BUILDING AFFORDABLE HOMES - Challenges and solutions in the Nordic Region Edited by Moa Tunström
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
BUILDING AFFORDABLE HOMES Challenges and solutions in the Nordic Region Edited by Moa Tunström NORDREGIO REPORT 2020:2 nordregio report 2020:2 1
BUILDING AFFORDABLE HOMES Challenges and solutions in the Nordic Region Edited by Moa Tunström NORDREGIO REPORT 2020:2
Building affordable homes Challenges and solutions in the Nordic Region Nordregio Report 2020:2 ISBN (print) 978-91-87295-83-6 ISBN (pdf) 978-91-87295-85-0 ISSN 1403-2503 DOI: doi.org/10.6027/R2020:2.1403-2503 © Nordregio 2020 Nordregio P.O. Box 1658 SE-111 86 Stockholm, Sweden nordregio@nordregio.org www.nordregio.org www.norden.org Editor: Moa Tunström Contributors: Curt Liliegreen, Antti Kurvinen, Jón Rúnar Sveinsson, Berit Irene Nordahl, Anna Granath Hansson Cover photo: Brandon Griggs/Unsplash Nordregio is a leading Nordic and European research centre for regional development and planning, established by the Nordic Council of Ministers in 1997. We conduct solution-oriented and applied research, addressing current issues from both a research perspective and the viewpoint of policymakers and practitioners. Operating at the international, national, regional and local levels, Nordregio’s research covers a wide geographic scope, with an emphasis on the Nordic and Baltic Sea Regions, Europe and the Arctic. The Nordic co-operation Nordic co-operation is one of the world’s most extensive forms of regional collaboration, involving Denmark, Finland, Iceland, Norway, Sweden, and the Faroe Islands, Greenland, and Åland. Nordic co-operation has firm traditions in politics, the economy, and culture. It plays an important role in European and international collaboration, and aims at creating a strong Nordic community in a strong Europe. Nordic co-operation seeks to safeguard Nordic and regional interests and principles in the global community. Common Nordic values help the region solidify its position as one of the world’s most innovative and competitive. The Nordic Council of Ministers is a forum of co-operation between the Nordic governments. The Nordic Council of Ministers implements Nordic co-operation. The prime ministers have the overall responsibility. Its activities are co-ordinated by the Nordic ministers for co-operation, the Nordic Committee for co-operation and portfolio ministers. Founded in 1971. The Nordic Council is a forum for co-operation between the Nordic parliaments and governments. The Council consists of 87 parliamentarians from the Nordic countries. The Nordic Council takes policy initiative s and monitors Nordic co-operation. Founded in 1952. Stockholm, Sweden, 2020
Table of contents Preface............................................................................................................................................. 6 Why does the contemporary Nordic welfare state lack affordable housing? Moa Tunström, Nordregio.............................................................................................................................. 7 Housing construction in the market periphery – Denmark Curt Liliegreen, The Knowledge Centre for Housing Economics.................................................13 Housing construction in the polarized Finnish housing market Antti Kurvinen, Tampere University............................................................................................................ 23 Assisted Housing in Iceland Before and After the Crash of 2008 Jón Rúnar Sveinsson, The Reykjavík Academy........................................................................................ 47 Newbuilds and households in the market periphery – Norwegian housing and planning policy at a glance Berit Irene Nordahl, Urban and regional research institute OsloMet – Oslo Metropolitan University.................................................................................................................. 59 Sweden: How could new-build be made affordable to lower-income groups? Anna Granath Hansson, KTH Royal Institute of Technology......................................................... 71 nordregio report 2020:2 5
Preface
As part of the Nordic Co-operation Programme This report is the result of work done for the
for Regional Development and Planning 2017– thematic group Sustainable Cities and Urban De-
2020, three Nordic thematic groups have been es- velopment. The group focuses on: 1) social sus-
tablished in the following areas: tainability and gender equality; 2) spatial plan-
ning; 3) urban qualities in small and medium-sized
1. Sustainable rural development cities, and the urban-rural relationship; and 4) the
2. Innovative and resilient regions growth and development of Arctic cities. Within
3. Sustainable cities and urban development these broad themes the group decides what ac-
tivities to conduct, and the researchers involved
The groups have been set up by the Nordic Commit- are responsible for the results.
tee of Senior Officials for Regional Policy (EK-R), The topic of this specific report, affordable
under the Nordic Council of Ministers for Sustain- housing, is an issue that is high on the Nordic agenda,
able Growth, and the members are representatives and one where there is potential for Nordic learning.
of relevant ministries, national authorities, regional
authorities and cross-border co-operation commit-
tees. One purpose of the thematic groups is to im-
plement the co-operation programme by contrib-
uting to the exchange of knowledge and experience
between regional policy stakeholders, by promoting Kristian Elleby Sundquist
Nordic perspectives and by highlighting the impor- chair of the Nordic thematic group
tance of regional policy issues for sustainable devel- Sustainable Cities and Urban Development
opment and growth.
nordregio report 2020:2 6Why does the contemporary Nordic welfare state lack affordable housing? Moa Tunström Nordregio nordregio report 2020:2 7
An in-depth study of Nordic housing policy devel- mon policy model, or that everyone should learn
opment (Bengtsson 2013), whose title translated the same thing. It may imply, for example, that
to English reads “Why so different?”, makes clear the Norwegian policy model could find inspiration
that housing policies vary between the Nordic from the Danish system, or that Swedish hous-
countries. Despite the common understanding ing policy could draw on the Finnish experience.
that a Nordic welfare model was developed during Since housing policy and housing construction are
the 1900s under political systems with many com- largely local responsibilities, some chapters also
monalities, e.g. the central role of the local level in report local examples that may serve as inspira-
urban planning, there are important differences in tion for municipalities, developers, or NGOs across
housing policy strategies. In the study, Bengtsson the Nordic region.
(2013) calls these differences an unsolved mys- The focus of this publication is primarily on new
tery. Conceptual confusion is common in housing building for low-income and vulnerable groups, of-
policy comparisons, and this is indeed the case in ten referred to in English as ‘affordable housing’,
the Nordic context. The Nordic countries do not that is, housing for groups on the market’s periph-
agree on the meaning of the concept of public or ery who suffer from high barriers. The financial as-
social housing, they do not agree on the role of lo- pects of housing are central, especially as regards
cal government in housing provision, and there are new-building costs, subsidies, social housing mod-
forms of tenure with similar names but quite dif- els, and affordability. Nordic cities are segregated,
ferent implications for residents, developers, and and new housing development, application of di-
local governments. This means that a Nordic dis- verse forms of tenure, and housing subsidies are
cussion of housing policy can be challenging. How- examples of tools that can either worsen or reduce
ever, housing affordability is an issue in all Nordic segregation, depending on how they are used. The
countries, as is a mismatch between the need for market seems unable, on its own, to supply enough
housing and its current or anticipated availability. suitable housing for students, young people, low-
Another commonality ian the Nordic region is a income groups, and newly arrived immigrants,
strong housing ownership norm. Housing is con- among others. This is of political interest since it
sidered a private commodity and an investment, challenges the whole idea of the Nordic welfare
to a large extent, at the same time as it is a right. model, and of social cohesion and equality as char-
This presents Nordic municipalities, which seek to acteristics of the Nordic region.
strengthen social – inclusion, with challenges when Nordregio invited knowledgeable scholars from
trying to regulate – or not – the availability and the Nordic countries to share their perspectives.
appropriate location of housing. More specifically, they were asked to describe:
The immediate reason for this report, and for
inviting scholars knowledgeable about housing 1) the ‘market periphery’, i.e. the groups that are
policy to give their perspectives on housing for the victims of high barriers to the urban housing mar-
‘market periphery’ – or affordable housing as it is ket, and
often termed – is to address a recurrent question 2) current policy and/or planning initiatives aiming
in the urban planning debate: Why is new-build to strengthen the position of low-income and vul-
housing always too costly for the groups that re- nerable groups in the housing market: What is be-
ally need it? Urban planning for social sustainabil- ing done to increase the supply of affordable hous-
ity by, for example, mixing functions, increasing ing, or to support vulnerable groups in the housing
density, and providing attractive public spaces, market?
appears insufficient. What then is the condition of
the Nordic welfare state if it can only provide new The contributors have drawn on their own ex-
housing for the wealthiest? Another reason for pertise and their own and others’ prior research.
this report is that Nordregio, as an institution, and They have focused primarily on national housing
the Nordic Thematic Group on Sustainable Cities affordability policy initiatives and the role of dif-
and Urban Development, as part of the Nordic ferent funding models, but also mention local ex-
co-operation, would like to contribute to learning amples and ‘experiments’. The primary focus is on
across countries and their various policy models. the urban context, where there is a lack of housing,
Such Nordic learning, or Nordic added value, does pressure to build, and a crowded market, even for
not imply that everyone should agree on a com- those who can afford to be there.
nordregio report 2020:2 8In her contribution covering the situation in Curt Liliegreen emphasizes that Denmark still
Sweden, Anna Granath Hansson points out that has a significant stock of good-quality affordable
recent policy and debate have focused on new- housing, but that there are some development
build and supply-enhancing measures, rather than trends that threaten its accessibility and afford-
on what to do with existing housing or on influen ability, and thereby threaten to gentrify Danish
cing demand. However, the high costs involved in cities and force economically vulnerable groups
new buildings, putting them basically out of reach to move outside the major cities. This would not
of lower-income groups, mean that affordability is only affect the vulnerable, but also long-term ur-
gaining increasing attention. Increasing the hous- ban and regional development more broadly. First,
ing stock is apparently not sufficient in the current Liliegreen mentions mismatch and the effects of
situation. Investment subsidies have been intro- urbanization as a housing market challenge. The
duced, serial housing production is being promot- mismatch is particularly visible in university cit-
ed by the state, and land models for affordable ies where there is a lack of, and high demand for,
housing are being tested. There is also small-scale small and affordable housing. Second, there is a
experimentation with co-operative solutions and low vacancy rate in social housing in major Dan-
rent-to-buy schemes. The effects of these initia- ish cities, and the social housing is concentrated
tives, however, remain local and limited. in certain urban areas – a precondition for spatial
Granath Hansson also reports that direct al- segregation. In turn, refugees and immigrants are
locations to specific groups and temporary rental concentrated in the social housing, creating both
contracts are increasing, and that the somewhat a socio-economic and ethnic segregation. Third,
changing approach to the concept of social hous- housing affordability is affected by renovations,
ing should be seen in this light. In the Swedish which raise rents. So, despite the existence of sev-
housing policy debate, the concept of social hous- eral tenure forms, there are signs of segregation
ing has been, for a long period, very controversial and an affordability crisis in Danish cities.
and associated with low quality and segregation. Among the strategies applied to increase the
In addition, there are now proposals and practices supply of housing, Liliegreen mentions attracting
in Swedish municipalities that could be referred to more private investors, increasing the industriali-
as a type of residual ‘social housing’. Obviously, the zation of the building process, and use of the Plan-
market cannot secure housing for all in Sweden. ning Act to secure the production of social hous-
Several of the contributions in this report in- ing. Other proposals are directed toward easing
dicate that high barriers to the housing market demand, e.g. to restrict Airbnb renting. These ex-
negatively influence urban development and at- amples of proposed, and implemented, strategies
tractiveness by reducing access to employment illustrate the political nature of the issue – some
and education and by increasing segregation and actors suggest more regulations and some fewer,
gentrification. Cities with a lack of available and some suggest regulating supply, and some regu-
affordable housing risk becoming unattractive to lating demand. There is simply no unified position
new residents. Students might seek another uni- here, although in Denmark there is perhaps less fo-
versity, and potential employees might be reluc- cus on providing subsidies to tenants.
tant to accept an offered position because of the In her contribution concerning Norway, Berit
challenge in finding housing; they may choose to Irene Nordahl argues that municipalities lack the
settle somewhere else or be unable to enter the power to create a socially sustainable housing
labour market. A city with available housing for situation. Because the Norwegian housing market
different income groups allows individuals and is so heavily dominated by ownership, municipal
groups of different socio-economic backgrounds, housing is only a marginal phenomenon. Rental
ages, income levels, and places of birth to access tenure is considered a temporary solution in Nor-
higher education or employment opportunities way and this, in turn, means tenure-form policy is
in the city. While social inclusion has value on its currently not an issue. The market creates segre-
own, this also allows people in those low to mid- gation through price variations and, following the
dle income professions that are necessary in cit- Norwegian Planning and Building Act, the munici-
ies, to reside there. The question remains however: palities cannot reduce the effects of the market
Should housing primarily be accessed in a buyers’ by specifying financial models or forms of tenure
market, or distributed with rental tenure? when planning for new housing. In some cases,
nordregio report 2020:2 9according to Nordahl, the market raises barriers homes, credit institutions have become powerful
not only for the most vulnerable groups, but also landlords, Airbnb renting to tourists is crowding
for the relatively stronger ‘middle bracket’. Re- out residents, and work immigrants are residing in
acting to this problem, the city of Oslo currently spaces not designated as housing.
emphasizes the necessity of integrating both mu- Finland is increasingly polarized between grow-
nicipal housing and housing tailored to low-income ing and declining regions and this affects housing
households that are just over the income limit for markets. While similar changes are occurring in
assistance, in new developments. It is apparent the other Nordic countries, because of urbaniza-
that not only the usual vulnerable groups are be- tion and slow population growth, the phenomenon
coming important in policy discussions, and that is particularly strong in Finland where migration is
there are local responses to the lack of influence concentrated in just a few urban growth centres
through the Planning and Building Act. with high housing prices. As a result, low- and even
As the Planning and Building Act is a weak tool middle-income households find it hard to settle in
in Norway, the options for more inclusive hous- these growth areas. At the same time, many mu-
ing are housing allowances, a very small supply of nicipalities are facing both population reduction
means-tested municipal housing, and – perhaps and population ageing and, as a result, a declining
most importantly – assisted purchasing schemes housing market. In his contribution on the Finnish
via the Norwegian State Housing Bank. This kind situation, Antti Kurvinen discusses the complex-
of financing body, supporting both households and ity, when aiming for an inclusive city, of choosing
developers, is of central importance in a situation between providing subsidies to tenants and pro-
so dominated by ownership. ducing subsidized housing. In general, the trend
Jón Rúnar Sveinsson starts out by calling Iceland, in Finland has been towards more tenant-based
with its very strong ownership tradition and only subsidies, while place-based production subsidies
a marginal rental sector, a Nordic outlier in hous- have decreased. However, there are contrasting
ing policy. In this sense, however, it is like Norway studies and opinions, with some proponents push-
and, as in Norway, the state agency responsible ing for more state-subsidized housing. This fur-
for housing finance has a key role. On the other ther complicates the quest for ‘affordability’. How
hand, Iceland is a small country and therefore is is affordability to be achieved primarily – through
very sensitive to global development trends. It was housing production or through policy measures
heavily hit by the 2008 financial crisis and this has directed to households? Kurvinen concludes that
influenced the current housing policy situation. production of subsidized housing should be used
Initially housing prices fell, while household debts primarily to reduce the effects of economic down-
and unemployment increased drastically. This turn and be directed to those who cannot other
meant that people lost their homes and that the wise find a home on the private market. This
rental sector became more important. These dras- points to an important role for production subsi-
tic events raised questions about the ownership dies in locations where regular privately funded
norm and led to increased political activism about housing production would not otherwise meet de-
housing. There were protests about evictions, new mand, particularly for groups with special needs.
landlords were criticized for raising rents, and a According to Kurvinen, the most effective tool for
Homes’ Association and a Tenants’ Association inclusion would probably be measures directed to
were formed. improvement of the employment situation, mak-
Sveinsson’s contribution portrays Iceland as a ing it possible for households to meet housing
fragile welfare state, peripheral but at the same costs themselves, coupled with infrastructure and
time intimately connected – and sensitive – to transport measures that reduce the pressure on
international developmental trends. It is in tran- attractive areas.
sition from a country where, historically, there This report began with the premise that plan-
has been affordable housing available and rental ning officials, seeking to plan and build inclusive
housing, for selected vulnerable groups, has been a cities, need to understand more about the costs
means-tested form of tenure alongside the strong and financing aspects of housing construction. All
ownership norm. It is now a country in which es- the contributions have shown, however, that the
tablished households have experienced losing their housing market situation is intimately connected to
nordregio report 2020:2 10broader trends and planning practices. It is fitting, therefore, to close this introduction by remarking that the initial focus on costs and financing aspects has revealed that specific urban planning needs and strategies must also be considered. References Bengtsson, B. (ed.) 2013. Varför så olika?: nordisk bostadspolitik i jämförande historiskt ljus. Malmö: Égalité. nordregio report 2020:2 11
Housing construction in the market periphery – Denmark Curt Liliegreen The Knowledge Centre for Housing Economics nordregio report 2020:2 13
Background – housing stock in were demolished and not replaced as a result of
Denmark urban renewal, especially in Copenhagen in the
What is the housing situation in Denmark for those period 1985–2005. A number of small apartments
on the periphery of the market – such as students, were also merged, particularly during Copenha-
the elderly, immigrants and other economically gen’s urban renewal period. It was commonly un-
vulnerable groups? In order to assess the situation derstood that Copenhagen had an excess number
for these groups it is necessary to look at the sup- of older, small apartments that had to be merged
ply and affordability of adequate homes. to make ones that suited modern needs. Lately, the
In Denmark, affordable housing has tradition- appearance of Airbnb in Copenhagen has removed
ally been provided by a relatively large social hous- from the market rooms that used to be rented to
ing sector and one of the most strictly regulated students. Instead, owners are renting out whole
private rented sectors in Europe (Whitehead, apartments for shorter timespans. In this way
2012). In addition, cooperative housing in Denmark they are earning the same, or even more, than be-
is also still highly regulated, and cooperative dwell- fore. Airbnb is now spreading rapidly across the
ings do not sell for anything like a full market price, rest of the country. All in all, there remains a high
especially in Copenhagen.1 Until recently this has demand for small and cheap apartments in Den-
provided Danish cities with a large stock of afford- mark’s cities.
able housing. In 2019, social housing amounted to Immigrants and their descendants, especially
21% of total stock, while private rental housing those from non-western countries, mostly live in
amounted to another 18% (Statistics Denmark, social housing. An important reason for this has
2019). However, urbanisation and an ageing popu- been Danish legislation regarding refugees. When
lation, along with rising prices for owner-occupied refugees arrive in Denmark, they are distributed
housing, has begun to alter the situation in the between the different municipalities by the Minis-
country’s major cities. There are large differences try of Immigration and Integration. Municipalities
between the housing stock in the major Danish cit- used to have a legal obligation to secure each ref-
ies in terms of types of tenure (See Figure 1). ugee permanent accommodation, in accordance
Denmark does not operate with an official with the Integration Act. In order to do so each
definition of affordable housing. However, rele- municipality would use its right to assign tenants
vant data can be found in the EU-SILC indicators to the social housing sector. A municipality may,
(European Union Statistics on Income and Living according to the law, use up to 25% of the apart-
Conditions), an analytical instrument aimed at ments in its social housing sector for social pur-
creating comparable, multidimensional microda- poses, and this also includes housing refugees and
ta for income, poverty, social exclusion and living immigrants on low incomes. It was possible for a
conditions. The EU-SILC indicators include data on municipality to use more than 25% of apartments
housing costs in Denmark and the other Scandi- for such purposes, provided that agreements can
navian countries, subdivided into cities, towns and be reached with housing associations. This legisla-
rural areas. It shows that 21.2% of the households tion was changed in 2019. Municipalities now have
in Danish cities spent more than 40% of their an obligation to secure temporary accommoda-
disposable income on housing in 2018, compared tion, not somewhere permanent to live.
with 14.9% in Norway, 10.1% in Sweden and 5.4% Because social housing is not evenly distribut-
in Finland. ed between municipalities, there is a certain level
More and more young people are now going of segregation between those of different ethnici-
into higher education, and this is putting pressure ties and socioeconomic backgrounds. Also, there is
on affordable housing for students in the larger a tendency to concentrate social housing in par-
university cities (primarily Copenhagen, Aarhus, ticular areas within the individual municipalities.
Aalborg and Odense, although smaller university The more vulnerable tenants are concentrated
departments are located in other cities, too). At in clusters in the major cities. Over the past few
the same, time many small and cheap apartments years the degree of segregation has been declin-
ing in the largest cities, Copenhagen and Aarhus
(Hansen, 2019).
1 Cooperative housing is called andelsbolig in Danish. It can
The government operates what is known as
be compared to the Swedish bostadsrätt, before these were
deregulated in 1968. a ‘ghetto list’ which defines some social housing
nordregio report 2020:2 14100% 2168 1777 Other
20023 5516
1677 984
3755 4870
2960
6916 4511 Public authorities
90%
Cooperative
24914
80% Social housing
96762
45353
Private rented
70% 28545
Owner-occupied
60%
25265
50% 59977
40120
40%
30% 62800
24171
39485
20% 57217
10% 55693
4402
0%
Copenhagen Odense Aarhus Aalborg
Figure 1. Housing stock distributed by tenure i major municipalities in Denmark 2018. Source: Statistics Denmark,
table BOL101.
areas as ‘ghettos’, reflecting a high level of seg- building private housing, or by converting family
regation. Before this they were simply called ‘vul- dwellings into social housing for the elderly or for
nerable areas’).2 This list is based on indicators young people. Some tenants will have to be moved
of ethnicity, income, labour market participation, to other areas within the municipalities, and it will
education and the crime rate among the residents. be necessary to build new social housing. This will
It is based on a political viewpoint, rather than inevitably lead to rent increases for these families,
on a scientific analysis of the segregated areas. since the annual rent in new-build social housing is
Many of these areas were built in the 1960s, 1970s DKK 1,200 per m2, while the corresponding average
or 1980s and have low rents. The problem here is for family dwellings across all social housing was
not affordability, but the difficulty of being a seg- DKK 811 in 2019 (The National Building Fund, 2019).
regated area with poor integration. In May 2019, An analysis of segregation in Danish social
the former government and the major opposition housing for the period from 1986 to 2017 can be
parties concluded a so-called ‘ghetto agreement’. 3 found in Hansen (2019). This analysis is based on
Under this agreement, DKK 10 billion will be used microdata for each tenant and each dwelling in the
for renovation and urban regeneration. The share social housing sector. The project defines the most
of ’family dwellings’4 is going to be reduced to 40% vulnerable and segregated areas based upon the
overall. This will happen through demolition, by tenants’ income, labour market participation, edu-
cation and criminal records. There is a high degree
of correspondence between vulnerable areas iden-
2 Udsatte områder in Danish.
3 The agreement is officially called Aftale om finansiering tified in this way and the government’s ‘ghetto list’.
af indsatser for at forebygge og nedbryde parallelsamfund in Because refugees are primarily accommodated
Danish. This translates as ‘Agreement concerning the financ-
ing of efforts regarding the prevention and countering of in social housing, a sudden increase in immigra-
parallel societies’. In June 2019, Denmark elected a new social tion puts pressure on that sector. There is a low
democratic government. The new minister for housing, Kaare
Dybvad, wishes to drop the use of the term ‘ghetto’.
vacancy rate in social housing in the major Dan-
4 Almene familieboliger, in Danish.
nordregio report 2020:2 15ish cities. It is therefore difficult to secure proper regulated through the Housing Control Act §5.2.
accommodation for refugees at short notice. This In recent years this practice has become increas-
problem is aggravated by the fact that, under ingly controversial. One reason for this is the emer-
Danish law, a municipality cannot direct a refugee gence of the American hedge fund Blackstone on
to an area which is defined as ‘a ghetto’. Like other the Danish housing market. In 2019, the previous
European countries, Denmark received many refu- government and opposition established a com-
gees and asylum seekers from 2014 to 2016, be- mittee to analyse how §5.2 was being used. A new
cause of the civil war in Syria. This led to a particu- government was formed after negotiations with
lar political agreement between the government some of the other political parties in parliament.
and Local Government Denmark (KL). It had been Based on these negotiations, it was agreed that
feared that the social housing sector would be foreign equity funds should be prevented from
overwhelmed by the number of refugees coming buying up Danish private rented dwellings. It is
in. So, the agreement, from March 2016, secured commonly understood that this this measure was
increased government subsidies for social housing aimed at Blackstone.
for up to 10,000 new housing units designated for According to § 5.2, a landlord cannot raise the
refugees. It was a condition of the subsidy that at rent before the tenant has moved out. It is possi-
least half of these dwellings should be under 55 m2 ble to raise the rent by a smaller amount when the
in size. But the number of asylum seekers quickly apartment has been renovated to a lesser degree
fell again. (using the Rent Control Act, § 5.1), but in that in-
It is important to understand that Denmark stance the landlord will be obliged to find an alter-
still has a significant stock of good quality afford- native cheap apartment for the tenant when the
able housing, especially when you consider the rent increase exceeds a certain threshold.
sheer numbers involved by international compari- Properties built after 1991 have a market
son. However, this supply is no longer adequate rent, although the precise term for this is ‘agreed
because of an increasing population combined rent’. One effect of agreed rents is that new-build
with the effects of urbanisation. properties in the private rented sector tend to be-
come rather expensive, and certainly beyond the
Problems related to different forms reach of households on the periphery of the hous-
of tenure ing market. This problem has been heightened by
The private rented sector regulations regarding the average size of apart-
The private rented sector is highly regulated and ments in new residential buildings in Copenhagen.
operates no fewer than four different systems of These rules are set by the municipality and not by
rent control. This causes a good deal of confusion the state. Copenhagen has determined that the
and a number of legal conflicts. Properties built average size of the building should be at least 95
before 1992 are regulated by the Housing Control m2. This regulation has effectively prevented the
Act5 if the municipality has chosen to be a ‘regu- construction of new smaller and more affordable
lated municipality’, which most of them are. apartments in Copenhagen. The neighbouring mu-
If an apartment built before 1992 in the private nicipality, Frederiksberg, has set even stricter rules
rented sector is modernised, with costs exceeding which require that the average size should be at
a certain threshold, the rent can be raised to what least 100 m2. The older, regulated apartments have
is referred to as ‘the value of the rented’. This is not a rent level which is 50% below the market rent.
a market rent, but rather a rent level determined In the media there has been talk of an afford-
by the local Housing and Rent Control Board. The ability crisis in major European cities. In Denmark,
rent increase arising from this modernisation can the major cities experiencing a substantial growth
amount to as much as 100% in Copenhagen. Even in population have been Copenhagen and Aarhus
so, this increased rent will be somewhat below (see table 1). In Copenhagen, the relative share of
the true market rent. This modernisation process owner-occupied housing is only 20% (28% if con-
is known as a ‘§5.2 modernization’ because it is dominiums rented out temporarily are counted).
The affordability issue is connected with those
owner-occupied housing units which have seen
5 Boligreguleringsloven, in Danish. This is short for Lov om
midlertidig regulering af boligforholdene, which translates as
a nominal price increase amounting to 51% from
‘Law on the temporary regulation of housing conditions’. 2013 to 2018. Private rental housing built after
nordregio report 2020:2 161991, and to some extent older but modernised 904 per m2, and for private rented built after the
apartments, also command high rents and are year 2000 it is DKK 1,401. These figures are aver-
getting expensive for both groups on the periph- ages, and there is a good deal of variation. How-
ery of the market, as well as for ordinary citizens ever, when this kind of housing is offered it is quite
with low- and medium incomes. But social housing common to see rents around DKK 1,800–2,200
and most private rented housing still have low to per m2 for new-build in good to prime locations.
moderate rents. In the major cities, and especially Copenhagen,
According to data from the Danish Trans- there is a lack of smaller affordable flats in the
port, Construction and Housing Authority (Trafik-, central part of the city. This is a problem for stu-
Bygge- og Boligstyrelsen, 2019), the average rent dents and for single-person households with low or
in social housing built before 1950 in Copenhagen moderate income when they are entering the hous-
is DKK 850 per m2 p.a. in 2019. For social housing ing market. It is less of a difficulty for most older
built after the year 2000 it is DKK 1,112 per m2. For people since they have often found private rented
private rented housing built before 1950 it is DKK apartments with regulated rents earlier on, or an
Table 1: Population at January 1st in major Danish cities
Municipality 2010 2012 2014 2016 2018 2019 Growth
2010-19 in %
Copenhagen 528,208 549,05 569,557 591,481 613,288 623,404 18
Odense 166,305 168,798 172,512 175,245 178,21 179,601 8
Aarhus 242,914 252,213 259,754 264,716 273,077 277,086 14.1
Aalborg 102,312 104,885 109,092 112,194 114,194 115,908 13.3
Source: Statistics Denmark, www.statistikbanken.dk, table BY2
120,000
110,000
100,000
Number of families
90,000
80,000
70,000
60,000
50,000
40,000
10
00
20 4
90
19 4
20 4
20 6
20 8
20 9
19 6
88
19 9
92
93
95
96
19 8
20 9
20 1
02
20 3
05
20 6
20 1
12
20 3
20 8
19
15
17
07
97
87
19 1
1
0
9
0
1
1
0
0
1
9
8
8
0
0
9
1
9
20
20
20
20
19
20
19
19
19
19
19
19
19
20
19
20
20
Figure 2. Difference between the number of families with 1 person and the number of households with 1 person
in Copenhagen municipality 1986–2019. The figure shows a positive trend. This means that the number of fami-
lies has been larger than the number of households during the specified period. The increase over time indicates
that more and more singles are living in shared dwellings, due to the pressure on the housing market and the
lack of smaller dwellings. Source: Statistics Denmark, tables FAM44N and FAM55N.
nordregio report 2020:2 17apartment in social housing. Some of these apart- come more and more valuable, on account of spec-
ments can be very attractive today, and the waiting ulation using §5.2 in the Rent Control Act and to
list for them is 25 years or more. Elderly owner-occu- the arrival in the market of foreign equity funds.
piers in the largest cities have had substantially high- The overall effect has been a sharp rise in prices
er equity in the past couple of years (Hansen, 2018). for cooperatives, although they are still below the
Some older people living in cheap, regulated market price (Hansen, 2017). Individuals are not al-
private rented apartments in the major cities fear lowed to take out mortgages to buy cooperative
that they may be squeezed out due to modernisa- properties and have to rely on bank loans, which
tion and rising rents. However, legislation in rela- have traditionally been more expensive. The interest
tion to these issues is extremely strict, with a high rate is usually somewhere between 3% and 7–8%.
level of protection for tenants, unlike many other
western countries. Over the next 20 or 30 years, Condominiums
it is likely that many of these apartments will be Copenhagen still has a few cheap condominiums,
modernised when the tenants move out, resulting with prices as low as DKK 500–600,000 for 35 m2.
in an increase in rents. This is likely to lead to an These are also the cheapest apartments in Aarhus
affordability problem in the future as well as to and Aalborg. Only a handful of apartments can be
further gentrification. bought at such low prices. In Copenhagen the me-
Because of increasing affordability issues on dian price for listed apartments for sale in August
the periphery of the housing market, a growing 2019 was around DKK 3.8 million. The market for
number of single-person households can no longer owner-occupied housing is in reality closed to eco-
afford their own home. One of the consequences nomically vulnerable groups.
of this is an increase in flat-sharing.6 When this Since 2012 the market for condominiums has
happens the number of single-person families may seen sharp price rises in all major Danish cities.
grow compared to the number of single-person Even so, buying a condominium has become eas-
households, as shown in Figure 2. This is an indica- ier in most cities, apart from Copenhagen. This
tor of the strain that can be put on the housing is because financing costs have been falling. For
market, and it is a tendency well known from other instance, even in Aarhus, the second-largest city
larger cities outside Denmark, including London. in Denmark, condominiums have risen in cost, but
they have become relatively more affordable due
Cooperative housing to falling interest rates and slightly increased wag-
The largest type of tenure in the municipality of es. Many small apartments in Copenhagen and
Copenhagen is cooperative housing, as mentioned Aarhus are bought by parents of students. This
above. This was traditionally seen as a cheap al- practice is known as forældrekøb (which translates
ternative for low-income families who could not as ‘parent purchases’) and it offers the parents
afford to buy a condominium. That is no longer tax advantages. They can rent the apartment to
the case since prices for cooperative dwellings their child at a market rent, and the child can apply
have gone up, even though they are regulated. for housing benefit. The child may then rent out a
There are no official price statistics for coopera- room in the apartment without paying tax.
tive housing in Denmark, but many cooperative In Denmark buying a condominium is financed
dwellings, especially in the greater Copenhagen by a mortgage up to 80% of its value. It can be
area, have seen price increases at the same level financed with a nominal 0.5% fixed interest rate
as for private rented housing. The reason for this for 30 years. For a 30-year loan with flexible inter-
is that the value of a cooperative dwelling can be est there has been negative interest rate for some
assessed in three different ways. One of these is to time. It is also possible to get interest-only loans of
set the price at the same level that a private inves- up to 60% of the value of the dwelling. The down-
tor would pay for the building if it was for private payment for this in Denmark is 5%. The remaining
rented housing. This is regulated in Denmark’s leg- 15% of the price can be financed with a bank loan.
islation for cooperative housing. However, the interest on a bank loan is higher, put-
In recent years private rental housing has be- ting people without savings at a disadvantage.
Even though financing is potentially extremely
cheap, not all households are eligible for a loan
6 In Danish, delt udlejning. in practice. As with other EU countries, Denmark
nordregio report 2020:2 18has just introduced the ‘macroprudential regula- Copenhagen used to have a quota limiting the
tion’. This limits how much a household can obtain number of dwellings that could be built specifically
as a loan in proportion to its income. The regula- for students each year, but this restriction has
tion also limits access to certain types of loans, now been lifted.
such as interest-only loans. This regulation has hit In the 20 years between 2000 and 2019, some
the more economically vulnerable groups in the 12,400 commitments have been made to con-
market. On the other hand, it was introduced to struct social housing, particularly for young peo-
prevent an unsustainable bubble in house prices. ple.7 Only 1,965 of these commitments were made
Were it not for the macroprudential regulation, in the municipality of Copenhagen, with the much
prices could probably rise even further, and vulner- smaller municipality of Aalborg being building the
able groups would be squeezed out altogether. largest number in recent years.
Private investors have been more active in re-
Strategies for solving housing lation to student housing, but the monthly rent in
problems in the major cities this part of the market remains quite high. In or-
In recent years the housing affordability issue has der to fight rising costs in the construction sector
attracted a lot of political attention. Different so- the idea was mooted of using shipping containers
lutions have been proposed, and some have actu- as temporary housing and placing them on rented
ally made their way into legislation. Pension funds land in the harbour. Even these dwellings are ex-
have been financing the construction of apart- pensive, with a monthly rent around DKK 4,000
ments in Copenhagen in recent years. Typically, for 20 m2. This project is called the CPH Village
these funds have a target for how many tenants in and it started out with 200 dwellings. They re-
each project should be fund members. Due to the ceived 2,000 applicants when the project was an-
rising cost of building in Copenhagen, the pension nounced. To make this plan feasible it was neces-
funds have signalled that they plan to scale back sary to change the Danish Planning Act, in which §
investment in new construction and look instead 19 now gives the municipality the right to agree to
for secondary locations outside the largest cities. exemptions from the local plan for up to ten years
The reason for this is that new construction is get- for student housing. Normally, such an exemp-
ting too expensive for their members. tion can only be for up to three years. This means
Table 2: Commitments for youth housing in social housing
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Copenhagen 0 0 0 0 300 22 0 0 0 0
Aarhus 156 39 153 176 23 257 251 0 0 306
Aalborg 53 119 195 0 0 4 0 0 0 0
Odense 0 95 56 71 40 22 0 0 0 57
Total 209 253 404 247 363 305 251 0 0 363
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Copenhagen 0 0 0 0 361 0 563 523 196 0
Aarhus 585 14 42 351 149 0 389 172 701 112
Aalborg 2,707 0 342 755 294 283 132 269 0 64
Odense 134 0 25 124 137 297 10 84 195 0
Total 3,426 14 409 1,23 941 580 1,094 1,048 1,092 176
Source: Boligstat.dk, Trafik-, Bygge- og Boligstyrelsen, May 2019.
7 in Danish, Almene ungdomsboliger.
nordregio report 2020:2 19that temporary housing in the form of containers able property in the middle of Copenhagen. About
can be established for a period of up to ten years, 400,000 m2 of land bordering Vesterbro, a part
which makes the investment profitable. of the city undergoing gentrification, is zoned for
There are a number of other examples of plac- development, with 5,000 new homes, plus offices
es where a more efficient planning process and and shops on former industrial land.
less onerous regulations have been experimented Overall, these strategies can be summarised as:
with. For example, municipalities can make it more
attractive to build if they cut back on the required 1. Trying to boost the supply-side by attracting
number of parking spaces for each dwelling. In the private investors and developing new sites for resi-
planning framework that dates from 2015 there dential building via land reclamation and on former
is a standard requiring at least one parking space protected areas.
for each 200 m2 of residential construction, but no 2. More regulation in order to ease pressure on the
more than one parking space for each 100 m2 of demand side:
residential construction. - by restricting Airbnb
Waterfront housing developments have been - by limiting the number of condominiums bought
built in all of the major Danish cities. In Copen- by parents and rented out to their children. This
hagen this has not only entailed the urban regen- practice gives the parents tax benefits. Some
eration of brownfield sites, but also through land political parties think this is an unfair advantage
reclamation. The sea around Copenhagen is very and skews the market.
shallow, only a couple of metres deep. This means 3. Trying to make construction cheaper through
that land reclamation is not only possible; it but less regulation, through industrialisation of the
relatively easy. It has also been a strategy for the building process, or through limiting construction
municipality to sell building rights on reclaimed per m2 in social housing.
land in order to finance investment in new infra- 4. Securing affordability by public regulation. This in-
structure. However, this has so far primarily been volves using the planning act and demanding that a
used to lure residents with high incomes towards certain proportion of residential property in new de-
the attractive – and expensive – new dwellings velopments should be designated as social housing.
close to the sea. The latest project in Copenhagen
is Lynetteholm in the port area. This was approved These are different, and to some degree also op-
by parliament in October 2018, and when it is fin- posing, strategies. Some call for more regulation
ished it will house 35,000 people. While the major- and some call for less. Such differences reflect the
ity of owner-occupied apartments in Lynetteholm varied political viewpoints in the housing debate.
will probably be very expensive, the municipality The conflict in thinking about the affordability ‘cri-
can demand that up to 25% of all new dwellings in sis’ (as some term it) can also be observed in other
the area must be social housing. The timeframe is aspects of the housing market in Copenhagen. The
very long, however. The project will not be finished municipality gives priority to affordable housing,
until 2070 – so even though it will be on a massive but at the same time it has been demanding that
scale, it will not solve current problems. Another the average size of apartments in new residential
example of innovation in Copenhagen is the west- construction projects should be at least 95 m2.
ern portion of the island of Amager. Amager is an From 2015, this regulation was eased somewhat.
integrated part of Copenhagen today. The west- So now only 75% of the total floor area in resi-
ern part of the island was reclaimed in the 1930s dential new-build has to meet this requirement.
and has been kept in a natural and unused state Recently the Lord Mayor of Copenhagen has sig-
ever since. In recent years it has been used for the nalled that this requirement might be eased even
development of the Ørestad project, which today further. Rules such as this are not uncommon in
houses 15,500 people. This has been an ongoing Denmark. For instance, the neighbouring munici-
development, and in 2019 the Danish parliament pality Frederiksberg requires that the average size
removed the protected status of even more land should be 100 m2. The historical background to this
in western Amager in order to develop a further is that Copenhagen used to have a substantial
2,500 homes. One final example in Copenhagen is oversupply of smaller apartments.
land owned by DSB, the Danish national rail com- In the next section we will look in detail at the
pany. DSB is a major landowner with consider- practical interpretation of these different strategies.
nordregio report 2020:2 20Trying to boost supply through the allowing for a correction in the data for differences
Planning Act in purchasing power. Traditionally consultants and
In February 2015, the Danish parliament passed analysts have pointed to over-regulation, admin-
an adjustment to the Planning Act. This gave the istrative burdens (‘red tape’) a fragmented value
municipality a right – but not an obligation – to chain in construction, and lack of competition.
demand that up to 25% of new residential de- In 1972 the Danish parliament introduced a
velopment be used for social housing. This bears cap on how big and how expensive housing units
some resemblance to the English Town and Coun- in social housing could be.8 This cap is on the total
try Planning Act, which enabled the council and a cost of land and building for one m2. The regula-
private investor/contractor to enter an agreement tion has been changed many times since and exists
regarding restrictions on the use of land. This has in a different form today. Of course, this cap does
been used to provide affordable housing in Eng- not necessarily secure a more efficient construc-
land. When the use of land is restricted it will most tion process, but it does put a limit on quality, and
likely reduce its value. In some cases, Danish legis- it can be difficult to build under the cap in years
lation can lead to compensation for the landown- with booming private construction which can drive
er, but not as a general rule. up both wages and the price of materials. The cap
The new rule is only applied to new urban de- on social housing for families is DKK 23,630 per m2
velopment, such as reclaimed areas in the port of in Greater Copenhagen. For dwellings for young
Copenhagen. This limits its application, because if people it is set at DKK 27,800 per m2. For social
an area already has a local plan the new rule can- housing land it is, on average, 19% of total costs.
not be used. Local plans are the backbone of the There have been many discussions about how
Danish spatial planning system. Any major de- to build more efficiently – as distinct from lower
velopment project will require a local plan. A local quality building – by optimising the whole con-
plan concretises objectives in a municipal plan. It is struction process. In order to stimulate this ap-
possible to replace a local plan with a new one, or proach, a new Public Procurement Act came into
to amend the existing one. force in 2016. This made optimisation possible
Copenhagen has shown a good deal of inter- through what is called ‘flexible supply/flexible calls
est in utilising this new legislation, but new social to tender’. The idea is to facilitate negotiation and
housing has been slow in coming nonetheless. dialogue between construction companies and
There have been different explanations for this their clients in order to streamline the building pro-
problem. One train of thought is that the high ac- cess, rather than just focussing on price competi-
tivity in the market makes it very difficult to build tion in the here-and-now. However, it is difficult to
social housing right now, due to the maximum change traditions and behaviour in this sector.
price allowed for social housing. Another explana-
tion is that the private sector has been focusing Parents buying apartments for their offspring
on building condominiums and more expensive It has been proposed by the Radikale Venstre (the
private rented housing in development areas, and Danish Social-Liberal Party), which supports the
that social housing has therefore often been post- current minority government, that tax benefits to
poned until a later phase in the development. The parents buying a condominium and renting it out
Lord Mayor of Copenhagen acknowledged these to their child should be removed. This was suggested
problems in a television documentary on Danish by the party in 2018, and again in the summer of
Radio entitled ‘The city of the rich’ (‘De riges by’), 2019. It has been estimated that these tax bene-
broadcast in November 2019. In it, Frank Jensen fits amount to between DKK 300–400 million p.a.
said that it might indeed be necessary to revise The idea is to remove tax benefits that stimulate
the legislation. the prices of smaller apartments, and instead to
secure revenue that can be used to finance afford-
Making construction cheaper able student housing.
For decades, rising construction costs have been
a challenge when it comes to providing affordable
housing in Denmark. It has been estimated that
construction costs are now 30% higher in Den-
mark than other western EU member states, even 8 Often referred to as kakkelovnscirkulæret in Danish.
nordregio report 2020:2 21Concluding remarks to be in vain. At the same time, older and relatively
The housing situation for economically vulnerable cheap apartments are being modernised and their
groups in major Danish cities is slowly deteriorat- rents are increasing significantly. It is therefore
ing. As the population has grown in the cities, the not surprising that politicians in both the City of
development of the housing stock has been slow to Copenhagen and the national government have
respond to increasing demand. In the owner-occu- taken a critical stance regarding existing regula-
pied housing sector, and in that part of the private tion of the housing market and of the construction
rented market that has a free market in rent, it is industry.
becoming more difficult for a newcomer to enter
the market due to the increase in prices and rents. References
The regulated portion of the market has always Hansen, J.Z. and Iversen, A.Ø. 2017.
been difficult to enter at short notice, at least for Ejerlejlighedslovens forbud mod omdannelse af
individuals without established networks. Difficul- andels- og udlejningsboliger til ejerlejligheder.
ties have therefore been mounting for people who Copenhagen, DREAM.
move to the larger cities from other municipalities, Hansen, J.Z., Iversen, A.Ø and Stephensen,
and for young people born in the major cities who P. 2018. Ejerboliger i det 21. århundrede.
want to move away out of the parental home and Copenhagen, DREAM.
start their own home for the first time. The situa- Hansen, J.Z., Hansen, M.F., Iversen, A.Ø. and
tion for people living in adequate accommodation Stephensen, P. 2019. Udsatte boligområder i
in the major cities has not deteriorated. Tenants Danmark. Copenhagen, DREAM.
are protected by rigorous legislation, and owners Kristensen, J.B. 2012. Konsekvenser
of cooperatives and owner-occupiers now have af huslejeregulering på det private
substantially higher net equity. For them the situ- udlejningsmarked. Copenhagen, DREAM.
ation has turned out to be beneficial. This is known Statistics Denmark, Boliger efter område,
as an insider-outsider problem in economic theory. beboertype, anvendelse, udlejningsforhold,
In the long run, housing problems will become ejerforhold og opførelsesår (2010–2019),
more visible as the population changes through Accessed: October 2019. https://www.
what is called gentrification. Economically vulner- statistikbanken.dk/statbank5a/default.
able groups, such as single people and people with asp?w=1463.
a low educational level and/or low and income, will The National Building Fund, Huslejestatistik
have to settle outside the major cities, on the pe- 2019, Accessed: October 2019. https://
riphery. This process is already happening. lbf.dk/analyser/statistikker-og-analyser/
Danish politicians at both a municipal and huslejestatistik/.
national level have acknowledged the problem Trafik-, Bygge- og Boligstyrelsen, Huslejestatistik
and have sought to deal with it through strate- 2019, Accessed: October 2019. https://
gies aimed at boosting construction. However, boligstat.dk/SASStoredProcess/
the number of new housing starts has not been guest?&_PROGRAM=/Boligstat/
enough to ease current pressure on the housing OutputFrontEnd&menu=4.
market, especially not in Copenhagen. Efforts to Whitehead et al., 2012. The Private Rented
increase the number of social housing building pro- Sector in the New Century. Copenhagen,
jects in Copenhagen have turned out more or less Boligøkonomisk Videncenter.
nordregio report 2020:2 22You can also read
