The concept of Social Housing can be traced back to the 1850s when Prince Albert of Britain proposed the first blueprint for social houses, as we have it today. Later on, in 1919, Denmark established its own Danish Social Housing system. In Denmark, legally speaking, social housing can be defined as a non-profit sector with the aim of providing affordable, decent, and standard housing to the populace whereby tenants have the legal right to influence their living conditions. At the heart of the Danish social housing scheme is the concept of tenants’ democracy; we’ll examine this unique system in much detail later in this article.
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Generally, Denmark operates an integrated housing system where the profit and non-profit organizations are placed on the same pedestal. Because both sectors are allowed to compete in the same market, we see that the standard of housing for the lower-income and middle-class population is of high quality. This then raises the question of who provides these non-profit housing and how it is financed.
Ownership and Financing
Right from inception, the social housing system in Denmark has always been independent of the government. It is facilitated by numerous non-profit housing associations. As of 2011, there were over 760 of such housing associations, which controlled about 541,500 units of housing. This accounts for over 20% of the housing sector. Although independent of the government, the Danish social housing scheme is regulated by central government policies.
One such way in which the State regulates social housing is through financial support and reforms. In 2002, the sector received a financial reform, which saw an increase in self-funding for housing associations. Due to this reform, 91% of capital for the housing project comes from mortgages. The remaining 9% is borne by the local government and the tenant, with the local government taking 7% and 2% covered by the tenant’s rent. The local government also provides a guarantee for the mortgage to the tune of over 65% of the initial cost.
Apart from financial reform, the government provides financial supports for social housing schemes, in the form of subsidies. On the side of the housing suppliers, the central government co-pays the interest rates on the mortgage for the non-profit housing scheme. Also, non-profit housing is exempted from income tax and real estate tax in the country. On the side of the demand, i.e., the tenants, the government provides individual housing allowances, as a means of financial assistance for the tenants, in need of social pensions.
However, there is a shift from providing supply-focused financial support to demand-focused support. This means less is spent in subsidizing the construction of social houses, and subsidy is focused on providing housing allowances. To finance itself, housing associations formed the National Building Fund for Social Housing (Landsbyggefonden) in 1967. The purpose of this fund was to receive mortgage payment for non-profit houses after the mortgage has already been completed. This excess mortgage payment is then used to finance projects such as refurbishing or construction of non-profit houses.
The first question would be who exactly qualifies as a tenant under the social housing scheme. In Denmark, home ownership, especially in urban regions, is the exclusive reserve of the upper-middle and high-income earners. This means that rental apartments (private owned and non-profit housing association owned) constitute a majority of housing stock in Denmark. The Social Housing scheme is, however, open to everybody on application.
Waiting List system is used in allotting housing units to people. There are two kinds of Waiting lists: the external waiting list, and the internal waiting list. The external waiting list is open to everybody to apply for, while the internal waiting list is exclusive to people who are already tenants of social housing apartments but desire to move to a better apartment. However, since there is no limitation to who can apply, preference is given to specific classes, for instance, families, older people, students, persons in dire need of a house, or refugees. Although there is no specific rule as to who gets a housing unit, the general rule is to allocate them on a first-come, first-serve basis.
Also, the local governments have the power to assign houses to people in dire need of housing, up to 25% (33% in Copenhagen) of available spaces. In such instances, the beneficiaries of the municipal space need not be on the waiting list. This is because the waiting list system is controlled by the housing associations, not the government. Although, most times, this power isn’t utilized. Sometimes, municipalities, with the agreement of the housing estates, use this space for administration purposes.
The concept of tenant democracy in Denmark is one of the most evolved in Europe. It allows tenants to participate in the running and administration of the social estates. Tenants exercise their democracy through the “Tenant Boards”. The tenants of each housing estate elect a tenant board at a yearly tenant meeting. At the annual meetings, the tenants elect the board, approve rent and budget, approve major refurbishing and maintenance projects, and decide on local estate rules. The estate administrator is, at best, a ceremonial role whose decisions have to be ratified by the board. There is also the tenant’s Appeal Board, which acts as an adjudicatory body to resolve disputes between tenants and housing associations.
By law, the rent is based on the cost-recovery principle, as against the market forces of demand and supply. This added to the increase in land and construction cost, and the reduction in government subsidy has caused a rise in rent prices in recent times. In a 2010 report by the Ministry of Social Affairs, it was shown that out of 59,000 affordable rent-houses in Copenhagen, only 20,000 are social houses. Due to the need to recover the cost of construction through rent, new social houses have become synonymous with low quality and high prices. These challenges (and more) are highlighted in the the EU website entitled Housing Policy in the EU Member States.
The Danish model of Social Housing and tenant democracy is having one of the most citizen-centric housing schemes in Europe. However, a balance needs to be struck to ensure that the sector continues to wax strong and becomes more affordable.