We create accessible cities together

Tessa Flantua investigated housing problems in the Dutch housing market by comparing various government interventions and institutional frameworks across Europe. The goal is to determine whether there are tools available to create more accessible cities.

Worldwide, more and more people are moving to major cities. By 2030, approximately 60 percent of the world's population will live in urban areas. The number of megacities (with more than 10 million inhabitants) has increased more than tenfold in fifty years. Demand for housing is increasing, and house prices are higher than ever. A growing number of studies show that the shortage of affordable housing in cities has numerous undesirable effects. For example, the housing market is stagnating due to a lack of affordable housing. Suburbanization, where people with lower incomes leave cities that have become unaffordable to them, promotes segregation and inequality. The economic vitality and growth of the city are under pressure. And substandard, overpriced housing leads to physical and mental problems (stress) for many people.

Basic need

Housing markets are influenced by many factors: government and policy decisions, local and global economies, construction costs, land costs, legislation, and multiple levers at the national and regional levels. These include housing subsidies, tax breaks, spatial planning regulations, and economic development plans. Governments are responsible for providing high-quality and affordable housing—a universal, basic human need—for everyone. The way governments achieve this varies widely worldwide. In many cities, the government plays a major role in (hierarchically) managing the housing market, but there are also cities where the housing market can function with relatively limited regulation (free market forces). Many intermediate options (network management or hybrid market structures) are also possible.

Institutions

To understand why certain measures work in one country and not in another, knowledge of how the institutional framework works is essential. Institutions are factors that contribute to the structure and transparency of the housing market. Scientist and Nobel Prize winner Williamson distinguishes four layers:

1. social, informal institutions; including norms, customs, culture, traditions and beliefs,
2. formal institutions; laws, rules, guidelines and procedures,
3. institutional arrangements; including contracts and private organizations,
4. Operational institutions; including price and supply. This is the layer where the market can move freely.

Informal institutions define the scope for formal institutions, which then outline the framework within which (economic) actors can search for efficient arrangements. They therefore determine the maximum scope for the operational layer. The problem with informal institutions is that they are not explicitly laid down in rules and often occur unconsciously. This makes change difficult and very time-consuming (millennia).

European approach

While the different institutional systems and the embeddedness of housing markets within these unique frameworks can explain divergences in policy and approaches, it is striking that an approach that can be implemented at European level is currently lacking. Climate issues, international trade agreements, financial markets: countries everywhere are making agreements with each other to address global problems. However, the housing crisis is being addressed nationally, regionally, or even locally. This is despite the fact that the international interconnectedness of local housing markets can transmit or amplify financial and macroeconomic shocks, and urbanization is a growing problem. Viewed in this light, a European instrument could help governments address imbalances in (local) housing markets across borders.

Responsibility

The literature sees roughly four solutions:

1. more freedom in dealing with development locations,
2. reducing construction costs,
3. reducing financing costs,
4. alternative forms of housing.

But purely practical solutions—building bigger, higher, and more—won't solve the problems sustainably. To achieve this, it's essential to recognize and value the crucial role of informal institutions in particular. The government will need to engage much more intensively in this area, but the responsibility lies with all parties involved. We need to engage in dialogue to collectively formulate answers to questions like "what do we allow and what do we consider normal?" Because only if everyone is willing to contribute to the solution will there be a chance of success. So stand up, join the discussion, and ask yourself: what is my contribution to a fair, future-proof housing market?

The full thesis, titled "An international study of government interventions within different institutional frameworks – an inspirational document for the accessible city," can be found on asre.nl, the website of the Amsterdam School of Real Estate.