realises value as money in exchange and circulates value as capital in a global flow of subsidies, land rents, interest-bearing loans, and investment yields. Affordable housing makes money, and it makes housing unaffordable.