How do other cities provide housing?

August 27, 2020

A globetrotting new whitepaper from SPUR looks at policy regimes in other countries that manage demand for housing with measurably more success than California. Three city profiles help give a sense of the bigger picture.

Key takeaways:

  1. Vienna funds, builds, and maintains a large stock of affordable housing through strong national and local government. Housing isn’t strictly a local matter there, and it’s considered more of a civic obligation than a speculative investment vehicle.
  2. Tokyo enforces national zoning rules and provides cheap mortgages for plentiful housing that rapidly depreciates rather than building value as an investment.
  3. Singapore owns most of the land in the city-state, and builds lots of dense housing, but actively promotes homeownership.

These three cities share some common characteristics that California lacks. For example, all three cities have strong central governments with land-use policies that promote abundant homebuilding near public transit, and provide ample funding for people to access housing, whether through direct provision of social housing or low-interest mortgage financing. More interestingly, all of these cities also discourage speculative investment in landownership by individual households. 

While Singapore requires citizens to save their income and provides grants for first-time homebuyers, it strictly regulates prices in the market, and encourages empty-nesters to downsize into smaller homes by unloading some equity rather than keeping a larger home than they need. This encourages growing families to move into larger apartments, to free up smaller ones for smaller households.

Singapore’s Housing and Development Board (HDB) technically only sells 99-year leases, while retaining ownership of the land. HDB prioritizes married couples for mortgages to encourage higher birth rates, and sets racial quotas. Most uniquely, they encourage turnover as families age: “Older owners can sell back to HDB the part of their lease that they do not expect to use, which not only frees up money for retirement but allows HDB to regain control of units to redevelop and resell.”

In Vienna, the government does not build every new square foot of housing, but it does build a fair bit of social housing, and SPUR notes that the city itself is a trusted housing provider that emphasizes services and amenities in its dense, low-rise developments. Renting is considered just as viable for long-term living in Germany and Austria as homeownership is in the US. Meanwhile, though private development does occur, the Viennese government has enacted a “wohnbauoffensive” to reduce permitting and construction barriers to boost housing production by 30%. Social housing production is financed by federal taxes, but the Vienna Housing Fund, a city-owned nonprofit, has run self-sufficiently since its foundation, and is a major player in the real estate market. Through its own land sales and acquisitions, the nonprofit builds thousands of units annually.

In Tokyo, the Urban Renaissance Agency (URA) is not nearly as aggressive in developing social housing, but the city remains one of the most affordable megacities in the world, and it would be difficult to get rich solely by owning a house anywhere in Japan. Because buildings are torn down and redeveloped every 20-30 years to accommodate advances in earthquake safety, housing depreciates relatively quickly. 

In the 1980s, in response to a crippling property market bubble, Japan nationalized land use and planning rules. There are essentially no NIMBYs in Japan: the national government implements a twelve-category zoning regime and prohibits local governments from interfering with private property development. It also provides low-interest mortgages directly to citizens rather than securing mortgages from private lenders.

How could we implement some of these lessons here at home?