1 Session 7 Access to housing: Housing allocation June 9, 2008 GGR 357 H1F Geography of Housing and Housing Policy DR. AMANDA HELDERMAN.

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Session 7

Access to housing:

Housing allocation

June 9, 2008

GGR 357 H1F

Geography of Housing and Housing Policy 

DR. AMANDA HELDERMAN

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Announcements

Web page: http://individual.utoronto.ca/helderman Midterm answers and last week’s lecture slides are

available Midterm preliminary results available

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Announcements

Available for you to pick up at the office in Sid Smith

This year’s results:– Lowest 22; highest 88; average 52; mode 39; median 49

Last year’s results:– Lowest: 52.5; highest 91; average 68.8; mode 64; median

67.5

No make up test Requests to redistribute the weights of the exams and

assignment based on official documents only (such as a UofT doctor’s note)

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Announcements

Class representative APUS:http://www.apus.utoronto.ca/

Summer students taking 1.0 credit or less (one course for one term only representative for the whole summer, until August.

Tuition freeze, university/gvt financial aid for part-time students, on-campus housing for part-time students, family care, and summer/ evening course selection

Representatives receive periodic information and keep their class mates informed

Feedback to APUS you might receive from class mates NOMINATIONS?

QUESTIONNAIRES

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Housing allocation, introduction

The distribution of housing among social groups/ households in a given location

Housing allocation mechanisms are parts of housing systems

They divide housing across the population Interesting process, because both market and

government have responsibilities They have differently prioritized, but some common,

goals! Different mechanisms that steer the process

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Housing allocation

Two principle domains housing allocation: through the private market and through the public sector

Most countries have a mixture of these two mechanisms

Even within countries, actual systems of allocation differ widely

Many systems, different scales, different stocks, different dynamics, different demands

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The private market

Mechanism: competition or price Price is determined by the values that people attach to

housing and their ability to pay The functioning of the market is based on the financial

resources of firms and their willingness to produce housing for profit

Main objectives are efficiency, maximizing output and minimizing excess prices and rents

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The public sector

Governments, housing officials and community groups are the main providers and allocators in this sector

Mechanism: competition and cooperation The mechanism is based on individual and collective

needs (=social priorities) The functioning of the mechanism depends on the

objectives of the agency involved Main objectives are a greater equity or social welfare,

and assuring adequate housing for all

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Goals of efficiency and equity

Both consider efficiency and equity important The public and the private sector handle their and each

other’s main goals with different criteria (costs, prices, stock attributes)

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Efficiency

Private market: minimizing aggregate housing prices and rents, maximizing output and profits, and maintaining rates of return

Public sector: maximizing the use of the housing stock, minimizing administrative costs, maintaining adequate stock

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Equity

Private market allocation: no one can move without making others worse off price restricts over-consumption

Public sector allocation: assuring adequate housing for all treating all equally & according to their needs

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Type of allocation system

Mix between private and public Ranging from laissez-faire to centrally planned society

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Collusion

Oxford’s dictionary: “a secret agreement for a fraudulent purpose”

In this context: “Acting together to exclude others”

A private factor that both the private market and the public sector have to deal with:

– In private market: exclude from the neighbourhood for example

– In public sector more subtle: altering of the location of public housing or altering waiting lists

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Functioning of the allocation system

How are criteria established? Are the criteria explicit? Implicit discrimination

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Monitoring mechanisms

What mechanisms are used to monitor changes in preferences, needs, and supply?

Goal of both private and public parties: match between households and the housing stock

What information is needed? How is the information collected?

By whom is the information collected? Signals Measures

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Implementation of changes

The information available may indicate changes Such changes demand implementation of measures to

keep matching households and housing Carrot & Stick: subsidies & persuasion or higher rents

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Housing markets

Economic market set within a political framework Set of institutions and procedures, bringing together

housing supply and demand for purposes of exchanging housing services

Actors: sellers, buyers, renters, landlords, builders, consumers

No single geographic place Buyers move to goods instead of vice versa

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Types of housing markets

1. Scale– Macro: housing sector of the national economy is

studied by the relationship between rate of investment in supply and aggregate expenditures of households

– Micro: behaviour of individuals is studied by the spatial expression of matching supply and demand

2. Location of control (private or public)3. Tenure type4. Age of housing and position in the market (sectoral/

submarkets)

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The urban housing market

A continuous geographic area, more or less clearly bounded, within which a household may trade or substitute one dwelling for another without altering place of work or pattern of social contacts

The spatial extent of the substitution of housing No discrete spatial boundaries The housing market perceived by developers, not

households, is larger and may constitute of various metropolitan areas

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The market mechanism

Dominant mechanism in North-America The market has a supply (housing units and their

attributes) and a demand (households and their attributes)

Asking prices versus bid prices

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Micro-economic approach

Allocation starts as to achieve market clearing solution (everything is matched)

Efficiency minimizes over- and under-consumption Total rents and prices are at a minimum Optimal: no household could be assigned better without

making others becoming worse off Disadvantage: Static! This model does not allow for change or diversity in

behaviour

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+ behavioural elements

There are different perceptions of the market that reflect in varying asking prices and bid prices

The process describes a convergence of asking and bid prices until a sale price is reached

This may take hours, days, weeks, months, years! The market circumstances influence the sale price A dynamic or tight market (few vacancies and high

and rising prices) may lead to bid prices that exceed the asking prices

Conversely, in a slow market there may not be a convergence and property may even be withdrawn

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Cost of realizing housing

Input of land and input of non-land If the input of land is relatively high: lower density,

single family homes will be more likely realized If the input of land is relatively low: higher density

housing, multi-family homes

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Cost of land versus other expenses

Single units

Multi-family

Apartments

Ratio

quantity

land/

non-land

Price land output/ price non-land output

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Segmented markets

Quasi-independent subdivisions of an urban housing market

A-spatial and spatial submarkets Homogenous clusters of housing types, and/or

household characteristics Unique set of prices/ rents with little substitution of one

unit for another Because of size/heterogeneity, diversity of demand,

barriers and disequilibria in the market Consequences: price premium/ discount that reflect

geographic differences

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Segment criteria

1. Submarkets: by tenure classes, structure types and values

2. Households: income, family type, race or ethnic origin3. Locations by status: inner city, inner suburban and

outer suburban

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Decision-making micro level

Complex process What type of housing, where, what can the household

afford Not the nominal price is the most important on the

market, but monthly out-of-pocket expenses! Housing is demolished or added to the stock Households form, dissolve or decease

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Constraints on the housing market

Constraints may be the result of: Supply restrictions: availability type of housing Accessibility restrictions: benefit from unique location Neighbourhood restrictions: small areas that are

especially (un)attractive, premium or discount price Institutional restrictions: redlining, building codes,

zoning, planning regulations Racial, ethnic and class discrimination: limits search Information restrictions: differential access to

information on the housing market

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Result of constraints on housing market

Prices paid may be more than expected for similar housing in a different area

Movements between areas are less than may have been predicted

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Allocation and class

Housing allocation is always founded by class conflicts, according to Weber and others

The class struggle in capitalist societies reflects the social structure of the city

This struggle is caused by differential means to access the housing market, by wide differences in income

Castells (1975): access to housing not only depends on income, but also on access to credit and thus the predictability of future income

The ability to use the system may be culturally determined

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The institutional context

Spectrum of administrators, politicians, technicians in the housing field: gate keepers who effectively determine who gets what from the housing market and where (Pahl, 1976)

Critical role of mortgage lending institutions Government policy: rent control, growth &

development of housing stocks, and fiscal measures

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CMHC

Canada Mortgage and Housing Corporation (CMHC), active since 1946

Canada’s national housing association Mostly concentrated on the owner-occupied segment of

the market Provider of mortgage loan insurance, mortgage-backed

securities, housing policy and programs, and housing research

Until 1966, CMHC set the interest rates! (Now it is market determined…)

Public mortgage insurance was the corner stone of post war housing policy and remains important today

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CMHC

CMHC works to enhance Canada's housingfinance options, assist Canadians who cannot afford housing in the private market, improve building standards and housing construction, and provide policymakers with the information and analysis they need to sustain a vibrant housing market in Canada.

Informative website, good source of information: http://www.cmhc-schl.gc.ca.

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The public allocation system in Canada

Welfare pluralism: centralized welfare system has been superseded a decentralized system

Proliferation of agents: much variation in the allocation of public housing, social housing and assisted market housing

Top down bottom up Policy drift: local outcomes may be a far cry from

program intentions Mutual shaping takes place Third sector housing provision

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Recent history of housing allocation programs

Requests for public housing came from municipalities Federal and provincial governments were in control of

every stage of implementation 1970s and 1980s were characterized by increasing

decentralization and a shift from public housing to nonprofits

Shift was based on concern that low-income residents were getting concentrated and stigmatized

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Recent history of housing allocation programs

Yearly unit allocations (6000-30,000 for ON) under non-profit programs in the second half of the 1980s and 1990s.

Usually, the units were allocated to third sector The programs often were targeted to certain people

(disabled), certain types of household (singles), or geographic areas

Ministries would give the project sponsors and others clear instructions as to the application process and the target groups

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Housing allocation programs

Federal and provincial negotiations produced a fair share allocation model (16 target areas) based on waiting lists, turnover units and the concept of core need (suitable housing not available within 30% income range)

Market rent units were allocated based on negotiations with sponsor groups

The 1990s were characterized by required skills developed within the Ministry of Housing (ON)

Good quality proposals from third parties

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Welfare pluralism

Local third sector carrying out programs designed at a higher level: welfare pluralism

Significant delivery mode Allocation is getting closer to targets throughout the

year: perhaps because of development of skills with program implementation in and outside the Ministries

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The case of the Netherlands

Production and allocation of housing traditionally firmly in the hands of public agencies (municipality level, mostly)

Long tradition of housing allocation systems, especially of inexpensive part of stock

The system of government control was developed to respond to acute housing shortages (WWII)

Qualifying households for new construction:1. Who would be allowed to live there?2. How to rank households on the waiting list?

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The Netherlands

Allocation controls not equally strict for all types of housing

Even if allocation of private housing is not strictly controlled by the government, municipal regulation did often dictate the households to which a landlord may rent his property

1960s and 1970s: shortage had subsided rents deregulated and allocation controls abolished

Return to free market principles to decrease the burden of housing subsidies, but not without putting production stimuli in place

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The 1990s and after

Distribution model: starts with registration of housing candidates on the waiting lists

BASICS OF MOST SYSTEMS:1. Eligible criteria to register for (socially) rented

housing must be met by households2. Reshuffling of the waiting list by ranking the

applicants, based on score card3. Points are awarded according to household and

current housing situation, and the duration of registration

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Distribution model

4. Vacant dwelling offered to the individual with the most points

5. Three suitability criteria: relationship household size and housing type, relationship income and price dwelling, and suitability in terms of ties with the neighbourhood, among other things (emplacement policy: sanctions deviation from the waiting list and exclusion of groups)

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Distribution model

Drawbacks: little freedom of choice and long, passive, waiting periods

New emphasis in government services on customer and choice in public services

Towards more market-oriented social housing sector A new allocation model: choice based letting model Shift from ‘need’ to ‘choice’

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Choice based letting model

House seekers may react to vacancies advertized, but only those deemed suitable for them

Criteria: length of residence, duration of registration, and age (and what type of dwelling the house seeker may leave behind)

Vacancy will be offered to the household that ranks the highest, and this person may accept of reject

Passed on to the next applicant on the ranking After selection of tenant, rankings are published, so

that other applicants may see how well they did

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Choice based letting model

The new model is more appreciated by home seekers

Current debates: To what extent may local authorities give priority to

local home seekers? How does preferential treatment for local home seekers

relate to European Union regulations that EU residents have the right of free movement and residence?

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The supply model

Variant to choice model! Housing is advertised Registration by home seekers Home seekers must react to ads Sequence criteria: longest registration duration or

duration of stay in previous dwelling Suitability criteria: least expensive dwellings for lowest-

income families, large dwellings for larger households, present income is decisive

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Advantages of supply model

Transparent, results can be checked More objective, less discriminating or exclusive than

distribution model

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Different historic context of the Dutch case

Motivation government to intervene: economic recovery after WWII

Large social housing stock (2002: 35%, within inner city of Amsterdam in 1970s: 80%)

Very small private rented housing stock (2002: 10%) In countries with a small social rented stock, the choice

letting model would be much less relevant!

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Historic context of the Dutch case

Housing market remains unbalanced, so government keeps intervening

Shift in emphasis towards free market would not solve problems without creating new ones

Housing is considered important in the functioning of society

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Attention for allocation of rented housing is rare

A lot of literature on this topic from the Netherlands United Kingdom also has a large body of literature on

this topic Also the only countries that use choice based allocation

models Ireland and Spain: waiting lists are increasingly

replaced by lotteries more transparent and fairer allocation

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Access, exclusion, affordability and allocation

Housing access decision in literature is not always separated from housing allocation decision

In the Netherlands they are separate!

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Literature for this session

- Bourne, L.S. (1981), The housing allocation process and urban housing markets. In: The geography of housing. Chapter 4. p. 69-92.

- Hulchanski, D. & M. Shapscott (2004), Introduction : finding room in Canada’s housing system for all Canadians. In: J.D. Hulchanski & M. Shapcott (eds. 2005), Finding room. Policy options for a Canadian rental housing strategy. Chapter 1. p. 3-14.