More room for state support of affordable housing

The lack of affordable housing is a major social problem. Not only in the Netherlands, but throughout the European Union, access to affordable housing has become a challenge. This is true for lower income groups, but it also affects middle-income people. The causes are diverse, including increasing demand, rising housing and construction costs, and insufficient new construction and renovation projects. To help EU member states combat the housing crisis, the Commission will come up with a European plan for affordable housing next year. The review of state aid rules is part of that.

In many projects, we see a desire to subsidize affordable housing, for example, with funds from the Start Building Impulse. We assist governments and developers to fit such financing within the state aid rules. To this end, it is helpful that the Commission now confirms that affordable housing can in principle be classified as SGEI, even if it is not social housing. The Commission wants to start providing more clarity on how the construction and renovation of affordable housing can be subsidized along those lines. That clarity will come with an amendment to the SGEI Order and possibly the 2012 SGEI Notice.

Considered adjustments

In particular, the Commission seeks to simplify and clarify a number of terms. For example, the Commission is considering including a definition of affordable housing in the regulations, which would read:

"Housing for households that, due to market conditions and especially market failure, do not have access to housing that meets minimum energy performance levels on affordable terms."

The Commission thus proposes a broad concept, without imposing in advance specific requirements on such things as the standard income of the target group or the purchase or rental prices of housing. This is also obvious. Affordability is a relative concept that is difficult to express in specific standard amounts that should apply to the entire EU. The member states are given explicit room to define the SGEI in more detail and tailor it to the national situation. To this end, however, the Commission will formulate some guidelines with general conditions. These conditions will include the target group, the target areas and the level of rental or purchase prices for housing. These conditions may also relate to the quality of the housing and the type of party providing this supply (such as housing associations).

In addition, it is considering clarifying in the regulations that renovation costs can also be taken into account when financing SGEI. It is also considering simplifying certain rules, such as reporting requirements, or updating them, such as the inflation rate.

Significance for the Netherlands

In the Netherlands, social housing has already been designated a SGEI since 2009, and the financing of housing corporations takes place within the frameworks set by the Commission when the Dutch system was approved. For some time now, voices have been calling for this SGEI to be extended to middle-income, and/or middle-rent housing. It is also very difficult for these groups to find suitable housing. The Commission now recognizes in so many words that the housing crisis also affects these groups. This is a welcome recognition that also already provides support for designating and subsidizing housing for middle groups as SGEI.

In the future, this will become easier. Exactly how this will play out will become clear from the guidelines that the Commission will formulate. How much room will those member states offer to delineate the target group or to set maximum prices? It also remains to be seen what the Commission will say regarding the quality of housing. It is good that precisely for these groups the energy performance of a home is also being looked at, because that can have a major impact on affordability.

Continued

The Commission has now launched a public consultation on this intention. Another consultation will follow soon when the drafts of the new state aid rules are ready. We will keep you informed of these developments. Our EU & State Aid team is also ready to answer your questions about this in the meantime.