Christopher André- Do we need another approach to housing policies? #housingfinance
Do we need another approach to housing policies?
Housing Europe – Finance Watch conference
Housing Finance – It’s a choice !
Property bubbles or social and ecological resilience?
Brussels, 5 November 2014
OECD Economics Department
An exceptional global housing price boom
Real housing prices, 1995=100
Source: OECD and National sources.
050100150200250300350United StatesGermanyFranceUnited KingdomCanadaIrelandSpain
Current housing price orientation in OECD countries
(as of September 2014)
Source: OECD and National sources.
Greece (-42), Italy (-23), Spain (-38), Slovenia (-27)
France (-6), Finland (-3), Japan (-9), Portugal (-10)
Belgium (+3), Czech Republic (-11), Denmark (-27), Hungary (-34), Korea (-3), Luxembourg (+7), Mexico (- 1), Netherlands (-24), Slovakia (-28)
Austria (+22), Canada (+14), Germany (+18), Norway (+13), Sweden (+4), Switzerland (+26)
Estonia (-34), United Kingdom (-9), Iceland (-27), Ireland (-44), New Zealand (+1), United States (-18)
Australia (+8), Israel (+58)
In parenthesis, percentage change in real housing prices relative to peak in 2006-08.
Gross household debt is high in many countries
As a percentage of net disposable income
Source: OECD National Accounts Statistics.
2012 or latest available year
But some cases of high risk lending (e.g. US, Hungary, Iceland)
Defaults resulting from a sharp deterioration in macroeconomic conditions (e.g. euro area periphery) Funding risk
Maturity mismatch (e.g. UK, Netherlands)
Currency mismatch (e.g. Iceland, some Central and Eastern Europe countries) Macroeconomic risk
Fall in consumption (e.g. US, UK, Denmark)
Reduction in residential investment
Second round impact on the economy and the financial sector
What are the risks associated with high/growing household debt?
Arrears in Spain
Percentage of non-performing loans for house purchase (>30 days in arrears)
Source: Bank of Spain.
Construction has collapsed in many countries
Source: European Mortgage Federation.
2012 (2011 for UK)
2012 (2011 for Norway)
Housing cost overburden rate by tenure status, 2012
Percentage of the population living in a household where the total cost of housing exceeds 40% of equivalised disposable income
Financial regulation and supervision
Tax systems often encourage home-ownership. Mortgage interest deductibility can be costly and tends to be regressive. If supply is rigid, capitalisation of tax advantage in housing prices Supply side:
Zoning and planning regulations are often excessively tight
Infrastructure investment is sometimes insufficient
Supply of new affordable/social housing is often low (partly because of costs and potential side-effects – segregation, weakening work incentives and mobility)
Private rental market regulations (rent control, balance of protection of tenant and landlord rights) are hampering the development of the rental market in some countries
A holistic approach to housing is needed
Monitoring of housing market developments and their macroeconomic impact: Economic Outlook http://www.oecd.org/eco/economicoutlook.htm
Structural policies: Housing and the Economy (2011) http://www.oecd.org/eco/growth/housing-and-the-economy.htm
Special chapters on housing in Economic Surveys http://www.oecd.org/eco/surveys/
Case study on the private rental market (Czech Republic, Finland, Germany, Netherlands): de Boer and Bitetti http://dx.doi.org/10.1787/5jxv9f32j0zp-en
Social policies for housing (ongoing project)
Selected OECD references on housing
Housing markets have become increasingly volatile over the past decades. High household debt may entail risks for households, the financial system and the wider economy -> Need for adequate financial regulation and supervision.
First-time buyers are increasingly excluded by high prices and deposit requirements -> But improving access to finance and providing demand-side subsidies is not enough (and can prove counterproductive).
Access to decent housing is increasingly problematic for some segments of the population in many countries, which has deep social and economic consequences -> Housing policies are only part of the solution.
Structural features of housing markets (e.g. land-use planning, taxation, regulations) can both limit the availability of decent housing and generate financial and macroeconomic instability -> A holistic approach to housing issues is needed.