Vancouver BC looks to Vienna Austria for a successful model to provide affordable housing. We can do that! Read on…
How Vienna Cracked the Case of Housing Affordability
Vienna has a 100-year history of building public housing for all. What can we learn? Part three of three.
By Patrick Condon
June 6 2018 | TheTyee.ca
Professor Patrick Condon is the James Taylor chair in Landscape and Livable Environments at the University of British Columbia’s School of Architecture & Landscape Architecture and the founding chair of the UBC Urban Design Program.
Excerpts:
It’s hard to admit a healthy Vancouver housing market may never come back. As evidence of market failure becomes more and more apparent, we look to Vienna, where over 60 per cent of its residents live in city-built, sponsored or managed housing.
How does this work? Can it be replicated elsewhere? The Vienna model begins exactly 100 years ago.
Vienna, during the last days of the Hapsburgs, demonstrated its wealth in the form of impressive building façades. But behind the façades was a grimmer reality. This Vienna was a city run by and for the landlords, wealthy owners of lands that had once been farms but now sprouted apartment buildings – workers crowded in 10 to a 300-sq.foot flats.
Renters had no protection. Evictions were immediate, without cause and without adjudication. In 1913, an astonishing quarter of the population were homeless.
Here in Vancouver there are echoes. The development industry wields outsized power over our elections, land speculators are reaping the benefits of our collective city-building efforts, homelessness is on the rise and wage earners are experiencing housing stresses that force them to accept insecure accommodations in crowded dwelling units.
When Austria and its allies were defeated in the First World War, the Hapsburg monarchy collapsed. Universal suffrage followed; voting rights were now granted to all, regardless of income or gender. This coincided with a dramatic leftward shift in Vienna’s politics, but in an unusual form.
The Viennese political left gained power with universal suffrage and the fall of the Austro-Hungarian Empire. Unlike leftist parties in other parts of Europe — elected city officials never set out to remove or even cripple capitalism by nationalizing property. Instead, they used a taxing strategy to meet their social ends and their most important achievement was providing decent housing for every resident.
How did they do it?
A number of policy and taxing policies made Vienna’s housing system possible.
Here in Vancouver, successive city governments have gone to herculean lengths to induce the private market to produce new rental stock — through subsidy, relaxed development taxes or density bonuses. The city has been nominally successful, but the monthly rents charged for new market-rate units are unaffordable for all but the upper tier of renters.
Vienna provides an interesting counterpoint. Because rent control disincentivized the private development of rental buildings, landlords were, for a time, removed from the market for urban land. Consequently, prices finally went down, allowing the city to buy land at a much reduced price; often it was the only buyer in the market. In the late 1920s, about 30 per cent of Vienna’s annual budget was spent buying land and financing housing construction. The city quickly became the dominant developer of new housing.
The bulk of the new housing was for wage earners and their families, to be owned and managed by co-operatives or non-profit housing corporations. Non-profit housing corporations operate just like for-profit housing corporations, except that their profits are poured back into operations and they are obligated to keep rents in line with incomes.
Even though the city was able to keep land prices down, land and housing still cost money. Where did that money come from? Mostly from taxes on private property and land. They were levied on private apartment buildings and progressively increased with the assessed value of each unit. Very high taxes were also levied on vacant land, giving owners extra incentive to sell.
These policies stripped land speculation out of the marketplace and did so very rapidly. The gravity of the housing crisis that Vienna faced, and the efficacy of their solution, is beyond dispute. Is Vancouver approaching this same point?
Resident Viennese had no problem supporting these taxes because they received secure housing that’s much more affordable than most of the developed world. Rents in Vienna are a quarter that of similar units in Paris.
Vienna also developed a system for working with non-profit development corporations that compete with each other for city sponsored projects. The city acquires the land for a project, establishes the housing goals and project pro forma and publishes the amount of financial subsidy to be supplied. Stakeholder groups judge the proposals submitted in response and decide which project team of architect, builder, developer and management entity has the most intelligent response.
Vancouver has been called the world’s most unaffordable housing market, at least by some measures. Vienna’s housing innovation was spurred by its own housing crisis a century ago. Is it time for Vancouver to act and build many thousands of non-market housing units?
What can we learn from the Vienna example?
Vienna treats land like the precious community asset that it is. We can acquire and keep land in the hands of the people who live on it. We should never sell city-owned land. And like Vienna, it would be crucial for Vancouver to purchase more land on behalf of non-governmental housing providers.
In the past, taxes like development cost levies and community amenity contributions have been reduced to incentivize the creation of market-rental units that developers would not otherwise build because of high land costs.
But that strategy is both inefficient and fails to ensure affordable housing in perpetuity. These levies can and should be retargeted, and increased as much as possible, to provide funds for non-market housing and to reduce speculative pressures on development lands. Together with these revenues and provincial and federal funds, the city could jumpstart the creation of non-market housing for city wage earners in the bottom half of the income scale.
The Vienna model gives us hope for a housing system that can still align with average incomes in the face of global speculative pressures on land. Far from closing out the free marketplace, the Vienna model shows that they can complement each other. Development land is still cheap in Vienna (relative to Paris, at any rate) for both the city and for private developers. It is precisely the presence of the city in the land market that keeps it this way.
As both the Vienna model and Henry George would suggest, the problem is forever and always the cost of land. Burdensome land costs, and the rentiers who gain massive wealth by passive land speculation, are the real enemies — not developers, not our homeowners, not our public officials. If we don’t want Vancouver to go down this path, then perhaps we should heed Henry George’s advice: tax land and use the proceeds to build the housing we need.
Comments:
Paraphrasing the key points…
- land speculators reaping the benefits
- instead of nationalizing property, they used a taxing strategy to meet social ends
- taxes on private property and land
- very high taxes levied on vacant land, giving owners extra incentive to sell
- these policies stripped land speculation out of the marketplace
- incentivizing the creation of market-rental units … fails to ensure affordable housing
- reduce speculative pressures on development lands
- passive land speculation is the real enemy — not developers
- heed Henry George’s advice: tax land
Vancouver BC and beyond… Throughout Cascadia the cost of land for housing has skyrocketed.
The take-away message here is: Don’t waste tax-payers money by providing inducements to create market-rental units. Rather, reduce the speculative pressure on land by shifting the property tax off building values onto land value. Be smart like Vienna!
