OTB2007 HUPS032 web.

OTB2007 HUPS032 web.
Marja Elsinga/Pascal De Decker/Nóra Teller/Janneke Toussaint (eds.)
ISBN 978-1-58603-830-4
Home ownership beyond asset and security
Changes in housing, welfare policies and labour markets
situate households in new dynamics, roles and relationships. More and more European households are becoming
homeowners: mortgage debts increase, but at the same
time housing wealth accumulates. Further, welfare regimes
are gradually dismantled, labour markets become more
flexible and financial markets become more competitive.
These changes impact on households’ perceptions and
housing decisions. But how?
Can home ownership be considered a safe haven in a world
that becomes more and more insecure? Do homeowners
consider housing equity as additional income in old age? Is
home ownership considered an asset that can be released
in case of welfare needs? These are questions that lie at the
core of this research project. This book reports on perceptions and housing strategies of more than 200 households
in eight different countries. Countries that are situated in
different parts of Europe and that have different histories,
institutions, policies and cultures.
Home ownership beyond
asset and security
Perceptions of housing related security and
insecurity in eight European countries
Marja Elsinga
Pascal De Decker
Nóra Teller
Janneke Toussaint (eds.)
Delft University Press is an imprint of IOS Press
OTB research institute for housing, urban and
mobility studies
H o u s i n g
a n d
U r b a n
P o l i c y
S t ud i e s
Home ownership beyond asset
and security
Perceptions of housing related security and
insecurity in eight European countries
Housing and Urban Policy Studies 32
Editorial Committee
Prof. M. Batty (University College London)
Prof. dr. J.B.S. Conijn (Universiteit van Amsterdam)
Prof. J.F. Doling (University of Birmingham)
Prof. dr. P. Glasbergen (Utrecht University)
Prof. dr. P. Hooimeijer (Utrecht University)
Prof. ir. G.J. Maas (Technische Universiteit Eindhoven)
Prof. dr. N.J.M. Nelissen (Radboud University Nijmegen)
Prof. dr. P. Nijkamp (Vrije Universiteit)
Prof. dr. H.F.L.K. Ottens (Utrecht University)
Prof. dr. ir. J. van der Schaar (Universiteit van Amsterdam)
Prof. I. Turok (Glasgow University)
Prof. dr. J. van Weesep (Utrecht University)
Home ownership beyond asset
and security
Perceptions of housing related security and
insecurity in eight European countries
Marja Elsinga
Pascal De Decker
Nóra Teller
Janneke Toussaint (eds.)
IOS Press
The series Housing and Urban Policy Studies
is published by IOS Press under the imprint Delft University Press
IOS Press BV
Nieuwe Hemweg 6b / 1013 BG Amsterdam
The Netherlands
Fax +31-20-6870019
E-mail [email protected]
Housing and Urban Policy Studies are edited by
OTB Research Institute for Housing, Urban and Mobility Studies
Delft University of Technology
Jaffalaan 9 / 2628 BX Delft
The Netherlands
Phone +31 15 2783005 / Fax +31 15 2784422
Website http://www.otb.tudelft.nl / E-mail [email protected]
The authors wish to acknowledge the financial assistance of the Dutch government through the Habiforum Program Innovative Land Use and Delft University of Technology through the Delft Centre for Sustainable Urban Areas.
OSIS – Origins of Security and Insecurity: the interplay of housing systems
with jobs, household structures, finance and social security – is a pan-European study with research partners drawn from nine member states and is funded under the Framework 6 Programme (CIT2-CT-2003-506007). The editors
wish to acknowledge the support of the European Union for its funding.
Design: Cyril Strijdonk Ontwerpburo, Gaanderen
Printed in the Netherlands by: Haveka, Alblasserdam
ISSN 0926-6240; 32
ISBN 978-1-58603-830-4
NUGI 755
Subject headings: home ownership, housing, Europe.
Legal Notice: The publisher is not responsible for the use which might be
made of the following information.
© Copyright 2007 by Onderzoeksinstituut OTB. No part of this book may be
reproduced in any form by print, photoprint, microfilm or any other means,
without written permission from the copyrightholder.
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Pascal de Decker & Nóra Teller
1.1 Setting the scene . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 The OSIS research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.2.1 Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.2.2 Weak globalisation thesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.2.3 Asset-based welfare systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.3 Structure of the book . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
A balance between contextual specificity and universal
Janneke Toussaint, Pascal De Decker, Deborah Quilgars,
Anwen Jones & Hannu Ruonavaara
2.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.2 Starting the project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.2.1 Deciding on the topic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.2.2 The complexities of cross-country qualitative research . . . . 16
2.3 The country studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.3.1 The institutional contexts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.3.2 The interviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.4 The cross-country comparison . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.5 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3 Belgium: Between confidence and prudence . . . . . . . . . . . . 29
Pascal De Decker
3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.2 The labour market and social security . . . . . . . . . . . . . . . . . . . 32
3.3 Housing policies and housing markets . . . . . . . . . . . . . . . . . . 35
3.4 The meaning of housing and home ownership . . . . . . . . . . . 37
3.4.1 The meaning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.4.2 The housing decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.4.3 Using housing resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.5 Security and insecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.5.1 The financial dimension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
3.5.2 The perception of risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Safety net strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Limiting housing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
What influences these strategies? . . . . . . . . . . . . . . . . . . . . . . 57
No role for the state . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Finland: Trust, risk-taking and scepticism . . . . . . . . . . . . . . 67
Hannu Ruonavaara & Päivi Naumanen
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
The national context of research . . . . . . . . . . . . . . . . . . . . . . . 68
Housing decisions and the meaning of tenure . . . . . . . . . . . . 77
Security and insecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Safety net strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Germany: Home ownership, a Janus-faced advantage in time of welfare restructuring . . . . . . . . . . . . . . . . . . . . . . . 101
Gudrun Tegeder & Ilse Helbrecht
5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
5.2 Main developments in the labour market and social
security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
5.3 Main developments in the housing market . . . . . . . . . . . . . . 108
5.4 Housing decisions and the meaning of tenure . . . . . . . . . . . 113
5.5 Security and insecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
5.6 Safety net strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
5.7 Conclusions and further discussion . . . . . . . . . . . . . . . . . . . . 126
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
6 Hungary: Escape into home ownership . . . . . . . . . . . . . . . 133
Jószef Hegedüs & Nóra Teller
6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
6.2 Main developments in the labour market and social security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
6.3 Main developments in the housing sector . . . . . . . . . . . . . . . 138
6.3.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
6.3.2 Crisis management (1989-1994) . . . . . . . . . . . . . . . . . . . . . . . . 139
6.3.3 Developing housing finance institutions (1995-2000) . . . . . . 141
6.3.4 The middle class in focus: new housing programmes
(2001-onwards) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
6.4 Housing decisions and the meaning of tenure . . . . . . . . . . . 146
6.4.1 The meaning of tenure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
6.4.2 Housing decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
6.5 Security and insecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
6.5.1 The roots of security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
6.5.2 Use of housing resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
6.5.3 Insecurity stems from four risks . . . . . . . . . . . . . . . . . . . . . . . 161
6.6 Safety net strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
6.6.1 Family networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
6.6.2 Individual solutions with constraints . . . . . . . . . . . . . . . . . . . 164
6.6.3 Safety net: the last resort . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
6.7 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
7 The Netherlands: Positive prospects and equity galore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
Janneke Toussaint & Marja Elsinga
7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
7.2 Main developments in the labour market and social
security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
7.2.1 The labour market: economic downturn, no increase
in flexibility and mobility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
7.2.2 Social security: emphasis on returning people to the
workforce and targeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
7.3 Main developments in housing . . . . . . . . . . . . . . . . . . . . . . . . 176
7.3.1 The development of housing tenures . . . . . . . . . . . . . . . . . . . 176
7.3.2 The development of house prices, rent and
mortgages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
7.3.3 Developments in housing policy . . . . . . . . . . . . . . . . . . . . . . . 180
7.4 Housing decisions and the meaning of tenure . . . . . . . . . . . 182
7.4.1 The meaning of tenure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
7.4.2 Housing decisions, work and income . . . . . . . . . . . . . . . . . . . 184
7.4.3 Home ownership: a source of wealth? . . . . . . . . . . . . . . . . . . 187
7.5 Security and insecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
7.5.1 Security of home ownership and renting . . . . . . . . . . . . . . . . 189
7.5.2 Income insecurity and risks . . . . . . . . . . . . . . . . . . . . . . . . . . 190
7.5.3 Insecure homeowners? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192
7.6 Safety net strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193
7.7 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197
8.1 8.2 8.3 8.4 8.5 8.6 8.7 9
9.1 9.2 9.2.1 9.2.2 9.2.3 9.2.4 9.3 9.3.1 9.3.2 9.3.3 9.4 9.5 9.6 9.7 10 10.1 10.2 Portugal: The sense of home . . . . . . . . . . . . . . . . . . . . . . . . 201
Pedro Perista & Isabel Baptista
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Main developments in the labour market and social
security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Main developments in housing . . . . . . . . . . . . . . . . . . . . . . . .
Housing decisions and the meaning of tenure . . . . . . . . . . .
Safety net strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security and insecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sweden: To own or to rent . . . . . . . . . . . . . . . . . . . . . . . . . . 225
Eva Andersson
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Main developments in the labour market and social
security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Developments in (un)employment, flexibility and labour . . .
Developments in the economy . . . . . . . . . . . . . . . . . . . . . . . .
Developments in social security: the main features of
the system and current discussion . . . . . . . . . . . . . . . . . . . . .
Housing-related social services and benefits . . . . . . . . . . . .
Main developments in the housing market . . . . . . . . . . . . . .
Developments in housing tenures . . . . . . . . . . . . . . . . . . . . .
Developments in rents, housing costs, house prices
and housing finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Developments in housing policy . . . . . . . . . . . . . . . . . . . . . . .
Housing decisions and the meaning of tenure . . . . . . . . . . .
Security and insecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Safety net strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Further discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom: Safe as houses? . . . . . . . . . . . . . . . . . . . 259
Deborah Quilgars & Anwen Jones
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Main developments in the labour market and social
security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.3 Main developments in housing . . . . . . . . . . . . . . . . . . . . . . . .
10.4 Housing decisions and the meaning of tenure . . . . . . . . . . .
10.5 10.6 10.7 11
11.1 11.2 11.2.1 11.2.2 11.3 11.3.1 11.3.2 11.3.3 11.4 11.4.1 11.4.2 Security and insecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Safety net strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Home ownership and income insecurity . . . . . . . . . . . . . 287
A comparison of household interview studies
in eight European countries
Janneke Toussaint & Marja Elsinga
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income insecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Some statistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Perceptions of income risks and safety net strategies . . . . .
Home ownership: the secure type of tenure? . . . . . . . . . . . .
House price developments and housing policy . . . . . . . . . . .
Perceptions of the financial security of home
ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Perceptions of renting relative to home ownership . . . . . . .
Use of home ownership as a financial resource . . . . . . . . . .
Some statistics on housing finance . . . . . . . . . . . . . . . . . . . .
Perceptions of the role of home ownership as a
financial resource . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.5 312
12 Reflections on asset-based welfare and future research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313
Marja Elsinga, Janneke Toussaint & John Doling
12.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313
12.2 Asset-based welfare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313
12.2.1 What is asset-based welfare? . . . . . . . . . . . . . . . . . . . . . . . . . 313
12.2.2 Is there a role for housing? . . . . . . . . . . . . . . . . . . . . . . . . . . . 314
12.2.3 Signs of housing asset-based welfare . . . . . . . . . . . . . . . . . . . 315
12.3 Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320
12.3.1 Further questions on housing asset-based welfare . . . . . . . 320
12.3.2 Countries covered by research . . . . . . . . . . . . . . . . . . . . . . . . . 322
12.3.3 Recent developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323
12.4 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327
The research team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329
Globalisation is affecting labour markets, welfare regimes, financial markets
and housing markets. Labour markets become more flexible, welfare regimes
are gradually dismantled and financial markets become more competitive.
This all impacts on housing markets and more in particular on households’
perceptions and housing decisions. Changes in jobs and social benefits cause
increasing income insecurity, while financial markets provide more opportunities. Is home ownership considered as a safe haven in a world that becomes
more and more insecure? And is home ownership becoming a cornerstone in
welfare regimes and part of asset based welfare policies? These are questions
that lie at the core of this research project.
This book reports on households’ perceptions and housing strategies of
more than 200 households in eight different European countries. Countries
that are situated in different parts of Europe and that have different histories,
institutions, policies and cultures. From the interviews we collected insight in
considerations of households concerning securities and insecurities of home
ownership. We learned that every country has its own logic on home ownership. In some countries, home ownership can simply mean a roof over the
head and additionally building a nest egg, that could be used for consumption
or in future be passed on to a next generation. In other countries, home ownership can be a pure necessity for financial security in case of welfare needs
or a well-calculated risk. Housing asset based welfare, specifically releasing
equity by using the new opportunities on the financial market, is a perspective in Anglo Saxon environments, but far away from everyday life for many
of the households that were interviewed for this project.
This book is the conclusion of a body of research that started in a workshop held at the University of York in October 2000. A group of researchers
discussed the impact of developments linked to globalisation on the role of
home ownership. It led to the insight that to understand developments in different countries it is indispensable to work with an international research
team that has awareness of historical roots and cultural idiosyncrasies. This
was the basis for the proposal called OSIS – Origins of security and insecurity (OSIS): the interplay of housing systems with jobs, household structures, finance
and social security – which was awarded funding as a Specific Targeted Research
Project under the Sixth Framework Programme. This offered teams in Belgium,
Finland, Germany, Hungary, the Netherlands, Portugal, Sweden, and the UK
the opportunity to deepen their studies by following two avenues of research.
The first was a quantitative research approach which resulted in the book The
social limits to growth: security and insecurity aspects of home ownership (Horsewood & Neuteboom, 2006). The second was a qualitative research approach
which focussed on households’ perceptions within their own country framework. The main aim of the research was to clarify the extent to which home
ownership provides households with security or insecurity. The fruits of this
study are presented in this book.
The research for this book was very challenging and demanding, and we
would therefore like to acknowledge the efforts made by the numerous people and institutions involved. First, we would like to thank the European Commission for enabling us to undertake this multi-country and multidisciplined
adventure. Second, we are very grateful to the interviewees who, with hospitality and willingness, generously shared their histories and concerns with us.
Next, we would like to thank all the administrative staff at our institutions,
especially Caroline Marshall from Birmingham University who kept everything together for us. Above all, we would like to thank John Doling and Janet Ford – who brought us together for such a fruitful collaboration – and our
qualitative research team colleagues for making this a wonderful experience,
and for helping us all to appreciate that in comparative research it is of ultimate importance to know what is self-evident. For example, for Swedish people it is the norm to be insured either by the government or by private insurance, whereas in Hungary and Portugal not being insured is perceived as rather normal. Moreover, co-operation between research partners from so many
different countries requires knowledge of different cultural manners of working and doing research. In some countries, for example, a deadline is an absolute that cannot be passed, but in other countries, a deadline is regarded as
more of a moving target.
Nevertheless, we succeeded. Thus, we invite the readers to enter our adventure of understanding housing decision making patterns and household strategies of eight countries, and getting to know more than 200 households virtually personally throughout Europe.
Marja Elsinga, Pascal De Decker, Nóra Teller and Janneke Toussaint
June 2007
1 Introduction
Pascal de Decker & Nóra Teller
1.1 Setting the scene
This book deals with the attitudes and the strategies of households in different European countries for accessing, securing and using the assets of
home ownership. These attitudes and strategies should be seen in the context
of two apparently contradictory factors. The first concerns the way in which home ownership rates in Europe are continuing to increase and is closely linked with the consequences of globalisation. The second factor concerns
the two different aspects of home ownership: home ownership as an asset
and home ownership as a risk.
This chapter discusses these frameworks in order to explain to readers the
approach of a 30-month international research project undertaken in the context of the OSIS1 project, outlines the research questions and elaborates their
relevance for the European area. This should allow for a better understanding
of the discussions in the following country-specific chapters.
A union of homeowners
Doling & Ford (2007) estimate that about 1,360 million European households
live in a house or flat that they own. Leaving the discussion on definitions
aside2, in around 2003 the fifteen, pre-2004 member states reached 63.5% home ownership and the ten, newer member states 66.7%. Under these circumstances it may, according to Doling & Ford, be appropriate to refer to a
union of homeowners. This echoes and extends to Europe Peter Saunders’
seminal concept of a nation of homeowners (Saunders, 1990). Saunders’
widely quoted book analysed the social, economic and political significance
1 Origins of Security and Insecurity (OSIS): the interplay of housing systems with jobs, household structures,
finance and social security, a research project financed by the 6th Framework Programme of the European Union,
2 According to Doling & Ford (2007) there is no systematically collected and fully harmonised set of data that
shows exactly how large the growth has been in each country. On the one hand surveys of the housing stock
by tenure have not been carried out at regular intervals in each country. On the other hand definitions of what
constitutes home ownership differ from country to country. Following Stephens (2003) and Hegedüs & Tosics
(1996) they refer to Sweden and the former socialist countries. Stephens argues that, because it is a tradable asset, Swedish co-operative housing ought to be thought of as a form of home ownership, a definition that would
raise the overall home ownership level in the country to around 60%. In the former socialist countries – among
them some of the new member states – public tenure rights could be sold on the open market and also inherited
and therefore the meaning of tenure was very different from that in most western European countries (Hegedüs
& Tosics, 1996).
of the growth of home ownership in the UK to include as much as 65% of
the housing stock. Since then the UK home ownership rate has continued
to rise. Moreover in many – if not most – member states of the European Union, home ownership has been skyrocketing. In the new member states, the
phenomenon of ‘super home ownership’ suggests that similar processes are
starting (Stephens, 2005a).
Since very few people are in a position to finance their own home in cash, home ownership is normally funded using loans (mortgages). This commits
households to long-term financial obligations (predominantly with private
banks), which implies the necessity of a stable income. As a consequence
there is also a need for secure, long-term employment. However, this stability seems to be in conflict with the features generally associated with the economic processes that currently underpin labour market conditions, summed
up in the popular concept of ‘globalisation’. If the repayment of long-term
loans or mortgages requires stability, globalisation seems to go hand-in-hand
with directly contradictory conditions: the rise of instability and insecurity.
Without doubt globalisation has influenced and continues to influence all
national labour markets. As Doling, Goossens et al. (2003) among others (e.g.
Edgar et al., 2002) argue, it is now much more common than in the earlier
post-war decades, for workers’ employment conditions to be uncertain and
characterised by temporary and fixed-term contracts, part-time work and
more frequent periods of unemployment. As a consequence their incomes
vary. A job for life and secure income prospects are becoming a thing of the
In addition globalisation has been affecting financial markets. In the early
post-war decades the general pattern was for institutional arrangements in
each European country to reflect country-specific policies. As highlighted by
Doling (2006), this has changed as European governments have begun, since
the 1980s, to implement financial reforms, mainly in the form of liberalisation, which have led to increases in competition. The European Union has also
undoubtedly played an active role in this process by creating a single market
for financial services, including mortgage finance. The increase in competition between private banks has had some important consequences.
The first is the trend towards higher loan-to-value ratio loans which generally translate into longer repayment periods, which in turn extend the period of risk (Ford et al., 2001; Doling, 2006) linked to possible job loss, a drop
in income or even relationship breakdown. At the same time it is important
to recognise that, as Doling et al. (2007) stress, a high loan-income ratio does
not itself mean that any individual household will inevitably start to make its
way down the slippery slope towards repossession. Indeed, the vast majority of households are able to prevent their situation from deteriorating, not
necessarily because circumstances change for the better, but because they
are able to adopt effective strategies to reduce their housing costs, perhaps by
rescheduling their mortgage(s), downsizing or even moving to the rental sector. A second trend is the increase in the volatility of interest rates and related
housing prices (Ford, 2006; Helbling, 2005; De Vries & Boelhouwer, 2005; Turner, 2004). In particular when interest rates vary significantly, households not
only face the positive effect of a drop in interest rates, but also the negative
consequences of a rise. This latter can make the financial burden unbearable and result in the house being sold. In combination with a job loss, the
need to downsize can leave the household with negative equity and, as a consequence, a significant financial loss if the house has to be sold (Forrest et
al., 1999; Stephens, 2005b). A third trend is that the highly competitive market
has resulted in lenders increasingly offering mortgages to those people who
had hitherto been regarded as riskier customers. (Ford et al., 2001).
Accompanying factors include the fact that household income growth is
less predictable than it has been previously; the same applies to the financial products which increase the burden on the household and also increase
unpredictability. Thus, we see a general growth in home ownership and, at
the same time, both on the demand side (household income) and the supply
side (financial products) uncertainty is on the rise. Income volatility, however, sits, as Doling, Goossens et al. (2003) state, uncomfortably with the increasingly long periods over which households repay housing loans. Given this, the
initial objective of this book is to report on the response of homeowners and
tenants in eight European countries to these potentially contradictory trends
and their effects on the households’ strategies.
Shelter versus asset
Over recent decades the home ownership sectors of housing systems in the
EU member states have generally grown in size. This growth has often been
the direct consequence of the reshaping of role of the states in housing and of
growing encouragement from government. It has also been fuelled by the deregulation of housing finance markets that – although at different rates and
to different extents in the various EU member states – has resulted, as Doling,
Goossens et al. (2003) state, in a shift in lending practices in relation to housing. An increasing number of housing finance products are available that allow homeowners to extract equity from their housing, which enables them to
finance both consumption (e.g. providing care services and meeting pension
needs) and investment (e.g. small business start-ups). Before deregulation, financial institutions generally rationed funds for the purchase of housing; following deregulation, they have been competing to lend money to homeowners for a range of uses, with loans frequently being secured against the collateral of the house (Maclennan et al., 1998).
Whatever the emotional or psychological benefits to individuals of being a
homeowner rather than a tenant, there is a general tendency across Europe
for long-term growth in land and house prices, which also means that home-
owners have been experiencing and benefiting from investment gains.
Other factors include the general rise in the value of owned homes, which
transforms them into an asset against which a household can borrow money for consumption. This has been reported in some countries (see the Chapters 6 and 10 on the UK and the Netherlands). Additionally, the value of the
house can also be used by people in their old age, for example to supplement
their pension or to finance care in the form, for instance, of a reverse mortgage (Rasmussen et al., 1997). This brings us to the second objective of this
book: to highlight the extent to which there has been a shift in the attitude to
the house in the selected countries which, instead of being regarded as a stable home and a refuge from the world, is now seen as a financial asset.
The role of the state
Over recent decades we have also seen a change in the role of the state in relation to globalisation (Edgar et al., 2002; Doherty, 2004). Under the umbrella of the so-called Washington consensus (Hertz, 2001) states have started to
deregulate and privatise services that for decades had been their responsibility. This changing role has, as Edgar et al. (2002) indicate, a major impact
on the provision of housing, the role of key housing providers (local authorities, housing associations) and the relationships between agencies (regulatory framework, nomination agreements). According to Edgar et al. this has had
severe consequences on the attempts of low-income groups to gain access to
It is a fact that in many European countries there has been a shift from
‘bricks and mortar’ subsidies to demand-side subsidies, such as housing
allowances (e.g. Kemp, 1997; Priemus & Dieleman, 2002). Basically, this tendency shifts the responsibility (at least in part) for housing provision from the
state to the individual household. This is further accentuated by the fact that
a large number of countries are simultaneously promoting home ownership.
It is undoubtedly true that the rise in home ownership rates is linked to the
promotional activities of countries (including financial support) and the withdrawal of alternatives (social housing for rent, regulation of the private rental market). In addition more and more governments are linking home ownership with old age, the pension system and care. As retired homeowners do
not have to pay rent and have generally finished paying off their mortgage,
their outgoings are relatively low. Furthermore the house represents an asset
that can be used to fund care.
In summary, as part of their changing role, numerous governments have
promoted home ownership with the result that a majority of Europeans
now own their own houses. This brings us to the third objective of this book,
namely to explore the attitudes of homeowners and tenants towards the state
and its role in relation to housing in general and home ownership in particular.
1.2 The OSIS research
1.2.1 Scope
This book is based on the findings from qualitative household interviews in
eight EU countries undertaken as part of an EU-funded research project Origins of security and insecurity (OSIS): the interplay of housing systems with
jobs, household structures, finance and social security. The research was a 30month, multi-method project funded by the European Union under its Citizens and Governance in a knowledge-based Society (Sixth Framework) Programme. Housing, as the main focus of the study, is the substantive area
through which wider processes affecting the restructuring of social rights –
and the meaning of citizenship – across Europe are being examined. Housing is an important area in which households experience this restructuring
process, and the research sought to examine the resultant patterns of security and insecurity associated with housing tenure.
The project was undertaken across eight countries and nine institutions. All
countries except France were involved in the qualitative part of the research,
which forms the basis for most of the results presented in this book:
nBelgium – Research Group on Poverty, Social Exclusion and the City, University of Antwerp;
nFinland – Department of Sociology, University of Turku;
nGermany – Department of Geography, University of Bremen;
nHungary – Metropolitan Research Institute, Budapest;
nThe Netherlands – OTB Research Institute for Housing, Urban and Mobility
Studies, Technical University of Delft;
nPortugal – Centre for Studies for Social Intervention, Lisbon;
nSweden – Institute for Housing and Urban Research, Uppsala University;
nUK – School of Social Sciences, University of Birmingham (Coordinator) and
Centre for Housing Policy, University of York.
Countries were selected to reflect key variations in social, economic and political contexts as well as different types of welfare regime (Esping-Anderson,
1990; Barlow & Duncan, 1994; Edgar et al., 2002 – see Table 1.1) and more specific differences in housing markets. Key categories therefore include:
ncountries with high home ownership rates (e.g. Belgium, UK, Finland) and
lower rates (e.g. Germany, Netherlands);
ncountries with recent high economic growth (e.g. Netherlands) and low
growth (e.g. Germany);
ncountries representing different types of welfare regime: social democratic
(e.g. Sweden); conservative (e.g. Germany); liberal (e.g. UK); Latin rim (e.g.
Portugal); former Eastern European (e.g. Hungary).
Table 1.1 Home ownership, unemployment and social welfare, 2005
% Home ownership
% Unemployment
Social welfare system
Strong but restructuring
Source: Elsinga et al., 2006
The project had two main objectives:
nto analyse the factors and processes – involving labour markets, financial
markets and social provision – that have impacted upon individual households and have consequences for their position as homeowners (and tenants);
to establish how households perceive the patterns of security and insecurity, advantage and disadvantage associated with different housing positions;
how those perceptions have moulded their personal strategies with respect
not only to housing, but also to matters such as jobs, family size, education
and pensions; and how those positions have provided them with material
security and insecurity.
The study involved two key stages covering a period of two and a half years.
The first stage consisted of quantitative analysis of key secondary sources
of data (European Household Community Panel and the Hungarian Household Panel) to explore evidence of statistical relationships between aspects
of home ownership and attributes of individual countries, also at a household level. Secondly, a qualitative stage involved the collection of further information about the institutional arrangements in each country, as well as 30
in-depth household interviews in each of the countries. The interviews were
designed to explore perceptions, attitudes and the extent to which housing
is a resource which individuals and households recognise as a repository of
‘wealth’ in the sense that it can be implicated in plans to manage both future
needs (education, pensions, care etc.) and to cushion insecurities. Additionally, the extent to which housing itself is a source of insecurity is also a focus
of the interviews3. The two stages represent distinct, stand-alone research elements. However, the qualitative work was also designed specifically to explore some of the statistical relationships in more detail. Three levels of data
were therefore collected by the study:
nquantitative information at both the macro and individual level;
ninformation on institutional arrangements in each country;
ndetailed qualitative data on household experiences.
3 Please see the detailed discussion of the methodology of the qualitative research in Chapter 2.
Each element of the study relied on the others to produce a meaningful analysis of the variance and similarities between countries. Indeed, the institutional, quantitative and qualitative research methods applied in the OSIS project’s
research process have also resulted in some of the research teams identifying common elements that are characteristic of the current set-up of the social rented sector, or similarities in the risk-handling strategies caused by the
changing welfare systems (Toussaint et al., 2007; Elsinga et al., 2006 and Batista et al., 2006).
1.2.2 Weak globalisation thesis
An earlier search for an answer to the questions ‘How, or in what ways, is globalisation affecting home ownership markets in western European countries?’ and ‘Why do the effects vary from country to country?’, comparing different countries, has led Doling et al. (2003) to produce what they call a weak
globalisation thesis. “This posits that globalisation has taken away the room
for autonomous action by national governments, with the resulting policy development in turn affecting not only the operation and outcomes of home
ownership markets everywhere, but also the perception and behaviour of consumers of housing” (Doling et al. 2003, p. 1-2). “In this thesis, policy developments have dismantled some elements of the symbiotic relationship between
work, welfare and home ownership. (…) What has been assumed to be a stable relationship – between income, loan repayments and welfare safety nets –
broke down. (…) So home ownership, earlier a source of stability, security and
investment, becomes for many a site of uncertainty and risk in which some of
the consequences of the changing nature of work and welfare are played out.
The transformation of these structures and processes (and others), along with
their impact on housing, increase the risks faced by individuals and society”
(Doling et al. 2003, pp. 7-8).
Undoubtedly, globalisation processes, in combination with the flourishing, neo-liberal ideology, are having an impact on the function of our societies and – as mentioned above – on housing in particular. Nevertheless, the
argument developed by Doling et al. (2003) is that the effects of globalisation
on the actions of states and, in turn, on national institutions and individual
households are much weaker than the strong globalisation thesis presupposes. They quote Scholte4 who states that the development of globalisation has
constrained choice, but nevertheless retained significant choices. So the weak
globalisation thesis does not ignore the force of globalisation, but, as Doling
& Ford (2003) conclude, “history, culture and political ideologies are likely key
mediating influences”. Following from this, Doling & Ford expect to see vari-
4 Scholte, J.A., 2000, Globalisation: a critical introduction, London (Macmillan).
ety in the experiences and outcomes associated with housing in general and home ownership in particular in different countries. This should foster an
understanding of how such global forces are mediated.
Doling & Ford’s ‘tour de force’, which involved bringing together analyses of
countries with quite different welfare states5, revealed important differences concerning mortgage markets, labour markets, social security and housing policies6. It should be stressed that there are apparent structural differences, in particular with regard to housing and housing policies. This follows
partly from the fact that housing policies are – especially in countries with
early urbanisation (Kesteloot, 2003) – much older7 than the general welfare
policies developed after the Second World War. This often has severe consequences, since as Kleinman (1996) puts it, countries become caged by older
policy options. The historical institutional settings for housing and the political structures leave profound impressions on both policy and its implementation: “Countries become locked into particular patterns of policy development at an early stage, for reasons that may be historical, deliberately chosen,
or the product of accident. Once locked in, this pattern then constrains future
development”. Feddes (1995) comes to a similar conclusion, after a comparison of post-war housing policies in 10 European countries, stating how surprising it is that in all the countries the initial paths that are chosen remain
the preferred ones. According to Feddes, countries show little inclination to
learn from their own or other countries’ experiences.
1.2.3 Asset-based welfare systems
A further discussion that might provide a framework for the findings of the
OSIS project is represented by the social policy debates on asset-based welfare versus income-based welfare.
The model of asset-based welfare developed in the US in the early 1990s is
based on several assumptions, and is considered to be an appropriate complementary system to that of traditional welfare tools. One of the most important arguments in favour of asset-based policies is that income inequalities
no longer reflect social inequality, as opposed to asset disparities, and therefore the gap cannot be entirely filled by income supplement systems (Sherraden, 1991). In Europe, the UK and Sweden have launched asset-based welfare programs, each of which counteracts the inequalities in the asset build-
5 Belgium, Finland, France, Germany, the Netherlands, Portugal, Spain and the UK.
6 See De Decker et al. (2003) for similar conclusions concerning urban policies.
7 In Belgium, for example, the first housing act dates from 1889, whereas the first Social Pact, which established
the country’s post-war welfare policies, dates from 1944. As a consequence both policies have developed separately and continue to do so today.
ing capacities of poor households, and therefore either offers matching funds
or restores the regressive character of the tax relief systems that are applied
in the case of savings, so that the opportunities for intergenerational mobility
are equalised (i.e. the case of the Child Trust Fund in the UK), or provides individual solutions as opposed to traditional state-organised provisions which
enable the households to make use of the assets they have accumulated for
specific purposes (i.e. pensions or health care).
From this perspective the role of housing as a special asset is undergoing
change, as Malpass (2003; 2006) describes, and therefore some further concerns and consequences have to be taken into consideration when discussing the changing role of the state in welfare provision. Malpass believes that
the withdrawal of the state from housing provision is one of the results of the
phenomenon of ‘responsibilisation’, that is increasing individuals’ (citizens’)
responsibility for their own wellbeing. As a result of the increasing dominance
of market allocation and the home ownership sector, housing becomes a consumer product that has to be purchased individually.
In parallel with this, however, the risk attached to home ownership is
increasing (for example as a result of changes in the labour market and in
employment security and because of the increased targeting of and cutbacks
in social expenditure). In variable housing markets, homeowners who rely on
long-term or variable interest rate mortgages can be especially exposed to insecurity.
A further concern relates to the unequal distribution of housing wealth.
If welfare or the access to services were to be based on individual housing
wealth, Malpass warns (2006), this would have a significant negative impact on
the aim of the post-war welfare systems to minimise inequalities in society.
By bringing all this information together, the OSIS analysis aimed to answer
the following research questions:
1.How do interviewees perceive income (in)security and to what extent do
interviewees take private measures and rely or not rely on social security?
2.To what extent do interviewees perceive home ownership as secure and
prefer it to renting for security reasons and how is this related to income
(in)security and the housing and mortgage market?
3.To what extent is home ownership part of interviewees’ financial safety
net strategy and how does this relate to the institutional context?
4.To what extent can housing policy be seen as a sign of asset-based welfare
1.3 Structure of the book
The country-specific chapters that follow the introduction seek to respond
to the research questions touched upon in the introduction with an in-depth
[ 10 ]
elaboration of the following issues:
nthe main developments in the labour market and social security;
nthe main developments in housing and the housing finance market;
nthe relationship between housing decisions and the meaning of tenure in
each country;
nthe securities and insecurities of home ownership and risk perception at
the household level;
nsafety net strategies, and the role of housing in the safety net strategies of
The country-specific chapters are preceded by a chapter on the methodology
of the OSIS research (Chapter 2) which includes a detailed description of the
methods applied in the international comparative qualitative research phase.
The country discussions are then followed by two concluding chapters: Chapter 11 compares the main findings from the country studies and discusses
them in the framework of the above-mentioned research questions and the
final Chapter 12 elaborates the changing role of home ownership throughout
the participating countries and comments on its development into a cornerstone of the welfare systems of Europe.
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De Decker, P. & J. Vranken (eds.), 2003, On the origins of urban development
programmes in nine European countries, Antwerp (Garant).
Batista, I., P. de Decker, J. Hegedüs, P. Perista & N. Teller, 2006, Tracks to residualisation and marginalisation. The case of social rental housing in Belgium,
Hungary and Portugal, paper presented at the ENHR Conference in Ljubljana,
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De Vries, P. & P. Boelhouwer, 2005, Local house price developments and housing supply, in: Property Management 23 (2), pp. 80-96.
Doherty, J., 2004, European housing policies: bringing the state back in?, in:
European Journal of Housing Policy 4 (3), pp. 253-260.
Doling, J., 2006, A European housing policy?, in: European Journal of Housing
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[ 11 ]
Doling, J. & J. Ford (eds.), 2003, Globalisation and home ownership. Experiences in eight member states of the European Union, Delft (Delft University
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[ 12 ]
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[ 13 ]
Pickvance, Chr. G., 2001, Four varieties of comparative analysis, in: Journal of
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an Asset Management Tool, in: Housing Policy Debate 8 (1): pp. 173-194.
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[ 15 ]
2 Methodology
A balance between contextual speci­ficity and universal comparability
Janneke Toussaint, Pascal De Decker, Deborah Quilgars,
Anwen Jones & Hannu Ruanavaara
2.1 Background
The OSIS project had the general aim of identifying the level, nature and
source of security and insecurity in home ownership in European countries.
In order to provide a full, factual picture and give a clear understanding of the
issues, OSIS drew on a number of disciplines and approaches; the research
group had expertise in economics, statistical analysis, sociology and anthropology. The project began with quantitative studies that provided evidence of
statistical relationships between, on the one hand, the security and insecurity
aspects of home ownership and, on the other, attributes of individual countries and of individuals and households (Horsewood & Neuteboom, 2006). Furthermore, the OSIS project included qualitative studies that allowed insights
to be gained beyond the statistical relationships and that offered an understanding of the basis and the nature of behaviour in different national contexts.
The aim of the qualitative research presented in this book was to obtain
detailed information about how individuals perceive the security and insecurity aspects of home ownership, in relation to renting and in the context of
the developments in labour markets, financial markets and social protection
measures in their country (Doling, 2003). The eight EU countries were chosen
because they reflect the main relevant variations across Europe: with high
(Hungary) and low (Germany) home ownership rates; with different types of
welfare regimes, including social democratic (Sweden), conservative (Germany), liberal (UK), Latin rim (Portugal), former Eastern European (Hungary); and
with high (the Netherlands) and low (Germany) economic growth.
2.2 Starting the project
2.2.1 Deciding on the topic
The decision to undertake research on this particular topic was a risky one,
as there was a potential for ethnocentricity. Although the project was developed by a group of research institutes, it is probably no surprise that the UK
took the lead, because it is here that the growth of home ownership has been
most prominent. Successive British governments have promoted home ownership, for example through the Right-to-Buy legislation introduced by the
Thatcher government and more recently through policies to encourage low
income home ownership, such as shared ownership schemes and more re-
[ 16 ]
cently Homebuy1. In the UK, numerous television programmes promote the
investment potential of property and, indeed, seek to advise people on how
to invest successfully in housing. These developments suggest that, in the UK,
housing is increasingly seen as an investment rather than a consumer product. The question for the OSIS qualitative group was whether this view would
be relevant for researchers from the other participating institutes as well. For
example, in Germany the rate of home ownership is not rising, renting is the
majority form of tenure and home ownership does not receive special attention from politicians or the media. Nevertheless, the researchers from all the
participating institutes did see the relevance of comparing the impact of different historical, cultural, socio-political and institutional factors on housing
decisions, although this was not always for the same reasons. The UK-centric
focus was a point of awareness during the meetings and was taken into account when deciding on the research design and tools (Quilgars, Jones, Elsinga & Toussaint, 2005).
2.2.2 The complexities of cross-country qualitative research
Carrying out a qualitative cross-country analysis on the basis of a number of
country cases with a group of researchers from different countries is hugely
complex and presents some considerable challenges, given the variations between the countries’ political systems, institutional frameworks, social policies
and underlying cultures (Doling, 1997). The qualitative studies are based on
household interviews and on institutional studies that provide a framework.
We aimed to obtain contextual, holistic knowledge of the households’ perceptions of the security and insecurity of home ownership. The impacting factors
would become clear from the interviews and therefore the researchers would
not limit their focus to the main variables. The risk of this type of research is
that every case is so richly and uniquely reported from a range of different
perspectives, with such different factors appearing to impact on the household’s perceptions, that comparisons could be hard to achieve. This risk was
taken into consideration during the development of the research approach. Moreover, not only the comparisons themselves are highly complicated.
One of the characteristics of qualitative research is that researchers are essential for the interpretation of the interview results. The advantage of having
researchers in each individual country is that they are best qualified to understand the links between the interview findings and the national institutional
contexts. However, structuring and undertaking the research using researchers from all eight countries is extremely difficult. As already mentioned, the
1 http://www.housingcorp.gov.uk/upload/pdf/FTBI_Buyers_Guide_Version_2_060906.pdf.
[ 17 ]
backgrounds of the participating partners were different and these had an
unavoidable impact on the contents of the household interview studies. Furthermore, with the exception of the British researchers, all the participating
partners had to bridge a language gap in the meetings where we discussed
the design and findings of the research and when reporting national institutional contexts and interview findings. In addition, many institutional, social
and cultural factors that were self-evident to researchers in one country were
considered remarkable by (and provoked a great deal of discussion amongst)
other group members. These factors were often crucially important for the
understanding of how home ownership was perceived in that particular country.
The qualitative research group aimed to carry out a higher-level comparative analysis with the OSIS project (Oxley, 2001). This means that, after
describing the different cases, we wanted to study the differences and similarities and relate them to institutional factors. However, before being able to do
this high-level comparison, many obstacles had to be overcome. We decided
to use a relatively standardised and structured approach, whilst at the same
time ensuring that we did not lose the essential and beneficial characteristics
of qualitative research methods. In this chapter we will explain our research
methodology and describe the decisions we made which allowed us to overcome the obstacles as effectively as possible2.
The remainder of the chapter will be structured according to the subsequent
steps in the research:
a.country studies
nstudies of institutional contexts
nthe interviews
b.cross-country comparison.
2.3 The country studies
2.3.1 The institutional contexts
The institutional contexts provided a framework in which the interviews
could be interpreted, first by each individual country’s researcher and subsequently by the researchers who would carry out the overall analysis. The researchers from each country reported on the main institutional arrangements
relating to the security and insecurity aspects of home ownership. They based
their studies on country-specific literature and secondary sources. The institutional framework included six features.
2 See also the article by Deborah Quilgars et al. in the International Journal of Social Research Methodology (2007).
[ 18 ]
The first institutional feature was the general functioning of the economy and labour market. Since the majority of aspiring homeowners buy their
homes with a mortgage and, as a consequence, make a long-term financial
commitment, a guaranteed, stable income is a prerequisite. During the postwar period, many countries evolved into welfare states, which succeeded in
guaranteeing income security for a large majority of their workers. As stated
in the introduction, this situation has now changed and employment – even
in the public sector – has become less secure. Flexible and part-time work is
on the rise, and there has been an increase in poorly paid jobs (Sennett, 2006).
Because these new circumstances form the framework for entering into home
ownership and determine its security, the institutional studies covered, for
example, the evolution of employment, the rise of part-time and flexible work
and the type of labour market in each country. The second institutional feature is the nature of the welfare state. Although
most people rely on earned income from employment, others are dependent, sometimes temporarily, sometimes for longer periods or even throughout
their entire lives, on benefits. The proportions of these groups in society vary
from country to country as shown by, for example, Esping-Andersen (EspingAndersen, 2002; Esping-Andersen & Sarasa, 2002). Although benefits can help
people to become homeowners, they are especially relevant to homeowners
in the event of contingencies such as unemployment, accidents or illness and
to those homeowners who still have a mortgage at pension age. Therefore the
institutional studies covered unemployment and in particular the nature, that
is the duration, the level and the eligibility rules etc., of a wide range of benefits, such as unemployment benefits, sickness benefits, subsistence income
and pension schemes.
The third institutional feature relates to housing policies. Just as general
welfare policies differ from country to country, so too do housing policies. In
some countries, such as Sweden, the promotion of home ownership is not a
significant factor. In others, for example Belgium, home ownership has been
promoted since the end of the 19th century as one of the tools for countering urbanisation and socialism (De Decker et al., 2005). In other countries,
the goal of encouraging more and more households to buy homes is a more
recent development. This is the case in the UK and the Netherlands which
have been moving rapidly towards higher ownership rates since the 1980s.
The institutional studies assessed these policies in detail. They looked at the
dominance of tenures in policies, the assessed impact of these policies on the
level of home ownership and the security schemes. If governments promote
home ownership, for example using tax deduction schemes, cheap loans or
free grants, do they also provide security in the form of insurance?
In assessing the security and insecurity aspects of home ownership, it was
also necessary to consider the wider housing policy, since the availability of
a sound alternative, for example, the existence of a large social rental sector,
[ 19 ]
housing allowances or tenant protection or rent regulation, can affect people’s
choices and attitudes. If, as in Belgium, Hungary and Portugal, social rental
housing is marginal and the private rental market is poorly regulated, people
may be forced into home ownership. This contrasts with countries with a
large social or public rental sector (Sweden, the Netherlands) or a well-regulated private rental market (Germany).
The fourth relevant institutional feature was the housing market. The studies evaluated house price developments, as these would be likely to influence
the security of home ownership as an investment. In Sweden and the Netherlands prices rose considerably, while in Portugal and in some areas of Germany prices dropped. In addition, the proportion of different types of tenures
and, if possible, the characteristics of households in different types of tenures
were described.
The fifth feature was the national financial markets. The questions asked
were: What are the mortgage practices in each country? What types of mortgage products are common in the country and are the interest rates normally variable or fixed? How large can a loan be in proportion to the borrower’s
income and to the value of the home? Over how many years are mortgages generally repaid? In this respect, the Dutch can be characterised as high
lenders, with relatively high loan-to-value ratios and relatively risky forms of
mortgage with long repayment periods. The Hungarians and the Portuguese,
on the other hand, have relatively high levels of equity. We also considered
whether lenders offer products to release housing equity.
The sixth and last feature concerns the general political system of the OSIS
countries. Currently they all are parliamentary democracies. However, for Portugal and even more so for Hungary, democracy is a relatively new experience. In Hungary, the recent and rapid paradigm shift has affected housing in
general and home ownership in particular.
2.3.2 The interviews
The qualitative group agreed on a methodology for conducting the household
interviews that would allow the greatest degree of comparability across countries, whilst retaining the essential qualitative nature of the work. Below is a
brief outline of the key elements of the work. Development of the research tools
The main research tool used in the interviews was the topic guide agreed by
all the country teams. The topic guide was designed to cover the key issues of
interest that might be relevant to the households’ appraisal of their housing
security and insecurity. One core topic guide was designed for all households
and this was then adapted to provide a separate guide for homeowners and
renters. In summary, the key aspects covered by the topic guide included:
[ 20 ]
ndetails of the household
nhousing history after leaving the parental home
nthe move to the current house
nan appraisal of the current housing – and the significance ascribed to the
nsecurity and investment issues – including resources invested in the house
nintergenerational transfers
nthe affordability of the present housing
nrisks to housing
navailable and desirable safety nets
nthe impact of housing on other decisions in the households’ lives
noverall housing preferences
nfuture housing intentions
nthe perceived role of the state.
Key concepts of interest to be discussed with interviewees were agreed. Key
terms such as ‘risk’ and ‘security’ were embedded within the topic guide. However, concepts such as ‘equity’ that appeared to be particular to one or more
countries were excluded. In the latter case, households were asked indirectly about issues through a discussion of whether their housing had provided
them with any financial benefits. The topic guide was semi-structured with all
key aspects being covered, but, in accordance with most qualitative research
practice, during the interviews researchers did not necessarily have to follow the order of the guide. Most questions were open in style, with a number
of follow-on questions. However, on a few occasions quite detailed ‘prompts’
were also included for key questions, for example when asking respondents
whether they might consider using housing resources in the future.
As part of the topic guide, vignettes were designed to allow the comparison of responses to certain prescribed situations. Vignettes are short hypothetical stories about people in specific situations relevant to the topic of the
research. Interviewees are asked to respond to these vignettes by, for example, giving advice or making a judgement of the situation and are then asked
to give an explanation of their response (Soydan, 1996). This method allows
different groups’ interpretations of a uniform situation to be examined, and
is helpful in elucidating influential variables. Four vignettes were designed
to investigate different aspects of housing: tenure preferences; equity release
options; risk and safety nets; and general attitudes to financial planning. The
responses to the vignettes were analysed alongside the topic guide.
Finally, key socio-demographic data were also collected for each household
interviewed, including gender, age, household type, tenure, economic status
and financial circumstances. This was done in order to be able to make comparisons across groups of households within countries and to appraise housing security and insecurity (for example, loan-to-value ratio for homeowners).
[ 21 ]
Box 2.1 Responses to the vignettes
Vignette 1
A young man and a young woman, both of whom still live with their parents, want to live together
and ask your advice about whether they should buy a house or rent one. The woman has a secure
job in a municipal government office but the man is in a less secure position and has had a series
of temporary jobs, although some have lasted as long as a year.
What would you advise them to do and why?
Vignette 2
In some countries it is possible for people to use their property to supplement their pension income. This is how the system works. Although you own your house outright, you take out a new
mortgage on your house. You receive a capital sum, but only pay interest on the loan. The capital
sum you borrowed is repaid on your death when the house is sold. Imagine that this is possible in
You have some friends who are considering increasing their income by this means. If they asked
you for your advice, what would you say to them?
Do you think that a scheme of this kind would be a good idea or not and why?
Vignette 3
A married couple in their mid-fifties have three years remaining on their mortgage. Their house
has increased in value by 300% since they bought the property. The wife works part-time and the
husband has just learned that he is to be made redundant in three months time. The wife’s salary
is not enough to cover all of their outgoings, but they do not have any outstanding debts, apart
from their mortgage.
What options do the couple have? What would you advise them to do? Could the couple have done
anything to plan for this eventuality?
Vignette 4
A friend inherits e 50,000. She has a mortgage of e 70,000 and expects to work for another 16
years. She asks your advice about what to do with the money.
What would you advise her to do and why?
Setting selection quotas
Purposive sampling procedures were used to recruit a similar range of respondents across the different countries. In particular, as far as possible, respondents in similar housing circumstances were sought in each country in
order to allow for a meaningful comparative analysis. The following quotas
were agreed:
Of the 30 interviews, 20 had to be undertaken with homeowners and 10 with
renting households. This was to emphasise that homeowners were the primary focus of the research. However, at the same time it was important to include sufficient tenants to compare tenure positions. Further, it was agreed
that both public and private renters should be included, where this was relevant.
Only homeowners with a mortgage were included in the sample; outright
[ 22 ]
owners were excluded. However, an exception was made in Hungary, given
the very low proportions of working age households with mortgages, which is
a consequence of an underdeveloped mortgage market and the nature of the
privatisation process. In Hungary outright owners were more likely to be marginal owners than those with a mortgage.
Employment status
‘Marginal’ and ‘non-marginal’ homeowners were included in each country. It
was acknowledged that marginality would take different forms in different
countries, which made defining it difficult. Finally, the group decided that the
unemployment or inability to work of at least one member of the household
would be the defining characteristic of marginality, whilst being aware that
the impact of unemployment would be different in the different countries.
Households with retired people (of any age) or students (of any age) were excluded from the sample.
To ensure that people at different stages of their lives were included, about
half of households interviewed were expected to be up to the age of 45 and
the other half aged 45 or over. Furthermore, it was decided that all adults in
the households should be aged over 25, as the very early stages of housing
were the subject of another study. There was no upper age limit, as long as
people fell into one of the specified economic categories.
Household status
Two thirds of the sample had to consist of ‘couple’ households, with one third
being ‘single’ households. A ‘sensible’ mix of households with and without
children was recruited within each category.
Where possible, it was agreed that both adults in a household (where relevant) should be interviewed together, but overall, it was proposed that a mix
of both men and women was included. Table 2.1 shows the suggested target
quotas that all the teams aimed to meet.
Recruiting respondents
Each team selected one housing market area for fieldwork, so that contextual factors would, to a certain extent, be standardised for the group of interviewees. Since it was not possible to undertake parallel studies in other areas for intra-country comparison, each country was asked to select one local
housing and labour market which had experienced roughly average economic
growth in the recent past. The aim was therefore to avoid very depressed areas and unusually buoyant areas. The selection included small, medium-sized
[ 23 ]
Table 2.1 Suggested ‘target’ quotas
Couples (with and without children)
Single (with and without children)
Employed households (all adults either employed and/or looking
after family)
Unemployed households (one or more adults unemployed and/or
unable to work due to accident, sickness or disability)
Aged up to 45
Aged 45 or over
Female as key respondent
Male as key respondent
Renters (10)
Owners (20)
and larger towns (for example, Caldas da Rainha in Portugal with a population
of 25,000 up to Budapest in Hungary with a population of 1.7 million, with the
majority of the towns being medium-sized, including York (UK), Turku (Finland) and Ghent (Belgium)). Within each city, smaller geographical areas were
identified that allowed a range of homeowners as well as renters to be interviewed.
The qualitative team decided that it was not necessary, nor practicable, for
all national teams to use the same recruitment method. The relatively highly specified research quotas outlined above were used to minimise any likely bias generated by certain methods, for example, with snowballing restricting recruitment to a certain network. In effect, teams used a range of methods including:
npostal invitations to a random sample of addresses in a particular location;
nusing gatekeepers, such as lenders, estate agents, social landlords and
social service providers, to send out letters introducing the research on the
behalf of the researchers or to give contacts;
nusing local adverts to attract those interested in the research;
nresearchers ‘cold-calling’ in selected locations;
n‘snowballing’ of other possible contacts in an area.
The interviews and the quality
With the exception of one country, specialist qualitative researchers led the
country teams. Therefore, the researchers were assumed to have a high level of interviewing skills. Before the interviews themselves were started, there
was a pilot stage. The early interview experiences were shared with the other group members and accordingly some final changes were made to the topic guide. The interviews were conducted from spring to autumn of 2005.
Analysis procedures
One of the key tasks of the qualitative working group was to agree the broad
principles and methodological approach towards the analysis of the interviews. The fact that eight countries were analysing material simultaneously at a great distance from one another, together with the aim of comparing
countries, made the design of analysis tools crucial. An analytical framework
[ 24 ]
and a coding frame were designed to ensure that each team addressed the
same set of research questions.
A detailed coding frame was used to code each individual interview at the
country level, in the language of the interview. An analytical framework was
structured around a set of key questions to enable the analysis to address the
overall aims and objectives of the study (and questions raised by the quantitative studies). This analytical framework was cross-referenced to the more
detailed coding frame. Each country report used the analytical questions to
structure the reports of their findings.
2.4 The cross-country comparison
The studied eight countries were the data sources for the comparative analysis (see Chapter 11). The analysis was built up in three steps. Firstly, the institutional characteristics which could have had an impact on the households’
perceptions were explored. Secondly, the households’ perceptions and the
country researchers’ explanations for the perceptions were analysed, and the
countries were grouped on the basis of these outcomes or with a focus on extreme cases. Finally, links were explored between perceptions and institutional contexts. Furthermore, when the relationships appeared to deviate from
theory-based expectations, we tried to identify the reasons behind this. As an
example, the analysis of the perceptions of income insecurity and the relationships with the institutional context will now briefly be described.
Example of the analysis process: Income insecurity
Firstly, we looked at some key indicators of the labour market and social security. We found that the UK had low levels of unemployment, whilst labour
markets in Portugal, Finland and Germany were less secure. With regard to
social security, interviewees in Portugal and Hungary had reason to feel insecure about their income, while in Belgium, the Netherlands, Finland, Sweden and Germany the welfare state provided a secure safety net. These institutional characteristics were expected to relate to perceptions of income insecurity, which were analysed in the next step.
Perceptions of income insecurity and their explanations were first collected
from the country reports. In this case, we distinguished between two groups
of countries. The first group were countries in which the interviewees were
reported to feel insecure about their future income. These were Hungary, Portugal and Germany. The second group consisted of the other five countries.
Different explanations for income insecurity were found for the first group.
In Hungary and Portugal, researchers reported that interviewees had to cope
with a relatively insecure labour market, could not count on social provision
and were therefore fairly insecure, whereas, in Germany, the recent develop-
[ 25 ]
ments and future prospects for the labour market and social security seemed
to be the reason for income insecurity. Thus different explanations were given for similar perceptions.
In the final step of the analysis, we evaluated the links between the institutional characteristics and the households’ perceptions. Obviously, we expected if labour market and social security features were more insecure (e.g.
higher unemployment, lower spending on welfare) than households’ perceive more income insecurity and vice versa. Here we noticed that perceptions were indeed remarkably congruent with the characteristics of the institutional contexts. However, Germany and Finland had rather similar institutional characteristics; in both countries the unemployment rate was relatively high, labour markets had become more flexible, governments had cut
back on public spending and the future affordability of the social welfare system was the subject of political debate. Nevertheless, the German interviewees perceived more income insecurity than the Finnish. The different perceptions could possibly be related to recent economic developments and optimistic or pessimistic expectations about the future. The Finnish interviewees
pointed to a strongly performing economy, whereas the Germans spoke about
a slowly recovering economy and expressed serious worries about the future
of social security.
Methodological difficulties are highlighted when relating differences in perception to differences in the institutional arrangements. The interviews and
the interpretation of the native researchers gave indications of the relevant
contextual factors, but sometimes the data did not provide any clues about
why interviewees in countries with, for instance, similar contexts differed in
their perceptions.
In addition, the comparative analysis relies on three subsequent interpretative steps in which misinterpretations can easily arise. Firstly the interviewees expressed their housing decisions, histories and opinions in words; they
recalled events and information from their memory and constructed their
‘housing perceptions’. The second step involved researchers in each country
interpreting these housing perceptions and translating them into conclusions
that summarised their interview findings. Finally in the third step, the findings from each country were further analysed, interpreted and summarised
for country comparison. To obviate this drawback as much as possible and
to clarify exactly who interpreted what, we distinguish between the views
of the interviewees, the interpretations of the countries’ researchers and our
final overall interpretations when we describe the outcomes of the comparative analysis. In this connection it should also be mentioned that difficulties
arise if a factor is not mentioned in one country, while it is in another. We can
interpret this as meaning either that it is non-existent or that it is considered
to be self-evident. In order to keep interpretation errors to a minimum, all the
countries’ researchers reviewed the outcomes of the analysis.
[ 26 ]
2.5 Conclusions
The qualitative part of the OSIS project involved a description of the institutional contexts and household interview studies. It employed a relatively structured and standardised qualitative method to produce comparable results, while at the same time aiming as much as possible to achieve the typical outcome of qualitative methods: namely gaining an in-depth understanding of households’ perceptions. The subsequent chapters report on the research undertaken on the basis of the methodology described above. Chapters 3 to 10 present the country data which are described in rich and unique
terms, but which are similarly structured. In Chapter 11 there is an analysis
of the differences and similarities between the countries, in order to gain an
understanding of the relevance of various institutional factors, primarily the
labour market, social security, housing markets, housing policy and financial
markets. There is also the opportunity to present explanations that go beyond
these main institutional factors.
Decker, Pascal De, et al., 2005, Revitalising the city in an anti-urban context:
extreme right and the rise of an urban policy in Flanders-Belgium, in: International Journal of Urban and Regional Research 29 (1), pp. 152-171.
Doling, J., 1997, Comparative housing policy, Basingstoke (Macmillan).
Doling, J., 2003, Origins of security and insecurity: The interplay of housing systems with jobs, household structures, finance and social security, Research Proposal for the EU’s 6th Framework Programme, University of Birmingham.
Enström, Cecilia & Bengt Turner, 2001, Bostadsbidrag och prisbildning - en
kunskapsöversikt (Housing Allowances and price formation - A survey), Appendix 6 in SOU, p. 24.
Esping-Andersen, G., 2002, A new European social model for the twenty-first
century?, in: Rodrigues, M. J. (ed.), The new Knowledge Economy in Europe,
pp. 54-94, Cheltenham, UK (Edward Elgar).
Esping-Andersen, G., & S. Sarasa, 2002, The generational conflict reconsidered,
in: Journal of European Social Policy 12 (1), pp. 5-21.
Horsewood, N. & P. Neuteboom (eds.), 2006, The social limits to growth. Secu-
[ 27 ]
rity and insecurity aspects of home ownership, Amsterdam (IOS Press).
Oxley, M., 2001, Meaning, science, context and confusion in comparative
housing research, in: Journal of Housing and the Built Environment 16, pp. 16,
Quilgars, D., A. Jones, M. Elsinga & J. Toussaint, 2005, Qualitative, comparative
housing research: Some reflections on methodology, paper presented at the
ENHR conference, Iceland.
Soydan, H., 1996, Using the vignette method in cross-cultural comparisons, in:
Hantrais, L. (ed.), Cross-national research methods in the social sciences, pp.
76-83, London (Pinter/Cassels).
[ 29 ]
3 Belgium: Between confidence and prudence
Pascal De Decker
3.1 Introduction
This chapter builds on the OSIS research project, which had two main objectives. The first was to analyse the factors that have impacted upon individual households and have consequences for their position as homeowners. The
second was to establish (1) how households perceive the pattern of security
and insecurity, advantage and disadvantage associated with different housing positions; (2) how these perceptions have moulded their personal strategies with respect to housing and also issues such as jobs, family size, education and pensions; and (3) how these positions have provided them with material security or insecurity.
This chapter concerns the second objective. The chapter is structured as follows: after a brief description of Belgium, the city of Ghent and the interviews,
there are two paragraphs covering the national research context, including an
introduction to the labour market, the social security system and the housing
market. This is followed by sections on (1) the meaning of housing and home
ownership, (2) features of security and insecurity and (3) safety net strategies.
The chapter ends with some conclusions.
The Belgian context
Belgium is a monarchy and a parliamentary democracy with a population of
10.51 million (2005). The population is growing and this growth has accelerated over the last few years. At the end of the 20th century the annual growth
rate was approximately 25,000 people per year. Between 2001 and 2005 the
population grew at a rate of between 40,000 and 50,000 people per year. In
2006 the figure was 65,530 people1.
Belgium was a highly centralised country before the constitutional reforms
started in the 1970s. These reforms have fundamentally reshuffled the institutional landscape. They resulted in the federalisation of Belgium, bringing
about a gradual devolution of power from the federal level to the communities
(cultural issues) and regions (territorial issues). This organisation has created
a complex set of institutions. At the federal level the remaining institutions are
the King, the federal parliament (the House of Representatives and the Senate), the national government and the civil service. The federal government
is responsible for taxation, justice, internal policy, foreign policy, defence and
social security (unemployment, minimum wage, health, pensions).
1 Source: Statistical Office (FOD Economie).
[ 30 ]
At the level of the communities and the regions, each has a parliamentary
assembly, a government and a civil service. The logic of the system decrees
that there should be three regional councils, three community councils and
six governments. In practice, however, there are eight elected assemblies,
eight governments and eight civil service organisations. The reason for this
is that in Flanders the councils and the executives of the region and the community are organised and managed as one entity. In the Brussels Capital
region, the interests of the French-speaking community are represented by
the French communal commission and those of the Dutch-speaking community are represented by the Dutch communal commission. A joint communal
commission promotes the common interests of both groups of residents.
It is important to note that, in constitutional terms, housing is the responsibility of the regions of Flanders, Wallonia and the Brussels Capital Region.
Nevertheless, an important factor for housing policies is that some responsibilities have remained at federal level. This concerns private rental legislation
(De Decker, 2001) – which for this reason is not a matter of housing policy, but
of civil law – and exemptions from taxes, which represent by far the largest
part of the housing budget (De Decker, 2000).
The OSIS qualitative interviews took place in Ghent, a city of 230,000 inhabitants located in Flanders. Ghent is a central city and a provincial capital. The
city offers approximately 140,000 jobs within its boundaries. 74% of these jobs
are in service industries, dominated by health care (20,000), finance and professional services (20,000) and education (17,700). The 35,500 industrial jobs,
including a major steel plant (Arcelor Mittal) and a large car factory (Volvo),
are mainly located in the sea port. In 2000, the city had 11,884 unemployed
people, which, at 11.4% of the labour force, was far higher than the average
for the Flemish region (6.3%), illustrating the general picture that urban areas
have concentrations of vulnerable populations (De Decker, 2004a; De Decker et
al., 2005). In 2001, the average income per inhabitant was slightly higher than
the Flanders average (€ 12,110 in Ghent, € 11,000 in Flanders).
In contrast to the Flemish housing market, which is dominated by home
ownership (74% in 2001), Ghent has a large proportion of rented properties
(45%). Of the approximately 105,000 dwellings, roughly 13,000 are social rental housing. This is 13.9% of the entire housing stock and is far higher than the
Flemish average of 6%. In 2002 more than 8,000 households were on the waiting list.
Because Ghent was one of the first cities on the continent to industrialise,
the city has a large proportion of old housing. 37.3% of the housing (probably
an underestimate) was constructed before the Second World War. More impor-
2 Unless stated otherwise, the data comes from the city monograph, the city monitor and other statistical information available on the website of the city of Ghent (www.gent.be).
[ 31 ]
tantly, the poor quality housing is concentrated in the so-called 19th century
neighbourhoods. As a consequence, approximately 20% of households live in
houses considered to be of poor quality.2
The interviews
In order to recruit respondents, two approaches were used initially. The first
was applied in a residential area of the city. It has mixed tenure types and
a mix of old and new flats and houses. In this area we hoped to recruit older and younger homeowners, and some tenants. A letter with an invitation to
participate was posted to a random sample of 200 dwellings. The goal was to
obtain 15 to 20 interviews in the area. The second approach was used in a less
attractive area built during the heyday of industrialisation in the 19th century.
The goal was to recruit tenants and poor owners. In order to reach them we
used a gatekeeper (a community workers’ organisation).
The second approach worked as expected, giving us addresses of people
with different profiles living in the centre of the city and the poorer northern neighbourhoods. The first approach was not as effective, since only seven useful contacts were obtained. An additional recruitment process was initiated using two gatekeepers: an NGO organising socio-cultural activities with
vulnerable people and an NGO handling addiction problems. We asked them
to send our request to their own staff in order to obtain a professional and
diverse response. The second gatekeeper kept to this approach, while the first
also forwarded the request to a wider mailing list. This recruitment method
was very effective and resulted in a diverse selection of respondents living
throughout the Ghent city region.
The 30 interviews with 20 owners and 10 tenants took place in June and July
2005. 26 interviews took place at the home of the respondents; 3 took place at
work and one in the house of a friend. The interviews were between 45 minutes and nearly 2 hours in length. On average the interviews lasted between
60 and 70 minutes. Six of the respondents had lost their home before and seven could be considered to be poor owners.
The interpretation
In order to obtain information from people who are exposed to the same
housing market, the OSIS researchers opted to concentrate the interviews
in one housing market in general and in one city in particular. It is important to stress that the Belgian sample is dominated by urban residents. ‘Urban’ not only by location but also by attitude, since the large majority of the
respondents enjoy city life and, for the majority, moving to the countryside or
to the suburbs is not a consideration. Of our 30 respondents, 27 live in innercity neighbourhoods. Two live in the suburbs and one is further out. Only two
respondents live in a detached house and only one in a semi-detached house.
All the others live either in a row house or a flat. Of the respondents who live
[ 32 ]
in flats, only one – a social tenant – is in a high-rise tower block. In the other cases the buildings were relatively small, with only 3 to 10 flats. With respect to the interpretation of our findings, it is important to emphasise that
this sample is atypical, as the Belgian housing policy has a strong anti-urban
bias and has channelled people towards buying detached and semi-detached
houses in non-urban areas (Mougenot, 1988; De Decker, 2004a). So, in order to
get a fuller picture, this sample would need to be complemented with suburban and rural respondents.
A second warning needs to be made with regard to the interpretation.
Although this kind of qualitative research does not seek to be representative,
it is important to indicate that in our sample more highly educated respondents are over-represented. Although earlier research (Sennett & Cobb, 1972;
Rakoff, 1977) illustrated that attitudes towards housing and tenure do not
necessarily differ between blue and white collar workers, we must stress that
we interviewed a very limited number of blue collar workers and house owners with lower levels of education.
3.2 The labour market and social security
Although specific housing policies are in place (see below), we cannot ignore
the fact that the development of home ownership in Belgium is linked to the
political economy and the economic development of the post-war period. During World War Two, in 1944, the social partners and the government concluded a social pact (Global Pact). This was the start of the establishment of a generous social security system. In addition, it was the starting point for negotiated wages and working conditions. Together these two developments resulted
in (1) (relative) job security, (2) (almost) guaranteed wage increases and (3) the
existence of a substantial safety net, all of which encouraged home ownership
without the need for major state investment for securing it. Although less robust than before, this social deliberation approach is still in place and determines wage and labour conditions in both the private and the public sector.
Despite the relative sustainability of the Belgian approach (Deleeck, 2001;
De Decker, 2004b), it is impossible to ignore the fact that times have changed.
This leads to the question: which factors no longer apply? And what does this
mean for home ownership? In the following paragraphs we will look at the
changes in the labour market and in the basic social security system in as
far as they are relevant for securing home ownership. This implies that we
will not consider the debates on the pension system3, as it is of little relevance for our topic, because all the respondents will have paid off their mortgages by the age of 65. The SEP 1997 survey shows that only 3.5% of heads of
households over the age of 60 are still making monthly mortgage payments.
Amongst heads of households over 70 years of age, the proportion drops even
[ 33 ]
further to 0.2%4.
The Belgian economy is undergoing significant changes. The major features
nA gradual evolution from a highly industrialised economy to a service economy. Around 65% of the working population is employed in the service sector; agriculture is now responsible for less than 1% of employment, while
approximately 35% of the workforce is still employed in industry (assuming
that the construction sector is regarded as industry).
nThe overall number of jobs is growing, as is the number of self-employed
people. Self-employment represents 16% of overall employment.
nAn increase in the number of service jobs has compensated for the decline
in industrial jobs, although there are some regional differences.
nApproximately 31% of the jobs are in public service and a further 11% are
in the non-profit sector, which implies that just over 40% of jobs can be
regarded as secure. As a consequence, private sector jobs, which are generally less secure5, represent just under 60%6.
nThe current debate has two dimensions. One concerns complaints about
high labour costs which make the Belgian economy less competitive. Dif-
3 The Belgian pension system has 3 pillars. The first, which is based on solidarity, has three subsystems: one for
workers in the private sector, one for self-employed workers and one for civil servants. Today’s working population pays for the pensions of today’s retired people. The pension age is 65. The pension amount is linked to the
career, the previous income – which includes benefits – and the household structure. Currently the average pension is € 865. The second pillar is organised by the employer. Some organise an additional pension plan. The
best known is group insurance in which the employer or employee invests a sum of money. In addition employers
can be members of a pension fund. This second pillar is organised predominantly by large companies. In the
third pillar, the government promotes saving by offering tax exemptions. People can choose between saving for a
pension, long-term saving or a combination of both. In addition to these pillars provided by the state, individuals
can also opt for a completely private investment strategy which is linked to purchasing power after the age of 65
(Deutsche Bank). It is worth noting that I believe that a discussion should be started about the launch of an additional pillar. This is related to home ownership. The Socialist Party in particular has linked the continued promotion of home ownership to pensions because homeowners in Belgium will no longer have any housing costs after
retirement. The most recent statement of the party’s principles is: “We want as many people as possible to own
their own house. This is the best guarantee of good housing and the best method of saving for a pension.” (SP.a,
2007 – my translation).
4 Thanks to Isabelle Pannecoucke (OASeS-University of Antwerp) for the calculations.
5 It is worth noting that dismissing an employee – which is easier in the case of white collar workers than blue
collar workers – is a legal matter. More important is the fact that in Belgium there is no time limit on the payment
of unemployment benefit.
6 Figures obtained from Peter Cabus from the Socio-Economic Advice Board of Flanders (SERV) for 2002. The
total number of jobs is 3,493,168 (of which 1,071,424 in the public sector, 373,873 in the non-profit sector and
2,047,871 in the private sector).
[ 34 ]
ferent policies have been introduced with the aim of reducing labour costs
without cutting employees’ net incomes. The second dimension relates to
the degree of activity which, by EU standards, is relatively low. In order to
increase this, an activation policy has been introduced and a debate on the
end of the working life is running, since in Belgium, as Doling (2006) shows,
a very large number of people retire early.
People working for the government and non-profit employers (generally) have
secure jobs. This is not the case for people who cannot enter the labour market or those in the private sector who become unemployed either because
they are dismissed or because they have health problems. In all cases social security measures are available. All of these can be considered as rights,
which means that they are available as long as they are needed. This even applies to unemployment benefit in the case of the heads of households and
single people. This policy was only changed recently for people living together (where the benefit then becomes a second income). Previously the benefit
for this category of people was paid for the average length of unemployment.
Currently, on the basis of the activation policy referred to above, it is linked to
the acceptance of support (e.g. training).
Although there is some criticism of the Belgian social security system, it is
generally considered to be relatively generous7 and stable.
What does this imply for owner-occupation? In contrast to the public
debate which ‘celebrates’ rising insecurity and the inaffordability of housing,
and taking into account the undeniable existence of booms and busts in the
economy, we cannot ignore the fact that during the whole post-war period –
with the exception of two years – the national income has risen every year in
real terms (Deleeck, 2001). This is also reflected in wages. Because house prices have kept pace with the financial spending power of households (Ph. Janssens as quoted by Deceunnynck, 2005 – see also: De Decker, 2007), this implies
that over the whole period there has been and still is a solid economic base
for home ownership.
7 This is the case if overall benefits are seen in terms of the proportion of GDP. At an individual level, the benefits are becoming relatively low, because the increase in benefit is linked to the consumer price index and not
to the overall increase in the cost of living in general (the argument of Bea Cantillon, Professor of Social Policy
at the University of Antwerp in Meulenaer, 2006). The counterargument is that the benefits are primarily second
incomes (the argument of the chairman of the employers’ organisation in Meulenaer, 2006), which is true. Two
major weaknesses are: (1) the system is still to a large extent based on a traditional household model and (2)
some benefits are not adjusted to match changes in the cost of living.
8 Mougenot (1988) stresses that already from the beginning social rental housing was stigmatised as housing for
those who could not afford anything else and were therefore dependent on the state. Note that social rental housing offers good quality housing, an income-related rent and tenure security (lease for life).
[ 35 ]
3.3 Housing policies and housing markets
More than elsewhere in Western Europe, Belgian and Flemish policy makers
have chosen to satisfy the need for housing by building single-family dwellings and by private ownership. Since the first Housing Act of 1889 a broad
range of instruments has been developed. Provision has been made, in fluctuating proportions, for cheap loans, free grants, cheap building land, cheap
houses for sale, interest subsidies and tax cuts. The principal emphasis of
these policies can be summarised as follows:
nThe housing policies were directed towards the construction of new houses;
until now, for a long time only lip service has been paid to renovation. The
theory the absence of a renovation policy was that by building new houses
on a ‘massive scale’ the lowest income households would be able to rent
better quality accommodation because of upward mobility (Goossens, 1983).
But in the end this approach led to relatively low new construction levels if
compared with other countries (Feddes, 1995).
nHousing policies were (and are) characterised by a broad target group. At
certain times no exclusion boundaries were laid down and at other times
only the highest income groups were excluded from certain subsidies. The
recent trend is for the income levels at which households are excluded to
rise again. As a consequence, a number of financial provisions intended
for lower income groups are benefiting middle and higher income families
(Deleeck et al., 1983; De Decker, 2000).
nHousing policies were (and are) characterised by low levels of financial intervention in both macro and micro terms. The choice is either to give limited support to as many families as possible or to support a more restricted
target group more substantially. In the case of the levels of intervention, it
has repeatedly been demonstrated that they are low in comparison to the
necessary investments. The premiums or grants therefore have hardly any
influence on people’s decisions to become homeowners (Deleeck et al.,
1983). In other words, the purchase of property is quasi entirely dependent
on the personal financial means and perceptions of the households.
The argument here is that the high level of home ownership in Belgium is
not due to the financial incentives provided by the government). Instead the
reason behind it is the fact that households looking for secure, good quality
housing did not have any alternative (see amongst others Mougenot, 1988; De
Decker, 2006). There are two aspects to this. One is the historically small market share of social rental housing (max. 6%), which means that people in need
of housing could not and cannot have immediate access to it8. The second aspect is the unwillingness to regulate the private rental market, which means
that (1) rents find their own level, (2) quality standards are virtually non-existent, (3) tenure security is limited9 and (4) no compensation is offered in the
[ 36 ]
Table 3.1 Flanders, estimated numbers and percentages of residential dwellings by tenure, 1980-2001
Privately rented
Socially rented
(1981 = 100)
Sources: NIS-SEE, 2001; VMSW (website) – own calculations
form of substantial allowances for high rents (De Decker, 2006).
Table 3.1 shows the tenure evolution in Flanders over the last 20 years.
There has been a steady rise in home ownership, while the proportion of
social rental housing has stagnated and that of private rented properties
is continuing to fall. This is because of a lack of real alternatives, but also
because home ownership is affordable for a large proportion of the population. This is illustrated by the fact that the households who enter into home
ownership only spend on average approximately 20% of their income on their
monthly mortgage payments. The figures also indicate that the financial burden is high only in the early stages and that it becomes smaller when the
head of the household reaches the age of 35 (De Decker & Geurts, 2003; Van
Dam & Geurts, 2005; De Decker & Van Dam, 2004).
In order to understand the answers to the interview questions, we should
also emphasise that the Belgian housing market has been remarkably stable
and has not seen spectacular booms and busts. As a result there is no fear
amongst homeowners of suddenly losing money as a consequence of the collapse of the housing market. In this respect, Figure 3.1 indicates two things:
(1) all housing prices and especially those in the home ownership market are
showing a steady rise (guaranteeing a return in the case of the need to sell)
and (2) in real terms the rise is moderate (guaranteeing access in times of economic prosperity, which was the case during the research period).
A normal loan-to-value ratio is between 75% and 100%. Some banks ask for
an additional 0.25% interest when the LTV ratio exceeds 80%10. The average
LTV ratio of new mortgage loans grew to 89% in 2004. Under the affordability test normally applied by Belgian banks, borrowers must spend no more
than 33% of their income on housing costs11. LTV ratios are, as the IMF (2006)
correctly states, not typically used; there are no regulations limiting the LTV
9 Legal private rent contracts cover a period of 9 years, with easy termination in the third and sixth year. However,
it is also possible to terminate the contract at other times (e.g. for the tenant’s own use or the use of a family
member) or by paying a penalty.
10 www.bouwlinks.be and www.livios.be, both consulted on 20 November 2006.
11 Another approach is that after payment of the mortgage a reasonable amount of money should be available
for living. This is assumed to be € 750 for the household plus € 125 per person (www.livios.be, consulted on 20
November 2006). See De Decker (2005a).
[ 37 ]
Figure 3.1 Evolution of housing prices in Belgium, 1980-2005 (index: 1953 = 100)
Houses in Flanders, current pricing
Building plots in Flanders, current pricing
Rents in Belgium, current pricing
Houses in Flanders, real pricing
Building plots in Flanders, real pricing
Rents in Belgium, real pricing
index (1953 = 100)
ratio. It is therefore relatively easy for the borrower to add a personal loan to
the mortgage and therefore to borrow more than 100% of the assessed value.
3.4 The meaning of housing and home ownership
3.4.1 The meaning
Setting the scene
“For me, my home is mainly somewhere to relax. A place where you can hide after
work. It is about coming home. A place where you feel at ease. A safe place. A place
to retreat to with the people you like” (owner, woman, 50 years old, with an administrative position in a private company).
“I know it’s a bit of a joke, but owning your own house is about freedom. OK, we
have to pay the mortgage. But we’re both working and we’re both relatively young.
We’re under 40 and within 5 years we will have paid off the mortgage and we’ll
have our own house without any costs” (owner, man, 38 years old, working in the
welfare sector).
“My house is a large part of what makes me feel happy. (…) My house is my saviour, my freedom” (owner, single man, 37 years old and self-employed).
[ 38 ]
Housing at
some of the
interview locations in Ghent,
The question on the meaning of housing and home ownership surprised
the respondents. They had to think carefully about it. Generally, respondents
explain what their house means to them by referring to two factors. One is
linked to the more emotional aspects of ‘rest, privacy and freedom’; the second concerns the ‘financial features’ of housing in general and ownership in
particular. Often both are mentioned by the same respondent.
Being in control
The concept of ‘rest, privacy and freedom’ evokes a whole range of emotions.
The most spontaneous reactions refer to the home as a place to relax, somewhere to return to after work. An overwhelming majority of the respondents
referred to this when they went into more detail. It is very clear that people see their home and, in particular, the home that they own as being separate from work. In particular respondents who have had to live with friends
for a while emphasise that after living in someone else’s house, having their
own place became important. In the same way for the majority the house is
a place where you can be ‘at home’, where you feel good and where things
are how you want them to be. It is linked to independence. The respondents
stress the fact that being an owner allows them to do what they want in their
home. As some of them said, in a rented house you don’t paint the walls and
you put up with problems (such as damp).
For numerous respondents being an owner is linked to ‘being in control’,
‘being the boss’ and this again is related to the possibility of giving the house
[ 39 ]
a personal touch. The house can be made to look good and feel comfortable.
It is the place where you can entertain people that you like, the place where
friends meet.
Things can change
It is important to note that some of the respondents who say that they entered into home ownership without an emotional attachment have found that
their attitude towards what a house or home in general means and towards
home ownership has changed. According to them, the home becomes more
important, it becomes more like a nest. It even led for some to the conclusion
that they should have purchased a house earlier. This is very much linked to
the presence of children. Nearly all households with children refer to the fact
that stability is good for the children. Because …
“… the children have strong ties with their school, their friends, the centre of their
world. In a family situation, in a context with children, the house is very important.
I once asked my children where they wanted to live. They could have chosen anywhere. And they both said: here. It is their operational base (…) Personally, I don’t
care. But for the children the house is extremely important. And what are the reasons? It’s difficult to put into words. I think it’s about feeling at home. But it is very
important, that’s for sure” (homeowner, man, 62 years old).
Status and pride
Earlier we highlighted the fact that, as a result of a long-standing policy,
home ownership in Belgium has become a social norm (De Decker, 2005). In
the post-war period this was predominantly achieved by building new houses.
Since the mid 1990s the focus has changed and the majority of recent house
purchasers have bought existing houses. As a consequence the ‘visibility’, a
combination of the new construction-in-itself and its location, became less
important. Since our sample is primarily urban and many of the respondents
live in the less popular 19th century districts, we can assume that status is
hardly an issue. This seems to be true, since only two respondents say that
the status of their house is important. These two live in the two most valuable houses in our sample. The first is an older owner (61 years old) of a large
and valuable inner city house with character. He attaches status to the house
as such, but also because he uses it as a place to meet clients. Being a former
manager, he needed – according to his reasoning – a large house and a large
car in order to impress. The second respondent, a high level civil servant (37
years old) says that status is ‘inseparably’ attached to a house. He lives with
his wife and two small children in a newly built house on an expensive plot of
land near the central station.
In response to the direct question of status, most other respondents say
that their house is not a status symbol and refer to the neighbourhood and
[ 40 ]
the facade of the house, which is indeed rarely impressive. One male respondent living in a larger row house says that housing has status, not for him, but
for others.
“You can’t deny that status is an issue if you build a big, posh house on a large plot
of land with a gate and two lions on the gateposts. That’s true, isn’t it?” (homeowner, man, 62 years old).
And, finally, a young tenant also refers to status:
“Unconsciously it is a status symbol. Renting or buying makes a difference. This
doesn’t imply that the house should be large. Or ‘chic’. But it is something to be
proud of. It says something about you” (tenant, woman, 26 years old).
This brings us to the issue of pride. A majority of the owners we interviewed
are undoubtedly proud of their houses. This is related to three features. The
first reflects the simple fact that they did well on the housing market. This
applies in particular to the least fortunate, a disabled woman who built a new
home and an older couple who work as bargemen and only have a primary education. The second aspect is linked to working on your house yourself,
which several respondents did. Most of them are proud of what they have
achieved, especially inside the house. And it is undeniably true that beautiful,
creative houses are often hidden behind unimpressive facades. “It’s my property now”, is a comment made in particular by female respondents. And two
men who stressed that their house was only a roof over their heads showed
the researcher around the whole house after the interview. A third point of
pride is linked to the choice of neighbourhood. Some respondents are proud
of the fact that they are bold enough to invest in a house in a poor urban
neighbourhood. The majority of them do not want to live in rural areas and
particularly not in the suburbs. One tenant, a single woman who is 29 years
old, even referred to these areas as being inhuman.
What about renting?
Under the umbrella of the general question “What does a house mean to
you?”, positive connotations were generally attached to ownership. In contrast renting is associated with a large number of negative factors. Few respondents refer to renting as a flexible form of tenure, which is an easy option because the tenant does not have responsibility for maintenance and
which is emotionally and physically less demanding. Most see renting as an
insecure form of tenure where tenants are exploited. Some respondents have
moved as a result of receiving notice to leave, having high rent increases imposed and identifying hidden defects. Renting is very much seen as throwing
away your money. At best it is regarded as a temporary solution which gives
[ 41 ]
couples time to get accustomed to each other12 and to save enough capital to
buy their own property, which is what the youngest respondents are doing.
In addition, social rental housing in particular is associated with a negative
status13. Although they are aware of the fact that social housing makes housing affordable and secure for them, a couple with both partners on disability benefits after disruptive lives, which include divorce, long-term unemployment and stays in numerous institutions, who live in a flat on an upper floor
of a high-rise tower block, see their housing situation as an extension of their
misery. They dream of owning their small own house with a small garden and
a small car. When asked if renting is an alternative, nearly all the respondents
reject social rental housing as an option.
Financial rationality
The reasons for buying and owning a home are very much linked to financial
rationality. The respondents have chosen to buy, because ownership is more
affordable in the long run than renting. The recurrent answer is that renting
wastes money, while ownership is a financial investment and in the end leads
to ‘free’ housing. The respondents who have recently become homeowners
point to the fact that nowadays renting is as expensive as paying a mortgage
on a small house. A young respondent (woman, 30 years old), who works in
Ghent, but now and then travels to London for her (previous) work, wanted to
continue renting while her work situation remained complex. However, when
her landlord informed her about a substantial rent increase, she and her partner decided to buy a small house near the railway station. Her monthly mortgage payments will only be slightly higher than the new rent. A middle-aged
homeowner (single woman, 52 years old) who has a long history of moves
in the rental sector because she was not interested in home ownership, explains her choice in terms of the affordability of home ownership and the instability of being a tenant. In the past she had already been given notice to
leave her home twice and the third time that this happened made her think
about her situation and do some sums. Using all kinds of subsidies, she finally bought the last house she rented and her monthly mortgage payments are
only slightly higher than her rent.
Although the respondents put the emphasis on the financial rationality,
the financial aspects of house-buying are, strictly speaking, not the only factors involved. The financial reasoning is frequently accompanied by an argument emphasising the more ideological dimensions of home ownership. Buying a house is a financially rational thing to do, not only because it is affordable in the long term, but particularly because it involves, “paying for your
12 This is the predominant response to vignette 1.
13 See also: De Decker & Pannecoucke (2004); De Decker (2005).
[ 42 ]
own house and not simply paying somebody else” (Naumanen & Ruonavaara
(2005). According to different respondents it makes no sense to pay rent to a
third party if you have the option of paying for your own home. Some people
even argued that, with hindsight, they should have become homeowners earlier, because on the one hand they feel that they have wasted money by paying rent, but also because they think that they have lost out on the potential
gains from rising property prices.
Social pressure and support from relatives
As mentioned, Belgium has a long-standing tradition of promoting home
ownership. It is not surprising then that, when explaining their choice, respondents refer to their parental situation and social pressure. The respondents’ childhood housing circumstances may have an influence on their views
and preferences. In fact there is a strong correlation. Nearly all the homeowners grew up in housing that their parents own(ed). Among the renters, some
households shared a background in home ownership. Some respondents
clearly state that their parents or their parents-in-law have encouraged them
to buy property and often gave them financial support (see below).
Few respondents grew up in rented properties. But those who did were
encouraged to buy property because they have seen the effect that renting
has had on the lifestyle of their parents when they reach retirement age. In
order to resolve that problem, one respondent – who regards buying property
as a sound investment – has already bought a flat around the corner from her
house for her mother. Another couple intends to buy a flat or small house for
the parents of one of them as soon as they have finished paying off their own
When asked if there is an over-emphasis on home ownership in Belgium, most respondents believe that there is not and find it a good thing,
because “you are doing things for yourself”. Although a majority of the owners stressed that they made conscious, independent decisions, some admit
that there has been some social pressure. However, it is never considered to
be the trigger. There is some pressure on people to buy, particularly those in
their early thirties. It often takes subtle forms and comes up in everyday conversations. People talk about it at work. Visiting peers and friends is a more
crucial factor. The visitors are shown around the house and the owners talk
about furnishing and illustrate its affordability. Often the pressure is less subtle and more overt when people are labelled as stupid if they have not bought
a house. Or, as one respondent said, “You are not a full citizen if you rent”.
Another respondent felt that “people who don’t own houses are seen as being
rather strange” (still a tenant but renovating her own house, woman, 29 years
Given this, it is not really surprising that only half of the respondents, in
their responses to vignette 1, advise the couple to buy a small house, “if they
[ 43 ]
don’t have to live off dry bread” (owner, man, 62 years old). Older homeowners in particular advise the couple to buy a house at a reasonable price as
soon as possible. Some of the respondents hesitate slightly, because the man
in the vignette does not have a permanent job, which might cause difficulties in paying the mortgage. Although a majority of the respondents in principle believe that you need two secure jobs or at least 1.5 per household, they
tend to advise the couple to buy. And as some interviewees say, if they are
not able to pay the mortgage, they can always sell the property and get money back. The younger homeowners also advise the couple to buy a house, but
some of them consider that the strength of the relationship is crucial here. If
the two people have not already lived together, it is a major risk. A breakdown
in the relationship and separation would cause major problems, not least
because of the need to divide the property and the debts. Pleas for prudence
are expressed by respondents who have experienced the loss of their home as
a result of the breakdown of a relationship.
In this context it is understandable that (grand)parents provide support
for their (grand)children when they buy a house. For example, Doms et al.
(2001) show that gifts are important. If a gift has been made, it tends to represent between 16 and 19% of the total investment. However, the respondents’ answers to the question concerning the importance of intergenerational transfers are highly ambiguous. While 14 of the 20 respondents who own
their own house had support from their (grand)parents in one way or another, between a third and a half say that they do not consider intergenerational
transfers to be important. When pushed, most respondents admit that financial support can be important or helpful and that it can help the children to
get a foot on the housing ladder.
If we look at the 14 owners in our sample who were given support, the money has been given by parents, grandparents and brothers or sisters. Different
methods are used, including (1) inheritance, (2) the donation of one lump sum
(3 respondents received € 37,50014 and one as much as € 75,000) or a number
of smaller lump sums on different occasions (for example when one part of
the renovation work is completed or when furniture has to be bought), (3) an
interest-free loan and (4) in one case a respondent was able live for € 1 in a
house owned by his (divorced) father.
In addition to the respondent living for € 1 in his father’s house, two other cases stand out. One respondent, a 34-year-old woman with 3 children and
married to a man who has previously been divorced while owning a house,
initially states that financial support from the family is not important. Later,
14 The first paid € 50,000 for the property in 1975 and took out a mortgage of € 87,500 in order to pay the cost
of purchasing and renovating the property. The second paid € 80,000 in 1998. The last paid € 162,500 to build a
new house suitable for her disability.
[ 44 ]
when recalling the experience of her husband, she admits that it can be “a big
help”. After divorcing his first wife, her husband kept the house and took over
the mortgage. At various points he was unable to pay the mortgage, until the
bank threatened to put him on the black list. Since this could have had serious consequences, on different occasions he received financial help from his
The second case concerns a young couple, still renting, who have already
bought a plot of land from her parents. Her parents, who own land on the outskirts of the city, are developing part of the land. Under the terms of the law,
a certain proportion of the plots of land has to be sold within a certain period
of time or the development permission will be withdrawn. Since this was not
the case, some of the plots were sold to the children. The children could buy
the land at well below the market price and receive an additional lump sum.
3.4.2 The housing decisions
Neither the house as such nor financial issues are the reasons why our respondents leave their parental home. The major motive for moving out is either to start an independent life or to marry or cohabit or marry. Apart from
this “big” separation, the reasons for moving are much more diversified. However, in our sample, relationships and the desire to start a family remain the
main reasons for moving out. It is rare for respondents to refer to their work
or changing jobs in this context. Different aspects of housing – in particular
tenure and tenure security – are becoming increasingly important, but are not
the predominant reasons to leave home.
“Because it has to happen at some point” is a summary of the answers given by different respondents when asked why they have purchased a house.
This very much reflects the argument developed earlier (see also De Decker,
2005). Becoming a homeowner is very much an essential part of Belgian society. It is no surprise then that some respondents assume that “meeting a partner, becoming a homeowner – either by buying an existing house or building
a new one – and having children are very often related events”. This applies
to a large extent to our respondents. Table 3.2 shows, for the households with
children15, the year when the household was set up, the birth of the first child
and the year when the property was purchased. In 10 of the 13 cases the birth
of the first child and the year when the couple became homeowners, in particular, are – with a maximum gap of 3 years – very closely linked. In two out
of the three other cases marriage or cohabitation and ownership went handin-hand. In the last case, a couple with two children who had inherited a large
sum of money and who had built an expensive new house, the gaps between
15 Including the households which later broke up.
[ 45 ]
Table 3.2 Respondents from Ghent, age of cohabitation, year of becoming a homeowner
and the year when the first child was born
Marriage or
Birth of first Year of becoming
a homeowner
+ = child came first, – = ownership came first
Years between
(1) and (3)
Years between
(2) and (3)*
Source: OSIS interviews, 2005
marriage and the birth of the first child, and between the birth of the children
and home ownership are all relatively long. But during the interview the male
respondent (37 years, civil servant) stressed on different occasions, that if he
could start all over again he would become a homeowner earlier. He links
their lateness to his laziness and the fact that they did not experience any
problems with renting. He now regrets this, because they have wasted a lot of
In popular writings in Belgium, home ownership is often shown in a romantic light and linked to a happy family life. Another common belief is reflected in the popular saying – often used to legitimise policies – that “every Belgian citizen is born with a brick in his stomach”, a reference to the high levels
of new construction during the post-war period, especially during the golden age of the 1960s16. In contrast, our survey did not highlight much romance
or many genetic influences during the interviews. With the exception of two
older respondents who correspond with the popular image, the majority of
the respondents – both owners and tenants – have a very rational approach to
home ownership. The factors which encouraged them to buy a home include:
nself-confidence about their relationship;
nself-confidence about their professional career (“We’ll find another job if
necessary” is the common attitude);
nsupport from relatives and friends (for example, for construction work) and
from parents in particular (for finance and construction work);
16 The levels are – if put in an international context – not particularly high. See Feddes (1995) and Peeters & De
Decker (1997) for example.
[ 46 ]
nthe affordability of home ownership;
neasy access to money;
n(to a lesser extent) the availability of subsidy schemes.
Of course, it is not only a case of being attracted to home ownership. Some respondents also point to the factors that pushed them out of the rented sector.
The belief or the fact that renting means wasting money is amongst the most
popular, mentioned by two-thirds of the respondents. Other frequently mentioned complaints about renting are its negative status – and this clearly relates to social housing in particular – and the fact that tenants are dependent,
a complaint which relates especially to maintenance and to small repairs that
are not carried out (properly).
Some respondents refer to the insecurity of renting, which has two dimensions: the length of the lease and the rent increases. One respondent, a 52year-old single woman, an artist with an uncertain income, links her decision
specifically to being given notice to leave on more than one occasion. Finally she bought the last house that she rented. Another respondent, a 29-yearold woman, relates the decision she and her partner made to the news that
the rent would be increasing substantially. As a result ownership of a small
property became a reasonable alternative. Other respondents also refer to the
fact that rents are currently so high that ownership of a small house is a real
option. By “adding a little more you are paying for your own home” is a popular argument. But again, it is important to remember that our sample is biased
because it is largely urban.
3.4.3 Using housing resources
An overwhelming majority of the owners say that they would not consider
making use of the resources invested in their house. If they do consider doing so, it is in the context of growing older. Some respondents state in general terms that they think that they might need to use the house to pay for costs
associated with old age. A limited number of people make a clear link between
the house and the cost of care and one, now living on a bridge pension, clearly
states that he does not want to live in his large house when he is old.
Even when prompted, respondents hesitate to answer this question. However some possible uses were given. Three respondents mentioned that they
might use the value of their house to buy a larger residence. Others state that
they might use the value to further renovate and extend the house. And for
two respondents financing a second home is an option. Two renters who want
to become owners plan to use house itself to finance the house purchase. One
is considering renting parts of the house out and the other intends to set up
a bed and breakfast business – or something similar – in order to finance the
[ 47 ]
Three respondents can envisage using the value of the house to invest in a
business. One respondent can foresee using some of it to help his son to start
up a new business. Two others dream of setting up a business abroad. They
will fund the business either by remortgaging the house or by using the rental
income from the house.
Although nearly all the owners state that the value of their house has risen or will rise, some doubt that they can make money out of the house when
selling it at short notice. A number of respondents have actually had their
house valued. However, they see the estimate as a theoretical value.
As a result of the ageing population in Belgium, there is an ongoing discussion on the affordability of pension system. And housing plays a role here, but
not yet in supplementing state pensions (see above). The opinion of the general public – which is now being heavily promoted by the Social Democrats (De
Decker, 2005) – is that it is good for people to own their own house when they
reach retirement age, as this affects both their purchasing power and their
independence. Most of the respondents agree with that point of view. Some
learnt lessons from the experiences of their parents who had rented property.
One tenant is experiencing the problems now, living on a bridge pension and
paying rent for an unsatisfactory home.
But by the same token and on the basis of the general logic of the situation,
several respondents seriously doubt whether it would be a good idea to use a
house to supplement a pension income, as suggested in vignette 2. The opinions are divided as follows: some respondents see it as a good idea for households without children, but a large majority do not approve. Those who disapprove think that the children are being disregarded, that it is not a reliable way
of obtaining an income, because the banks will take most of the profit, or that
the state that should take care of those people whose pensions are too small.
The description of the situation in Finland by Naumanen & Ruonavaara
(2005) also applies to our respondents: the idea of using housing as ‘capital’
and a possible source of income is still very new and strange for many people.
For some respondents housing and particularly an owner-occupied home represents a kind of sanctuary that should not be mixed up too closely with economic considerations.
3.5 Security and insecurity
3.5.1 The financial dimension
The feelings of financial security amongst the respondents do not in any way
correspond to the divide between owners and renters. If tenants feel more insecure, it has little to do with the financial dimension. Although some refer to
the fact that private rents are high and are continuing to rise, this is not relat-
[ 48 ]
ed to insecurity. If respondents refer to insecurity, it is more likely to be in the
context of the termination of the contract. Generally, the respondents are very
confident, which is, of course, linked to the fact that a large majority of them
regard their jobs as being permanent. Even those who have experienced financial insecurity still feel relatively secure. However, if there is a split on this
issue, it is between those who have not yet experienced financial insecurity
and those who have. For the former, financial insecurity is linked to a range of
issues. Of course, it may be connected to a job loss, but only one respondent
experienced this for a short period of time (and he solved the problem by informal work). More frequent references are made to relationship breakdown,
which causes hardship for some people, accidents, such as fire or water damage, and the illness of a member of the household, which in all these cases
was covered by insurance. It is important to note that if financial insecurity is
mentioned, relationship breakdown comes top of the list, since it often goes
hand-in-hand with the loss of a second income. Even the couple who are both
on a short-term contract are confident that they will find a job, although according to the woman, a 24-year-old PhD student in bio-engineering, her degree is no guarantee of a job.
We stated earlier that some respondents either fall into the category of
poor owners or have experienced a drop in income. In addition some of the
respondents are on benefits. If we look at the poor owners, who are – at least
theoretically – the most vulnerable of our respondents, it is clear that they
can handle the situation. One respondent (man, 34 years old) only works
part-time as a taxi-driver. For the rest of the time he is paid unemployment
benefit. He is using his spare time to renovate his house. Although he has a
relaxed attitude, he is aware that his situation is precarious. While he is confident that he will find another job if necessary, he has solved his financial
problem by subletting. He plans to convert his relatively small house into
three small flats and expects that the rent will cover his monthly mortgage
payments. Another respondent opted for the same solution. As a 52-year-old
artist living alone, her income is relatively insecure. When she renovated her
small house, she turned part of it into a flat which she lets and which covers a large proportion of her monthly mortgage payment. A third respondent,
a 38-year-old self-employed single man, has cut his housing costs almost to
nothing by subletting his shed.
If we look at the respondents who faced a drop in income as a result of relationship breakdown, we see that they were all able to keep their house because
they had a secure job. Even though it may influence their lifestyle, living on
benefits is not really regarded as posing a financial threat. One respondent
who lost his own house after a relationship breakdown and has been living for
a while on disability benefit can ultimately still go back to his well-paid bluecollar job in the port of Antwerp, although he would prefer not to.
In the case of the couple who are social housing tenants, both partners are
[ 49 ]
on disability benefit which gives them a disposable income of € 1,400. According to them this income is relatively secure. And combined with their social
tenancy with an income-related rent, it gives them a reasonable lifestyle.
As already explained, the divide in the feelings of financial security is
between those who have experienced risk (aware) and those who have not
(very confident). But it is important to remember that most owners are very
confident about their relationship (which is necessary because of the second
income) and their income (we will find another job easily). In addition they
believe that their status as a homeowner adds to their financial security for
various reasons, including the fact (1) that the mortgage will be paid off (for
some respondents at a relatively young age), (2) that the value of the house
will increase and (3) that some have lower monthly payments because the
interest rate has fallen or because they have recently renegotiated their rate.
They reason that this can be offset against the fact that rents are continuing
to rise even under agreed contracts.
Although it is not directly linked to immediate risk or insecurity, it is worth
mentioning that some respondents have thought about housing and tenure
when they are old(er). Only a few of them express clear objectives, but some
explain that they want to learn from the experiences of their parents. There are
two aspects to this. One is that some respondents specifically state that they
do not want to live in a large house. The other is that some say that they do not
want to be renting when they are old. This factor is linked to the fact that leases are insecure and that they will have to pay rent. People are not keen to move
house when they are old. And they are aware that paying rent will affect their
lifestyle, since their purchasing power will be lower than it would be if they
owned their property outright (which will be the case for all the owners).
Of course, financial security is linked to work or to the social security system for those who cannot work. Owners also take the rising value of houses
into account in relation to their financial security. In addition they may also
have other financial resources available. Despite the fact that some respondents hesitated to give the value of their resources, they were willing to answer
the question. Although some have other investments, a deposit in a savings account is the main form of financial resource. Out of 20 respondents
17 have savings accounts. Two of the three others do not have any savings
because they have recently been affected by a relationship breakdown. The
third, an artist, chooses to invest her spare cash in materials. With the exception of three respondents, who have car loans, none of the other respondents
have other loans. Various respondents say that they saved money before they
invested in their house or bought other items.
Three of our respondents have other properties. In all cases they have more
than one and all three respondents say that it is a deliberate choice because,
in the long term, property offers the best value for money. For two of the three
respondents, these are investment properties, although one is a holiday flat.
[ 50 ]
The third combines investment with social goals. The respondent rents out a
small house to a friend at a low rent and the other property is for her mother.
Some respondents also own stocks and shares. But generally speaking this
does not seem to be a popular method of investing money. This is because
the respondents do not want to spend time on their investments: “We are not
If we look at the sums involved, we can see huge differences. The amounts
range from “little” as one respondent answers, to sums as large as € 625,000
(not including the value of the two investment properties and the respondent’s own house). Although it is difficult to assess, we can conclude that a
large majority of the owners in our sample have significant financial resources in addition to their houses.
3.5.2 The perception of risk
“Security is never absolute” (homeowner, man, 37 years old).
“Risks are not on my mind” (tenant, woman, 41 years old).
“I cannot imagine any” (tenant, woman, 31 years old).
“You cannot live with risks” (homeowner, man, 34 years; homeowner, woman,
35 years old)
“You don’t think about that” (homeowner, woman, 30 years old; tenant, woman,
25 years old).
“You can only search for solutions when things happen” (homeowner, woman,
34 years old).
These quotes illustrate the fact that both homeowners and renters have a
very trusting attitude towards their future lives. Although the opinions on
housing are more blurred, for the most part respondents consider risks unlikely to happen.
If risks are taken into account, we can only detect one real difference
between owners and renters. Highly logically, renters to some extent fear
an unexpected termination of their contract. Nevertheless it is worth noting
that few of them think that it will happen within a short period. And to some
extent they live with it. One renter, a single 31-year-old woman, rents from
a couple, now living in the countryside, who bought their flat in the city to
live in when their health declines. She is aware of the fact that if “something”
happens, she will have to leave. She can live with that, because she is relatively sure that she can stay until then. This will give her the opportunity to
[ 51 ]
look out for something else.
If the respondents are prompted, they mention a range of risks. Most prominent is the risk related to a drop in income. This can have different causes. As
one might expect, the respondents refer to job loss, although they are very
confident of finding another job, but a fall in income is also linked to retirement, a bridge pension and relationship breakdown. While for most of the
respondents these risks have a rather abstract nature, for others they have
been a reality. Three of our respondents have faced a cut in income as a consequence of unemployment. One, a 34-year-old man with a very relaxed attitude, who combines unemployment with a part-time job as a taxi-driver, is
not too badly affected by it, because he budgeted for his house and the necessary renovation on the basis of the expected rental income. Another respondent, who also already owned a house with a mortgage, solved this problem
by informal work. And a third respondent, a single woman, stopped renovating her house and camped out on one floor for a long period. Although people are aware of the fact that unemployment will affect their income, only a
few of the respondents regard it as the major risk, because, on the one hand,
they believe that they will find another job and, on the other hand, they will
receive unemployment benefit. It is not a lot of money, but it is seen as a kind
of bridge until they find a new job17.
Far more threatening according to the majority of respondents is relationship
breakdown. We have already discussed this. The answers of those respondents
who have already experienced it do not differ from the responses of the other
respondents. It is generally seen as the most important risk which can result
in the house being lost, as it is the one risk for which there is no insurance.
As discussed previously, older and younger people have a different approach
to solving the problem of the house when divorcing or splitting up. The older
respondents (3 cases) sold the house, paid the outstanding bills and split any
money that was left. Those who have recently faced a relationship breakdown
– all of them women, of whom two had two young children – tried to keep the
house. One respondent was lucky to be given a social loan18 which allowed her
monthly mortgage payment to be adjusted to her new income and made the
17 Note that in relation to vignette 3 the majority of the Belgian respondents state that the situation cannot get
as bad as this here because we have unemployment benefits. This is combined with the finding that losing your
home is seldom a consequence of a job loss (see De Decker & Geurts, 2003).
18 Some non-profit organisations are entitled to offer mortgages at interest rates that are below market levels.
Therefore they are subsidised by the regions. Basically, there are two schemes. One is linked to income and the
other combines income and the size of the household. In the first scheme the interest rate is related to the income: the lower the income, the lower the interest rate. It is evaluated every 5 years. A higher income leads to a
higher rate, but if the income falls the interest rate does too. The second scheme links household size with the
interest rate, which drops when the number of children increases.
[ 52 ]
situation viable. Another, a disabled woman, has a large burden of debt, “but
it does not keep her awake at night”. And a third respondent, a mother of two
young children, supplements her income with an additional job in catering
while her mother looks after the children. One respondent refers to the hardships her husband faced after a divorce. He kept the house, but was in arrears
with his mortgage payments at various points, to such an extent that the bank
threatened to put him on a black list, which would have meant that he would
not have been able to get another loan at a later date. He avoided this with the
help of his parents and his problems were finally solved when he met his current wife.
Other respondents mentioned risks related to health and illness. Once again
it is those respondents who have been confronted directly or indirectly with
problems of this kind who refer to them. One respondent mentions her husband’s job. He is constantly exposed to risks at work because he is a construction worker. Some respondents or their partners have faced illness and institutionalisation (depression), but their house was never put at risk. One female
respondent became ill and needed an operation when she was in the pro­cess
of negotiating the mortgage. This made it more difficult for her to obtain a
A few respondents regard aspects of their neighbourhood and neighbourhood
planning as a risk. Three respondents ‘fear’ new noisy neighbours. Others worry about general changes to the neighbourhood and refer to the influx of businesses and immigrants and the increase in congestion. Three respondents
mention compulsory purchasing as a consequence of urban renewal plans.
One is afraid that it will happen as a consequence of collateral damage when
the local government restructures the neighbourhood in order to clear some
slum housing ‘around the corner’. The other two respondents are actually confronted with plans for compulsory purchasing. Although this concerns
one of the flagship projects of the local government and despite the fact that
the government is already buying dwellings in the neighbourhood, both couples still hope that they can avoid it19. One has already been made an offer,
but has rejected it. The other has not received an offer and, as a consequence,
still considers the forthcoming compulsory purchase plans to be a rumour20.
R: “We are being faced with a compulsory purchase order.”
Q: “What happens now?”
R: “You’ll have to ask the city council. We don’t know what will happen. It’s hanging over our heads. We don’t feel calm. We never feel calm any more. For the city
19 In the meantime, they had to leave. One of the couples left the city of Ghent.
20 When this item is discussed, it causes a change in tone. The respondent’s neutral, distant tone changes to
one of anger and determination.
[ 53 ]
council it is a fact. For us, it is a rumour. Basically, we have no problem as long as
there are no signatures. (…) It feels like having a burglar in your house all the time.
I have the feeling that the house is not mine any more, that someone else owns it
and is making the decisions.”
Other risks mentioned include the house being destroyed by fire or other hazards and costly repairs. Once again the respondents’ own experiences determine the answers, since one respondent has been faced with a fire and another has suffered severe damage when a water pipe broke.
Most of the respondents state that they can deal with risks, if the consequences are only temporary. If they become chronic, it would be more difficult. Nevertheless we should not underestimate the impact of even a temporary risk. We have already referred to the man faced with the threat of being
blacklisted. Another respondent, who resolved an earlier drop in income as a
consequence of a previous short period of unemployment by working illegally,
because of a relatively large mortgage, now faces the combined effect of living
on a bridge pension and his wife’s sickness benefit. Although they can cope, it
has a serious impact on their lifestyle.
And our self-declared poor owner – now facing the consequences of a fire
– explains that a single-income household cannot cope with any risks. As
already mentioned, she had to stop her renovation work when she became
unemployed. And her new job – as a result of her low level of education – pays
too little to allow her to improve the situation afterwards. She will be experiencing hardship for years.
As discussed in the previous section, we found that homeowners – if prompted – will highlight a range of different risks, whereas tenants are mainly concerned about their finances (for example, in the case of unemployment) or
rent increases. Homeowners mention risks such as accidents, serious illnesses,
compulsory purchase orders etc., which are not referred to by the tenants.
Within the group of homeowners, there is a clear differentiation between
those who have already experienced risks and those who have not. For the
latter, the notion of risk is something very vague and abstract and, if prompted, they nearly all answer that they will cope with it. Especially with regard
to job loss, the younger homeowners are very confident that they will find
another job. Older homeowners are less likely to be affected by financial risks,
because their mortgages are already relatively small or have been paid off
altogether. However, as has been demonstrated, a drop in income can affect
their lifestyle, even if it does not result in them losing their home.
Homeowners’ concerns about various risks may be explained by the fact
that they feel they have a lot to lose, if something harmful happened that
would result in them losing their home. Their home may be something to hold
onto, a point of reference, which represents their whole life. For homeowners,
being forced to move out may be the equivalent of losing their independence,
[ 54 ]
not to mention the effort, time and money that they have put into their home.
In order to illustrate this, we can take the example of the respondent who faces compulsory purchase (but still considers it to be a rumour). The effort put
into the house is particularly important in this case, since the respondents
did nearly all the renovation work themselves, which took between six and
seven years, and transformed an old dilapidated dwelling into an attractive
modern house full of colour and light. Working on a property yourself generates a strong sense of attachment, which is illustrated by the following quote:
“My house means everything to me. It’s my home. A bit of privacy. It’s the place
where I can be myself. It’s a place to enjoy. But it’s also something practical: everything is where I want it to be. And it’s a way of expressing yourself. On the inside.
The status of our home is on the inside. It illustrates our lifestyle” (homeowner,
woman, 45 years old).
The other couple facing compulsory purchase also emphasise the fact that
they did a lot of work on the house themselves and will lose their security.
“When we came to this house, I thought it would be the place where we grow old.
(…) Until recently, it meant security. But not any more and it’s the fault of the city.
If I ever buy again, it won’t be in the city of Ghent. The city is a faceless organisation. They intend to put people like us in a tiny rabbit hutch, in social housing, where
people piss and shit in the lifts, where there are cockroaches everywhere, where the
walls are thin and people don’t pay the rent” (homeowner, woman, 63 years old).
We cannot conclude that occupation, income and the size of the mortgage have
an impact on the perception of risks, because, as mentioned earlier, most owners and especially the younger ones had a very rational and calculated view of
it. All those who have not suffered a relationship breakdown are more confident of things going well. We should stress once again that the majority of the
respondents see relationship breakdown as the major risk. On the other hand,
respondents who have a large debt to pay off and have had experience of being
unemployed are also likely to be more concerned about their finances and possible breaks in employment, even if they have a good, well-paid job.
3.6 Safety net strategies
3.6.1 Limiting housing costs
Our inquiry indicated a very rational approach, which is the same regardless
of the type of tenure, as even tenants who plan to buy a property in the near
future have a very reasonable attitude. Differentiations are largely based on-
[ 55 ]
ly on age. Apparently, for the older respondents buying their own house was
more than a purely rational calculation. It was more a case of investing in
something for “the rest of their lives” which would be “their castle” (former
owner, man, 61 years old). The younger owners clearly regard it as being nothing more than the first step on the housing ladder and do not believe that it
will affect their lifestyle beyond their housing. Given these considerations, the
most important strategy concerns the starting position. Most of the respondents started with very affordable housing costs.
There are different aspects to making the house affordable in the perception of the respondents, and some are relevant for owners as well as tenants.
They concern limiting the housing costs by:
nSelecting the area – With the exception of two, the respondents who own
their houses live in more down-market areas of the city where the house
prices were low at the time when they purchased (De Decker, 1999).
nChoosing an urban location or one near to a railway station All but three of
the respondents live in central urban areas. They often refer to the fact that
everything is nearby and that they need only one car. Even one of the two
non-urban respondents lives near to a railway station, so that the partner
can travel by train to work in Ghent. They also have only one car.
nLimiting their housing aspirations – All but five of the owners live in medium-sized row houses with at best a small garden. Two even justify their
choice on the basis of environmental issues or what they have seen in
developing countries.
nWorking on the house themselves – A large majority of the respondents
– regardless of their educational level or professional status – did a large
amount of renovation work or intend to carry out further renovations themselves.
nObtaining financial support from parents and grandparents.
nUsing subsidies, if they are entitled – Various respondents have used subsidy schemes. These include social loans, social purchase housing21, interest allowances and lump sums given by different levels of government. It
is important to emphasise that, although all the respondents are familiar
with tax exemption, no one regards them as a great help. This does not
mean that they do not take them into consideration. Some see it as a reason for not paying back the mortgage more quickly. The tax discount is, as
one respondent (owner, woman, 45 years old) says “so much to be good”.
21 Alongside the ‘traditional’ social housing companies that are subsidised to construct social dwellings for rent,
there are also social housing companies that are subsidised to construct dwellings for purchase, which are sold
at below market prices. The benefit for the purchaser results from (1) the economies of scale because the houses
are clustered together and (2) the related social loan schemes. These are subsidised loans and therefore charge
interest below the market rate. In addition the loans are guaranteed by the state.
[ 56 ]
nAvoiding other risky investments – As mentioned above very few respondents have other investments, except a few in property. Only three respondents have other investments and these form part of a broad investment
strategy which includes property and stocks and shares. By the same token,
it is important to note that the respondents have hardly any other loans.
First save and then spend, is the thread that runs through the interviews.
This attitude is often a result of parents’ experiences.
nCalculating cautiously – This includes basing the investment on a minimum
of 1.5 incomes, including two years of unemployment for each partner
when drawing up the budget and taking ‘stories’ of others who overcommitted themselves as a warning.
Taking the tenants who have already bought homes, the homeowners and the
former owners into account gives us 23 relevant cases. Of these, 19 entered
into home ownership on the basis of two incomes. Of the remaining four, two
narrowed the affordability gap using rental income from parts of their (other) properties, one defines herself as a poor owner and the last bought after a
third threat of eviction from her landlord.
Although calculations and confidence play a prominent role, we have also
detected some ambiguity, because most of our respondents use a wide range
of safety nets (De Decker, 2005). Some even combine the whole range: various
private insurances, building up savings, calculating the increasing value of the
dwelling if a sale is necessary, social security benefits and other state aid (for
example, housing insurance if they are entitled), private pension funds, insurance against illness and hospitalisation, and finally family and friends. Some
of these issues have already been addressed. In three recent divorce cases, the
partners were able to make use of the increase in the value of the house, so
that at least no money was lost, as one 41-year-old woman says. Some used or
will use their hospitalisation insurance, while two others used their fire insurance. Others were helped by state benefits, either unemployment or disability benefit. It is worth taking a closer look at one particular case of state aid. It
concerns a woman who is now 37 years old, has two young children and was
facing divorce. They lived in a social purchase house. Houses of this kind are
bought from a social housing company and are accompanied by a so-called
social loan with an income-related interest rate which is adjustable every five
years. In this specific case, the respondent’s interest rate was adjusted significantly at the end of the five-year period following her divorce. Of course in the
meantime she had had a larger financial burden. Nevertheless in all the cases
where respondents were confronted with risks, all the safety net issues played
a role – even if only a minor one – in allowing people to keep their houses. We
should mention that the owners who are better off are also better insured.
The poorer owners have hardly any insurance, as they cannot afford it.
Finally we look at family and friends as possible sources of help. A large
[ 57 ]
majority of the respondents see this as an option, although they all stress
that they would only take this route after having investigated all the other possibilities. But at the same token, his is not a virtual safety net, but a
real one, already used by four respondents. After his divorce the husband of
our respondent kept the house. In the period between breaking up with his
first wife and meeting his second partner, he faced hardships which included the threat of being blacklisted. When his situation was really desperate,
his parents helped by giving him a lump sum. Our self-declared poor owner,
who faced a divorce, unemployment and a fire, was helped at different times
by friends. She was given (interest-free) lump sums that she could pay back
when it suited her. A 32-year-old woman with two young children was abandoned by her husband and, as a result, it was difficult for her to meet her
mortgage payments. She got some help from her brother, whom she has to
pay the money back to, and from her mother, who cares for her children while
the woman is at her second job. And finally, a disabled person who is facing
divorce is fairly sure that she can count on her parents to help bridge the gap.
Although everyone who experienced risks, including unemployment, relationship breakdown or illness, have faced and continue to face hard times,
they were all able to keep their houses. The situation of the two respondents
facing compulsory purchase of their properties is rather different. Under the
terms of the legislation they will be paid compensation, but both of them
doubt whether it will be enough to allow them to buy an equivalent house.
They believe that they will not be able to buy another house for the compensation offered without spending more money.
3.6.2 What influences these strategies?
In the previous section we learned that two major strategies are used. On the
one hand, there is the risk-avoidance strategy when entering into home ownership, while, on the other hand, an overwhelming majority of the respondents use a wide spectrum of safety net arrangements (although the majority of these are not directly linked to home ownership). This shows both confidence and prudence at the same time. If we look in more depth at the strategies used by the households for managing risk and avoiding its consequences, different features become apparent:
nA large number of respondents still22 has a strong belief in the social security system. Some respondents have actually received or are still receiving
22 There has been a major public debate on the future affordability of the Belgian social security system. The
tone of the debate (which is negative) contrasts with current reality, as there has been no tendency to restrict or
privatise the services available (De Decker, 2004). One could even argue that the political consensus for a strong
welfare state has grown (see for example Verhofstadt, 2006, who previously had the nickname “baby Thatcher”).
[ 58 ]
unemployment benefit, disability or sickness benefits or adjustable interest
rates for social loans. The belief in the social security system is highlighted
when analysing the response to vignette 2. The majority of respondents not
only feel that it is bad idea to use the house to supplement the pension,
but also say that they hope that the Belgium social security system never
becomes so bad that this will be necessary. However, a large majority of the
respondents still believes that our social security system provides protection against setbacks, such as unemployment and illness, and that it offers
adequate pensions (although most of the respondents are saving for their
own pension, which is partly tax deductible). If the state does not provide
support in a particular case, they feel that it should.
nA large number of respondents are relatively confident about their job security. Some are employed by the state, while others who work for local government, NGOs and even private companies that offer relatively secure
contracts (unlimited term). They also have a more or less secure pension. In
general terms the respondents are self-confident and rely on finding another job quite easily.
nWith the exception of those respondents who faced relationship breakdown
and stayed in the property, which meant that they often needed to rely on
savings, saving is an important concept for the group we interviewed. As we
have seen, their savings and assets are often quite substantial. Sometimes,
part of their money is invested in other property, which means that they
are aiming to make a threefold profit: (1) an income from the rent, (2) profit
from the increasing value of the property and (3) profit from tax exemption. As already mentioned, some of the respondents have invested in property and others are considering doing so. Generally, the increasing value of
the respondents’ own houses is also seen as a kind of saving, since it is the
equivalent of a growing sum of money.
nAn overwhelming majority of the owners combine a set of compulsory and
non-compulsory, public and private insurances in order to deal with various
hazards, such as unemployment, illness and hospitalisation, or disasters
such as fire or water damage.
nA large number of the homeowners also look to their (grand)parents and, to
a lesser extent, to friends for help. The majority of them say that their relatives can and will help; some have already helped and in the end they will
inherit part of their (grand)parents assets.
nFinally, there is the recurrent ‘cultural’ attitude: “We don’t spend money until
we have it”.
3.6.3 No role for the state
“Some of our friends are spending up to 60% of their income on a mortgage on a
large house in an expensive location. In cases like this, the government has no role
[ 59 ]
to play. The state has to provide a roof over our heads, but it has no role in that
kind of situation. The government has to prevent this sort of thing from happening.
The people might think that they can afford monthly payments of this kind, but if
everything goes wrong, the government has to help. But not at all costs. The state
should arrange, for example, an alternative payment plan but it must be conditional” (woman, 30 years old, still renting but renovating a purchased house).
“I don’t believe that the state should help people every time there are problems.
People are responsible for resolving their own problems. But I think that there
should be more social housing. There are always people who have bad luck. And
it should be possible to get interest-free loans. The state should also warn people
about the consequences of their actions since it isn’t always possible to foresee
what will happen. (…) Offering money without conditions attached is dangerous,
because people will get used to it being there. Basically, for me, the role of the state
is to develop the framework by providing, for example, more child care, so that
mothers can work” (multiple owner, woman, 50 years old).
“The state has no responsibilities if this happens in the case of a loan. Becoming a
homeowner is a calculated risk. It’s like the stock exchange: you can make a profit,
but you can also go bankrupt. It is your own decision. A lot of tenants want to buy,
but aren’t able to. If these people get into trouble, the state should help” (owner,
man, 38 years old).
When we ask if the state has any role or responsibility if a homeowner fails to
pay their mortgage, most respondents take a very cautious approach. To a large
extent they feel that the owners themselves are responsible for their own actions and decisions. For some this is a matter of principle: the state should not
help owners (a 37-year-old civil servant “who has”, as he says, “a Thatcherite
view of it”). The line of reasoning is that if you decide to buy a house, you must
be aware of the consequences. And “if something goes wrong, you should live
off bread and jam for a while” (wanderer, man, 44 years old) is one of the comments. Others refer to fact that it is a delicate matter, but believe that the state
should not pay for all the problems its citizens get into: “You are responsible
for your own finances” (tenant, man, 30 years old).
Other respondents disapprove of the idea of state aid for more negative reasons. Some are against the idea because they never received “anything, not
even a student grant for my daughter”, from the state. Others fear that the
system will be abused. One respondent, who previously worked in property
restoration, in order to illustrate his point, refers to a moated castle, that was
renovated largely with tax-payers’ money. In his opinion there are two problems with state aid: there is the risk that it will be poorly targeted and the
risk that people will try to make a profit from it. “It is like asking the fox to
watch the geese.”
[ 60 ]
One respondent who looks at the question in more detail, a single mother
now working for the housing administration of the city of Ghent, relates her
opinion to more general housing policy options. Since the government has
promoted and is continuing to promote home ownership, in her opinion, the
government has to be consistent and provide a safety net. This means that
she is in favour of the existing free insurance which provides cover for loss of
income. She believes that it should be generally available and generous. Others also approve of the existing insurance scheme:
“I know that there is a scheme offering free insurance on housing in the Flemish
community. I think the state should play a major role. The system is a good one and
it also helps people in wealthier areas. They can become ill like everybody else. I’m
in favour of a system like this for everybody. It should also apply to tenants, since
they are generally worse off” (woman, 29 years old, cultural assistant, tenant).
Some respondents see no need to safeguard the mortgage payments of wouldbe owners. According to a 39-year-old man who owns a large house where he
lives with his wife and two children, Belgium has a good social security system. He believes that that is enough, although it should be constantly adapted to changing circumstances. Another respondent fears that the system will
be abused and feels that only a minimum of support should be provided in
the form of temporary accommodation and nothing more. One 35-year-old
woman feels that “in our country, when you lose your income, there is always
some help available. You won’t end up on the street.”
Although a majority of the respondents, both the owners and the tenants,
opt for a hands-off approach towards safeguarding mortgage payments, this
does not imply that they do not believe that there is a role for the state. Some
respondents are of the opinion that the government should focus on prevention by providing information. People should be made aware of the possible
impact of their actions. In this respect, information could prevent ‘crazy’ decisions being made, as it is not the responsibility of the state to pay for “the
madness of some citizens” as some respondents say.
But by and large, if the respondents see a role for the government, it concerns renting. With the exception of one respondent, a single mother working for the city’s housing administration, who rejects the idea of social housing because of the stigma attached to it, a majority of those who believe that
there is a role for the state stress the need for more social housing. Some
express a desire in very general terms for regulation for the almost unregulated private rental market, which is the area where housing rights are most
often violated. As two respondents clearly state, “We do not need the state to
help us, but others do.”
[ 61 ]
3.7 Conclusion
In line with earlier conclusions (De Decker, 2005), it is clear that home ownership is an essential part of the lives of the homeowners we interviewed
in Ghent. The tenants aspire to home ownership or express regret that they
are unlikely ever to own their own home. A good illustration is the fact the
two youngest respondents (in their early twenties) are already in the pro­cess
of becoming homeowners, either by setting up a concrete savings plan or
by purchasing a plot of land. Another clear indication of the importance of
home ownership is that all the women who have recently been involved in
the breakdown of a relationship, have tried hard to keep their own home and
succeeded in doing so.
Although home ownership is still an essential part of life and is still taken for granted by those who can afford it, our interpretation is that ownership has become even more instrumental than before. The house which the
respondents live in and own now (1) is probably not their final step on the
housing ladder and (2) housing expenses, including paying the mortgage, are
not allowed to rule their lives, in which self-development and leisure (travel,
eating out, cultural activities) play an important role. But, the fact that their
current home is not their final house does not imply that there is no emotional significance attached to it. Indeed for the majority it has all the features of
what a good house should be. It must be comfortable and provide privacy, a
place to relax and to entertain friends.
It is important not to underestimate the interviewees’ rational approach
towards ownership. This essentially concerns the financial dimensions. The
respondents compare it with renting and all their individual calculations
seem to show that ownership is more favourable (renting means losing money; renting has become expensive; a mortgage will be paid off; the value of
the house increases). At a later stage a range of different strategies is used
to ensure that the monthly payments remain affordable. These include, for
example, the choice of location, the option of doing renovation work themselves using subsidies, if they are available, and finally intergenerational
The interviews also show that the majority of people do not worry about
the risks involved. Nevertheless there is a clear difference between those
respondents who have already been exposed to risk in one way or another
and those who have not. The former seem to be more sensitive. Generally, a
loss of income following unemployment, although it may result in a period
of hardship, rarely leads to the home being lost. Therefore the major threat
is relationship breakdown, which is one of the only risks for which there is
no insurance (neither private nor public). Most respondents refer to family
and friends as potential ‘saviours’ when they are in urgent need. This is clearly not just a ‘belief or a hope’, but a reality, because numerous respondents
[ 62 ]
have already experienced it in one way or another. And finally, many of the
respondents are aware of the fact that one day they will inherit from their
parents, which represents the ultimate insurance.
In conclusion we should emphasise that making use of housing equity does
not generally come into consideration, because people are not prepared to
put their house, which is basically a home and not an investment, at risk. For
older­ people the house has no other role to play than a refuge which is free of
financial burdens23 and which will be inherited by their children.
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in: De Tijd (Portefeuille), 16 May, p. 49.
De Decker, P., 1999, De kostprijs van het wonen in de stadsgewesten van de
Vlaamse Ruit en het Brussels Hoofdstedelijk Gewest (The costs of housing in
the city regions of the Flemish Diamond and Brussels), in: De Decker, P. (ed.),
Wonen onderzocht: 1995-1999 (Housing researched: 1995-1999), Brussels (Ministerie van de Vlaamse Gemeenschap), pp. 177-200.
De Decker, P., 2000, Who benefits from housing subsidies in Flanders, Belgium?, paper presented at the ENHR Conference, Gävle (Sweden), June (org.
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De Decker, P., 2004a, De ondraaglijke lichtheid van het beleid voor de stad in
Vlaanderen. Van een geïndividualiseerd woonmodel tot stedelijke crisis (The
un-bearable lightness of urban policies for Flanders. From an individualised
housing model to an urban crisis), unpublished PhD thesis, University of Antwerp.
De Decker, P., 2004b, Dismantling or pragmatic adaptation? On the restyling of
23 Currently an overwhelming majority of owners finish paying off their mortgage by the age of 65. It is even
possible to formulate the hypothesis that the level of early retirement identified by Doling (2006) in Belgium is
linked to the fact that mortgages have been paid off. Mortgages rarely exceed(ed) a period of 20 years. It is only
since 2006 that (some) banks offer mortgages lasting up to 40 years. It is important to note also that reverse
mortgages are still illegal.
[ 63 ]
welfare and housing policies in Belgium, in: European Journal of Housing Policy 4 (3), pp. 261-282.
De Decker, P., 2005a, The institutional study for Belgium, report for the project
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De Decker, P., 2005b, Belgium. Household interview report, report for the OSIS
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systems with jobs, household structures, finance and social security), University of Antwerp (OASeS).
De Decker, P., 2005c, Not for rabbits… nor for migrants?, paper for the International Colloquium Mobility/Poverty/Insecurity/Hospitality, Nanterre, 29-30
De Decker, P., 2006, Waar kunnen armen (nog) wonen en wat kunnen ze daarbij van de overheid verwachten, (Where can poor people still live and what
can they expect from the government to help), in: Vranken, J., et al. (eds.), Armoede en sociale uitsluiting. Jaarboek 2006, Leuven (Acco), pp. 257-288.
De Decker, P., 2007, Is wonen niet altijd te duur? (Is housing not always too expensive?), in: Ruimte en Planning 27 (1), pp. 3-9.
De Decker, P. & V. Geurts, 2003, Belgium, in: Doling, J. & J. Ford (eds.), Globalisation and home ownership. Experiences in eight member states of the European Union, Housing and Urban Policy Studies 21, Delft (Delft University Press),
pp. 21-48.
De Decker, P., C. Kesteloot, F. de Maesschalck & J. Vranken, 2005, Revitalising
the city in an anti-urban context: the extreme right and the rise of an urban
policy in Flanders-Belgium, in: International Journal of Urban and Regional
Research 29 (1), pp. 152-171.
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preliminary assessment of the discourse on social rented housing, in: Journal
of Housing and the Built Environment 19 (4), pp. 293-303.
[ 64 ]
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Wallonia, 1985-1997), in: Bernard, N. & C. Mertens (eds.), Le Logement dans
sa multidimensionalité: une grande cause régionale (Housing in all its complexity: a major regional problem), Jambes (DGATLP), pp. 17-37.
Deleeck, H., 2001, De architectuur van de welvaartstaat opnieuw bekeken
(The architecture of the welfare state revisited), Leuven (Acco).
Deleeck, H., J. Huybrechts & B. Cantillon, 1983, Het Matteüseffect (The Matthew Effect), Antwerp (Kluwer).
Doling, J., 2006, Home Ownership in Europe: limits to growth?, paper presented at the CECODHAS ‘Colloquium on Current Developments in Housing Policies and Housing Markets in Europe: Implications for the Social Housing Sector’, Brussels, 13 September.
Doms, K. et al., 2001, Op zoek naar eigendom (In search of property), Leuven
Goossens, L., 1983, Het sociaal huisvestingsbeleid in België sinds 1830 (Social
housing policy in Belgium since 1830), in: Knops, G. & L. Goossens (eds.), Sociaal woonbeleid (Social housing policy), Brussels (Koning Boudewijnstichting), pp. 12-33.
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market, regulation and inflation: post-war housing policies compared), Nederlandse Geografische Studies, Utrecht.
IMF,2006, Belgium, selected issues, IMF Country report 06/76 (www.imf.org).
Meulenaer, G.,2006, België is niet langer een sociaal paradijs (Belgium is no
longer a social paradise), in: Trends, 31 August.
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[ 65 ]
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[ 67 ]
4 Finland: Trust, risk-taking
and scepticism
Päivi Naumanen & Hannu Ruonavaara1
4.1 Introduction
In this chapter we will investigate how households in an average Finnish
neighbourhood understand the meaning of housing, especially that of housing tenure, and how they perceive security and the risks attached to their
housing. The chapter draws on the Finnish household interview report (Naumanen & Ruonavaara, 2005) and the institutional study (Ruonavaara & Naumanen, 2005) prepared for the European Commission as part of the OSIS
Before presenting the results of the qualitative interviews, we will describe
the institutional context (Section 4.2). The chapter begins with a discussion of
the main developments in the Finnish economy, labour market, social security and housing market. The following sections describe the findings of the
interviews held in Turku. Section 4.3 elaborates on the interviewees’ housing decisions and the meaning of tenure. Section 4.4 looks at the respondents’ perceptions of security and the risks attached to housing and tenure.
Section 4.5 focuses on the safety nets and precautions taken to accommodate
the potential risks. Finally, Section 4.6 concludes the chapter with a summary
of the main findings and the discussion.
The Finnish qualitative interviews were conducted in the city of Turku,
mainly in one of the city’s residential areas, Ilpoinen. In terms of the distribution of housing tenures and the socioeconomic and demographic profile, the
neighbourhood of Ilpoinen, which has around 3,000 residents, compares well
with the city of Turku as a whole and, furthermore, does not differ significantly from the national average in any large urban municipality in the country. The analysis presented in the following sections (4.3, 4.4 and 4.5) is based
on twenty-eight qualitative interviews conducted between May and September 2005. The interviewees were recruited using various channels. Advertisements were published in a community programme’s bulletin and website,
leaflets were distributed to mailboxes, public notice boards, health and day
care centres and even in the local pub in the area, gatekeepers (a community
group, landlords and heads of public offices) were asked for help in accessing
respondents and finally the research team made three separate tours in the
neighbourhood of Ilpoinen, knocking on doors to ask people directly if they
were willing to participate in the research.
Altogether twenty homeowners and eight tenants were interviewed in
Ilpoinen and in the surrounding neighbourhoods, Koivula and Peltola. Twelve
1 We would like to thank Jenni Jakku and Carita Lockmer for their research assistance in drafting this chapter.
[ 68 ]
of the homeowners lived in flats and eight in owner-occupied houses, a distribution that reflects the division of owner-occupied housing in urban municipalities in general. Tenants were equally divided into those living in private
market and ‘social’ rental housing (which also reflects the general situation).
Two thirds were living with a partner with or without children. Four fifths of
the respondents were either employees or self-employed. A little more than
half of all respondents were under 45 years of age. There were slightly more
females than males among our main respondents (females 16, males 12).
4.2 The national context of the research
Finland has 5.2 million inhabitants, of whom about two thirds live in urban
areas. It is a parliamentary democracy and was ruled from 2003 to 2007 by
a coalition government consisting of the Centre Party, the Social Democratic Party and the Swedish People’s Party. In terms of ethnicity, culture and religion Finland is a very homogeneous nation. In 2006, about 91% of the population spoke Finnish and 6% Swedish as their mother tongue. About 1,800 people had Sami and 21,000 Russian as their first language. Less than 2% of the
population spoke some other native language (Statistics Finland, 2006b). Although at the moment Finland has one of the highest birth rates in Europe
(total fertility rate 1.8 in 2005), the population is aging very rapidly. The population is predicted to grow until 2015-2020. After that, the demographic structure will change radically. The baby boom generation born between 1945 and
1955 will reach retirement age and the proportion of the population over 65
years of age will rise from 16% to 27% by 2030 (Forsander, 2002, p. 88). By then
at the latest, it is estimated that the country will have an equal number of dependents and working people.
In the past ten years Finland has experienced significant economic growth,
with production capacity increasing and the income level of the population
rising. However, despite the fact that a large majority of the Finnish people are
currently doing well and are more prosperous than ever, there is still a section of the population which is relatively poor and whose standard of living
is worse than before. The material and social inequalities between Finns have
evidently increased during the years of prosperity. The system of social security, which is said to bear a close resemblance to the so-called Scandinavian
welfare state, known for its high levels of compensation and wide coverage of
services, was relatively badly affected by the depression of the 1990s and by
the restructuring of the system. It has been struggling constantly with financial problems, prioritising and cutting costs. In the aftermath of the depression, the housing market and housing provision also underwent some substantial changes. In the following sections we will shed light on these developments.
[ 69 ]
The economy and the labour market
The structure of the Finnish economy has changed very rapidly over the last
forty years. The proportion of the total output contributed by agriculture and
manufacturing – and even more clearly the share of employment – has declined, while the contribution of the service sector has increased. In the
1950s, half of the population was still employed in agriculture and forestry.
Fifty years later, almost one third of the labour force was working in the public service sector, more than one fifth worked in industry and one in every six
people was employed in the commercial sector.
After the post-war period of steady economic progress, Finland was hit by
an exceptional and deep recession in the early 1990s. The economic crisis led
to a decline in GDP, explosive growth in unemployment, bankruptcies, a banking crisis, a crisis in public finances and the collapse of the housing and property markets (see, for example, Doling & Ruonavaara, 1996; Kalela et al., 2001;
Kautto & Uusitalo, 2004). The Finnish economy and society recovered from
the crisis in an astonishingly short period of time in the late 1990s, but the
depression has had a lasting impact on the social structure. The labour market in particular has been transformed. After the depression of the 1990s longterm unemployment became a constant problem, part-time work and fixedterm contracts became more common, there was an increasingly strong focus
on productivity, efficiency and shareholder value, and in general there was a
growth in uncertainty and feelings of risk in the labour market. In 2004 one
in every five female employees and one in every ten male employees worked
part-time and nearly 20 percent of all contracts were fixed-term (Labour Force
Statistics, 2005).
In recent years the Finnish economy has performed very well, as shown by
various growth indicators (see Kiander et al., 2004). From 1994 to 2000 output
grew on average by almost 5% and exports by 11% annually. From 2001 to 2003
the growth rate was close to 2% per annum. In addition, the real income level rose rapidly after the depression years. In 2003 the real income level in Finland (the level of GDP per capita) was slightly above the average of EU countries (ibid. p. 4). According to Statistics Finland’s preliminary data (National Accounts, 2005) the GDP per capita was € 30,005 in 2005. Strong economic
performance during the last ten years has also helped to increase tax revenue
and decrease public expenditure. The state budget showed a surplus in 2000.
Even though the Finnish economy is performing strongly, the employment
situation has not fully recovered. At the beginning of the 1990s, the employment rate was 10% higher than in EU countries on average. During the recession the total employment level fell by almost half a million. Since the recovery, from 1996 onwards, the employment rate has improved year after year,
although the rise in the employment rate was very slow (as compared to the
fall during the recession). In 2005, the employment rate in Finland was 68%,
and the number of employed people (2.4 million) still remained below the pre-
[ 70 ]
depression figure. Furthermore, the unemployment rate has been falling gradually, although it exceeds the EU average. According to Labour Force Statistics
(2006) the rate of unemployment was 8.4% in 2005.
Whilst the overall unemployment rate has fallen, the long-term unemployed still constitute a relatively high proportion of all unemployed people
and face a serious risk of becoming totally excluded from the labour force. In
addition, youth unemployment and precarious employment are the other key
concerns for Finnish policy makers. Whereas the long-term unemployed are
usually older, male and with a relatively low level of education, the precariously employed with fixed-term and short-term contracts are usually younger, female and better educated (Naumanen, 2002). In 2004, half of all employees in temporary positions were under 30 years of age. In the 25 to 43-year-old
age group, at least twice as many women as men are employed on fixed-term
contracts (Ministry of Social Affairs and Health, 2006, p. 138).
Social security
The Finnish model of social protection is based on two pillars: the system of
income security and the system of welfare services. The overall aim is to provide reasonable basic security for all, earnings-related benefits for those with
work history, special income transfers for people living on low incomes and
equal access to welfare services irrespective of personal wealth, gender or
place of residence. Statutory income security consists of residence-based security and employment-based security. Most social security is based on residence, which means that those who live in the country can claim the benefits.
A person who is regarded as a resident is entitled to apply for various benefits
that are administered by the Social Insurance Institution2. In addition, local
authorities provide last resort, temporary social assistance (income support),
which is intended to supplement the benefits in cases where the disparity between a person’s income and living costs is too great or where there are delays in the payment of benefits. The system is further complemented by social care and services financed by taxation, run by local authorities and available to all residents according to need.
The Finnish system of social security developed rather late but rapidly after the Second World War from “Poor Relief” to a more comprehensive
and institutionalised model of social welfare, and has been an important tool
in smoothing the country’s rapid transition from an agrarian society to an
industrial and service society (Niemelä & Salminen, 2003). Until the 1990s, the
2 Residence-based security includes numerous benefits ranging from the family allowance and child home care
allowance to the family pension and state pension. Employment-based security includes the earnings-related unemployment allowance, accident insurance and protection against occupational accidents and illnesses (Niemelä
& Salminen, 2003).
[ 71 ]
system worked very well as regards the standards of the Scandinavian model of welfare: the income differences between households narrowed and relative poverty remained at a very low level (see, for example, Jäntti & Ritakallio,
The economic crisis of the early 1990s changed this situation considerably
by causing severe problems in public finance. As a result of the huge budget deficits and the problems of rising loans to cover the increased expenditure, cuts and adjustments were made in all areas of social and welfare policy. Cost cutting together with the growth of a neo-liberal ideology led to a
more profound restructuring of social policy. A strong trend towards reducing
costs was followed by a tendency to increase selectivity and user charges (see
Lehtonen et al., 2001). In spite of ten years of economic growth following the
depression, cost cutting and prioritising have remained constant themes in
the debate on social policy. Whereas Sweden restored many of the cash benefits intended for parents and families and actually increased some in the early 2000s, Finland chose to take a different direction by keeping the cutbacks in
place and allowing inflation to erode the benefits further (Hiilamo, 2004).
After the recession differences both in income and relative poverty began
to increase in Finland. The real incomes of the richest 10% of the population increased the most, whereas the incomes of the poorest 10% of population remained as before, which meant a decrease in relative terms. However, the development took two forms. During the recession years there were
no major changes in income distribution. The recession resulted in a loss of
income, but this was fairly evenly distributed across the income groups and
the restructuring of the welfare state was an important tool. The least welloff did become poorer, but the same thing happened to those who were better
off as well. The post-recession period was clearly different; since 1995 income
differences have increased and the relative position of low-income groups
has deteriorated. This development has been explained by the fact that strong
growth in property income has benefited mainly the highest income group,
but another important reason for the increasing inequalities has been the
changes made to income security (transfers) (Kautto & Uusitalo, 2004, pp. 8889, 99).
In the 1990s, social security benefits, such as unemployment benefit, social
assistance and housing allowance, were modified in a way that weakened
the level of minimum security. No increases were made in the levels of benefits and the terms on which they were awarded were tightened (see Kautto
& Uusitalo, 2004, pp. 88-89; Niemelä & Salminen, 2003, pp. 61-64). At the same
time, the overall need for income protection has remained high as a result
of widespread and prolonged unemployment. Unemployment and changes in
income security have forced the recipients of minimum benefits to rely quite
extensively on the municipal social assistance that was intended as a last
[ 72 ]
From the 1990s onwards the most important form of state housing subsidies has been housing allowances. The share of the total state housing subsidies represented by housing allowances has grown considerably, as the state
has withdrawn from providing direct subsidised housing finance for housing production and as the importance of tax deductions on mortgage interest has diminished. In the new millennium the proportion of total state support for housing in the form of housing allowances has increased, reaching
61% in 2003 (cf. Statistics Finland, 2004, p. 184). Housing allowances are granted to low-income households in Finland irrespective of the type of tenure.
However, little of this support has benefited owner-occupiers. Only 6-7% of all
recipients of housing subsidies were owner-occupiers during the period 19992003 (ibid., p. 154). Moreover, as the number of households – especially renting
households – receiving housing allowances has increased, the level of benefits
has fallen. In the same way as some other income transfers, housing allowances became increasingly means-tested during the 1990s. The conditions for
receiving the benefit were tightened for one and two-person households and
the level of rents taken into account was not increased, which resulted in the
housing allowance lagging behind the increased cost of living. (Kautto & Uusitalo, 2004 p. 89)
Furthermore, the recent improvements to income security have remained
very modest, without any real impact on the purchasing power of benefits. The government, on the other hand, has continued its policy of reducing income tax. Since tax reductions have not been adjusted to the modified income made up of social security, the people relying on social security have had only a limited benefit from the new, more lenient taxation. As
Kautto, Parpo & Sallila (2006, pp. 238, 240-243, 246) predict, further increases in income differences amongst Finns seem likely in the future. They claim
that Finland will gradually lose its traditional status as a country with a low
risk of poverty.
Housing policy and housing tenures
There are three characteristic features of the Finnish ‘housing regime’. Firstly,
the system is based on the presupposition that households satisfy their housing needs mainly by relying on sources other than public provision of housing,
either in the private housing market or by self-promotion of housing. Secondly, housing policy has been understood to be a branch of social policy. Its function has been to help households that cannot help themselves to acquire decent housing. In the past housing policy measures became more intense only
in acute crisis situations, such as those after the world wars, and were abolished when normal conditions returned. Since the 1960s housing policy has
become more institutionalised, and its objective has been to raise the housing standards of the population gradually, especially for those people who are
less well-off, using selective measures. Thirdly, the Finnish housing system is
[ 73 ]
a dualist one with two distinct housing sectors: one where a relatively free
market reigns and the other where access is regulated by means testing and
waiting lists. Jim Kemeny has described dualist rental systems where one part
of rental housing is private and profit-driven and another part is public and
non-profit-making (Kemeny, 2006, p. 2). In the Finnish case, this dualism applies to the whole housing system, as part of the owner-occupied sector has
in the past been subsidised and means-tested (Ruonavaara, 2006, pp. 219-220).
The development of the tenure pattern from 1950 to 1990 is characterised by
the dominance and the growth of home ownership and the decline of private
renting (see Table 4.1). The figures conceal, however, an important change. In
the 1950s, there was a clear distinction between urban communities and rural
ones; in the former renting was by far the majority tenure, in the latter home
ownership was dominant. With the rapid industrialisation and urbanisation
of the country since the 1950s this has completely changed. The share of owner-occupation in urban municipalities has increased and is approaching the
home ownership levels in the countryside. Cities of tenants have been transformed into cities of homeowners and the difference between urban and rural
tenure patterns has diminished considerably. However, this has also resulted
in a change in the form of home ownership. A significant proportion of urban,
owner-occupied dwellings are flats in blocks and terraced houses. Flat ownership is organised in Finland through institutions whose name has a variety of translations in English, including housing corporation, condominium or
housing company (a literal translation of the Finnish term would be ‘dwelling joint-stock company’). Housing companies bear some resemblance, on
the one hand, to the Swedish type of co-operative housing called tenant ownership and, on the other hand, to what is known in English-speaking countries as a ‘condominium’. However, its legal form is sufficiently different from
that of a condominium that it cannot be considered to be the same thing. It
is closer to Swedish co-operative housing, although the ownership rights and
responsibilities it grants to the owner are considered to be more extensive
than in tenant ownership (see Ruonavaara, 2005, for a discussion of the housing company form in comparison with tenant ownership). In the latest statistics just under half of owner-occupiers were housing company owners.
The trend towards the increased predominance of home ownership
changed in the 1990s. Table 4.1 shows an interesting and unique development
when compared with the rest of Europe. During the 1990s the proportion and
the absolute number of owner-occupier households started to decline. It was
at its highest at the beginning of the decade, when 72% of households were
owner-occupiers. By 2002 it had fallen to 64%. A number of reasons for this
can be identified, of which many have to do with the exceptional economic
depression which Finland suffered in the early 1990s (see, for example, Doling
& Ruonavaara, 1996; Ruonavaara, 2003). The growth of home ownership halted, as people were no longer able to buy houses because of unemployment
[ 74 ]
Table 4.1 Households by tenure in Finland, 1950-2002 in %*
- House owners
- Housing company owners
Co-operative owners
- Private**
- Public**
Other or unknown
Households (in thousands)
* Subtenants and other households without a dwelling of their own (the homeless, inmates of prisons and institutions, the
elderly in old people’s homes etc.) are not included in these household figures.
** The percentages for privately and publicly financed rental housing for the years 1950-1970 are estimates based on production statistics for state-financed rental housing.
Source: Ruonavaara, 2006, Table 5.1
and the increase in short-term work, but also because the range of housing
alternatives widened to a certain extent.
Finland has also been a country of mass home ownership in the sense that
home ownership has been the majority tenure in all socioeconomic groups
(cf. Ruonavaara, 1989), even though the clear differences in the home ownership rate according to income, age and family status have remained (cf. Ruonavaara, 1996).
Anneli Juntto (2004a; 2004b) has studied the housing careers of Finns in
order to find out whether they became more differentiated between 1990
and 2001. She found that disparities between the income deciles had significantly increased as regards the tenure status, type of housing, housing space,
dependence on housing allowance and housing-related consumption. Those
with the highest incomes had increased their lead over the others, whereas
the relative position of the lowest groups had weakened. The housing career
of the lowest income group had actually deteriorated as compared to the situation in 1990. As Juntto (2004a) puts it, the owner-occupation of detached
housing has become a more popular form of tenure among well-to-do groups
in Finland, a kind of peak of their housing careers, which is no longer within
the reach of low-income groups, least of all in the country’s growth centres.
Juntto (2004a, p. 108) presents several causes for the deepening differentiation of housing careers. Firstly the increase in income differences has led
to a situation where there are fewer opportunities for low-income groups to
achieve a higher level of housing. Secondly, renting has become more common and family breakdowns more widespread, the amount of income available for tenants to spend on their rents has been steadily falling and rent levels
have risen by more than the costs of owner-occupation. Thirdly, the relatively
low housing costs in mortgage-free owner-occupation have further broadened
the income gap and increased the proportion of people in low-income groups.
The differences in the housing careers increased not only in terms of the
income scale, but also on the basis of the age divide. The current very low
[ 75 ]
Figure 4.1 Development of real selling prices of second-hand flats in
Finland, 1990-2004
Helsinki Metropolitan Region
Rest of Finland
index 1983 = 100
interest rates tempt new
entrants into the owner-occupancy market to take out
large loans, which they pay
off over a longer repayment
period than previous generations did. The new homeowners from the younger generation have large mortgages and
spend a large proportion of
their income on housing and
will continue to do so for decades, given the longer loan
periods (Juntto et al., 2006).
* Estimated
Source: Statistics Finland, 2006
The housing market and house prices
In the aftermath of the depression Finnish housing provision underwent substantial changes. The private rental market, which had been shrinking, saw
an extraordinary level of re-growth. Housing policy also changed. The previously generous tax incentives for home ownership were eroded by changes
in the principles of taxation and the generally low interest level. The subsidy
policy was oriented more towards selective measures and production subsidies were reserved only for social rental housing.
The 1990s recession resulted, amongst other things, in the collapse of the
property and housing markets. These markets were clearly overheated in the
late 1980s and the speculative bubble burst when the depression came. During the late 1980s the easier availability of credit and rising income levels created a large demand for housing, which resulted in a building boom. The economic depression that hit Finland at the end of 1980s brought this phase to
an end. Annual production fell from 65,000 dwellings in 1990 to 21,000 in 1996;
in the present decade housing production has stabilised at a level of 27,00028,000 new dwellings per year (Statistics Finland 2004, p. 125).
At the end of the 1990s the high housing prices plummeted, resulting in
negative equity for large numbers of new homeowners, and the home ownership market came to a standstill for a number of years. By the end of the
1990s the Finnish home ownership market had begun to show signs of recovery, judging from the numbers of sales and the rise in prices. Since the beginning of the new millennium housing prices have been growing steadily. Figure
4.1 shows the development in the price index of real prices of flats from 1990
to 2004, that is nominal prices adjusted for inflation. The figure shows the
development of prices relative to 1983 prices, not their level. In reality prices
in the Helsinki metropolitan area have been considerably higher than in the
rest of the country.
[ 76 ]
Figure 4.2 The development of real rents in Finland, 1991-2005
(adjusted to 1991 prices)
$ per square meter
The figure also shows the
deep decline in housing prices in the early 1990s and their
rise after that. In the Helsinki
region real price levels have
* Estimated
surpassed the 1990 level, and
in the rest of Finland they are
approaching that level. This
implies that the owner-occupier market has indeed recov’93
ered, but the price developSource: Statistics Finland, 2006
ment has also caused concern. Recently experts have
warned about the possible overheating of the owner-occupier market, and it
has even been suggested that the state should abolish some of its subsidies
for owner-occupation. If owner-occupation suffered a setback, the same was not true of renting.
The extraordinary revitalisation of the private rental market in the early 1990s
was partly due to the conversion of unsold, newly built housing intended for
sale into rental dwellings during the early years of the depression. However, the gradual deregulation of the rental market certainly had a more lasting impact on the renaissance in private renting. Until the early 1990s Finland
had a system of rent regulation that controlled rent levels in the private rental
market. This was abolished and the final traces of rent regulation had disappeared by 1995. In addition the regulations concerning rental contracts were
relaxed which had the effect of reducing tenants’ security of tenure slightly.
The free market in rental housing and a tax reform, which reduced taxation
on capital income, acted as an incentive for investors and small-scale owners
of housing to become landlords. With the steady growth in the state-subsidised, non-profit rental sector, rental housing has recovered some of its position as an alternative to home ownership.
The deregulation of rents created a situation in which rent levels in the
private and the subsidised market started to diverge (see Figure 4.2). When
rents in the private sector were deregulated, those in the subsidised sector
remained cost-based and increased more slowly than in the subsidised sector. However, the difference has not been very great even in recent years, partly because the structure of the housing stock in the two sectors is different.
There is more newly built rental housing in the subsidised than in the private
sector, and the average rent levels do not differ significantly from the private
sector as a result of the historically high costs of the new housing stock.
Changes in the labour market and the housing market have created a situation where some of the ‘old truths’ about the Finnish housing system are less
evident than before. Moreover, the changes in the financial markets have also
[ 77 ]
had an impact on the environment in which households make housing choices. The deregulation of the financial markets in the late 1980s contributed
to the economic and housing market crises of the early 1990s. But they also
resulted in more positive developments; since the end of the depression, the
housing finance markets have functioned much more effectively than before.
There are more financial products available for homebuyers than before with
more flexible and varied terms and, most importantly, loan interest rates
have remained at a relatively low level. The lower interest rates and longer
repayment periods have enabled more people than ever before to buy houses. On the other hand, the present high prices of dwellings have largely offset the benefits of cheaper loans (Kärkkäinen et al., 2006). In the face of these
changes it could be argued that the country has been undergoing a significant
transformation in the way in which the housing market works and the way
in which people’s housing careers are likely to develop, in comparison with
the system in place during the majority of the post-war period. Therefore, the
views of Finnish people on the security and risks of different forms of housing are particularly interesting to investigate.
4.3 Housing decisions and the meaning of tenure
Perceptions of owning and renting
Even though the Finnish labour and housing markets have undergone major crises during the 1990s and in the period which followed, our respondents’ views on housing and their tenure preferences are consistent with the
very conventional viewpoints held by Finns. Home ownership and especially owner-occupation of detached houses is the form of housing that is generally believed to be preferred by Finns. However, there is very little fresh survey evidence relating to the housing values and attitudes of the population.
Housing at
some of the
interview locations in the
Ilpoinen neighbourhood in
Turku, Finland.
[ 78 ]
Recent surveys of young people’s housing preferences, for example, do show
that home ownership is still the preferred form of tenure, and no substantial
changes in these preferences seem to have taken place. However, this should
not be regarded as self-evident following the experience of the housing market
crash in the late 1980s and early 1990s. In our sample, home ownership is the
preferred form of housing and tenure amongst both homeowners and tenants.
For respondents in Turku housing means, first and foremost, a home –
a place of privacy and a place where one can feel safe. These two qualities,
privacy and safety, are the basic attributes of the description of a home, and
occur frequently in the answers given by both homeowners and tenants. A
homeowner describes her feelings:
“It gives you a feeling of security and protection from the world outside. And it’s
also your own private space. I mean, in a way you never know what’s happening
inside your neighbour’s four walls. You only see what’s happening on the outside.
But anyway, this is somewhere that’s really mine; nobody can come in unless I let
them in” (homeowner, woman, 56 years old). Apart from this broad agreement between the interviewees, there are some
important tenure-specific differences in the meaning attached to the home.
For homeowners housing means not just privacy, but also being independent
and free from external control; it means that you can do as you like with the
property, and there is no landlord to check what you do. For some respondents the feeling of being at home is directly proportional to the extent of the
environment in which they can operate freely. For those who own a detached
house with a yard or a garden around it, housing often means being busy and
doing various things outside, such as gardening, something that is virtually impossible for tenants and also for many homeowners living in blocks of
flats. Here tenure and house type are closely interrelated, although these actually are two different things. The difference is more evident in Finland than
in countries where the owner-occupation of flats is non-existent or rare, because a substantial proportion of owner-occupied housing is in blocks of flats.
Moreover, detached housing is rarely available to rent. As the preferred type
of housing in Finland is generally detached houses, this may also bias tenure
preferences towards owner-occupation.
For the tenants in our sample, home is not in the first place associated with
the freedom to do what they want. The only freedom they associate with
housing is the freedom from debt and from the responsibility of maintenance
that is a burden for some homeowners. In addition, some owner-occupiers refer to their feelings of pride and sense of achievement when describing their perceptions of their home. This is congruent with the view expressed by many
homeowners when we asked them about the role of home ownership in the
country as a whole. They said that being a homeowner is a matter of status,
[ 79 ]
performance and esteem. For older people a house or a flat of their own is not
simply a property and an indication of financial success, but also an essential
link between the generations.
Tenants refer less often and much less emotionally to the special meaning of their home than homeowners do. They are more inclined to understand their home as (merely) a roof over their head, in other words a consumer product. Some even claim that being a renter does not have any additional
or special meaning for them. According to a young couple (both starting their
working career) their rented flat is not a home which they strongly identify
with but rather a temporary place to live, because they are intending to buy a
property as soon as they have secure jobs.
When exploring the meaning of tenure, it is especially interesting to find out
to what extent housing is associated with themes of economic security and
financial investment. When homeowners are asked what are the main reasons for buying and owning a house rather than renting, one reason they often give is financial rationality: they think that in the long run it is a more affordable type of housing than renting. In other words, over time they will probably
be better off, in terms both of saving capital and cutting their housing costs.
For some owners this preference is not so much an ideological choice, in
the sense that they see intrinsic virtues in home ownership itself, but rather – as they wish to point out themselves – a very practical decision. In particular those owners who have had a long housing career in the rental sector
and have changed tenures later in life justify their decision by referring to the
high costs of renting. They have calculated and compared the expenses of different forms of tenure and reached the conclusion that over time the cost of
ownership will be lower than the cost of renting.
For the owners with a longer career of owner-occupation, the superiority of
ownership seems to be self-evident. They do not question their choices. When
asked about the reasons, they justify their decisions on the basis of rational
economic motives; they have chosen to own their own home because in the
long term this offers a more affordable means of housing than renting. Furthermore, paying a mortgage is seen as preferable to paying rent to a landlord, because it allows them to accumulate wealth for themselves and not for
someone else. For many of the owners the motive is clear and simple: “It just
makes no sense to give money away.” The economic rationality is often linked
to arguments about the feeling of freedom and well being that home ownership is seen to give.
“I have the impression that if you rent a property and pay your money to someone
else, in ten years’ time you will have paid a lot of money to your landlord, and you
won’t have anything to show for it. — — It’s just like taking money out of your
wallet and giving it to someone else. It feels bad” (homeowner, male, 58 years
[ 80 ]
When buying a house or a flat and paying a mortgage, you are at the same
time building something (equity?3) for yourself, which is an opportunity that a
renter misses out on entirely. This is the central idea shared by many homeowners as they explain their housing preferences. As it is repeated over and
over again in the discussions with the owners, it starts to sound more or less
like a myth4 that governs the Finns’ perceptions of the housing system. Tenants largely share the homeowners’ preference and the related views about
economic rationality, but they believe that they do not have the financial
means to achieve their housing goals. They are also very cautious about the
financial risks associated with home ownership. To some extent, tenants feel
that the dominance of home ownership creates normative pressures relating to the way in which people’s housing careers should develop. The norm of
home ownership is associated with financial resources and employment status: if you are employed and have a regular income, you should own a property, otherwise you are not “sane” – a conventional piece of wisdom that one of
our respondents wants to challenge:
“But other people do not regard me as a sensible person, because they think that
you should only pay for things which will belong to you one day. I am an exception
because I do not share this piece of wisdom. I have a very different piece of wisdom;
I don’t want to be in debt” (tenant, male, 40 years old).
Relationships between housing decisions, labour markets, social security
and personal well being
Life course considerations, financial reasons and housing considerations are the
main motives behind interviewees’ major decisions about their housing. The
most prevalent reasons for respondents to leave their parental home are
work, study and relationships (marriage or cohabitation). After the first move
– the big separation – the reasons become much more diversified. In addition
to so-called life course factors (study, employment, relationships, starting a
family), the moves are also based on factors relating to housing itself, such as
housing circumstances (space, equipment, outdoor areas etc.) housing costs,
availability of different forms of housing, tenure and housing security (sales,
When asked whether and how other aspects of life impact on their housing
decisions, the interviewees usually speak about their work situation (respondent’s own or partner’s), the environment for children to grow up in (playground,
day care, schools) or the importance of relationships (relatives, friends) either
3 The respondents themselves do not use the Finnish language equivalent of the word.
4 By ‘myth’ we mean here a generally held belief about a state of affairs that members of the culture in question
‘know’ to be true without examining any evidence for it (see Ruonavaara, 1994).
[ 81 ]
encouraging or preventing them from moving. For the tenants, however, the
most decisive reasons are connected with their financial situation. It is the small
income of a single parent, unemployment or poor employment (part-time, precarious) or just lack of money and financial resources that prevents renters
from fulfilling their housing goals. The renters do not want to put their financial situation at risk by getting into debt and therefore they would rather continue renting, even if they would clearly prefer to own a property.
By tracking the decisions made in respondents’ housing careers, it is easy
to identify a pattern of tenure shifts which progresses predominantly in one
direction: from renting to home ownership. Most homeowners have rented at
the beginning of their career, but only one tenant has been an owner-occupier before being in the current situation of ‘forced’ tenancy due to unemployment and a reduction in income. This result supports the conclusion that, for
Finnish respondents, it is home ownership and not renting that is the target
and the peak of their housing career (with regard to tenure).
For some respondents in our sample it is easier to identify how other aspects
of life affect housing decisions than vice versa. Tenants who have no history of owner-occupation at all have difficulties in understanding how housing,
and in particular the form of tenure, has influenced their lives. In contrast, the
homeowners who have previously been tenants can easily compare the two
forms of tenure and analyse the impact that both have had on their lives. They
mention the following effects of home ownership on their lives:
nSpending money: initially the need to pay the mortgage restricted their
spending in other areas, but as soon as the mortgage is paid off, there is
more freedom to buy other goods.
nRelationships: the threshold for separation or divorce and moving away is
higher when owning.
nHobbies and leisure: more time and more money are spent on building
work, decorating and furnishing.
nSocial activities: greater willingness to take part in decision-making and
managing community issues, for example involvement in a homeowners’
housing company, in voluntary work, in environmental matters etc.
nEmployment: paid employment is necessary in order to be able to pay the
mortgage. One husband has passed up a job opportunity because it is too
far away from home.
nStudying: flexible mortgage payments have enabled some respondents to
study because the payment conditions are better than when renting (a single
parent claims that she could not have done this if she had been paying rent).
nLifestyle or way of life: a more organised and settled way of life is needed (a
regular rhythm). Some owners refer to qualities such as taking responsibility for one’s actions and self-control when speaking about the positive attitudes that they are developing because of home ownership (in contrast to
[ 82 ]
nHealth and well-being; owners of a detached house with a garden maintain
that their house is keeping them young, healthy and happy because they
spend a lot of time doing all the little jobs in their garden. They also believe
that they do not need a holiday home or summer cottage because they are
already close to nature.
A good, steady job is necessary because it provides the financial resources
needed to purchase a house. However, when homeowners are asked about the
factors that have impacted most on their housing decisions, relatively few describe their job as a major resource for building up a housing career. This may
imply at least two things. Firstly, for many people employment may be such a
self-evident factor in this context that it is not immediately recognised – unless it is lacking and therefore complicates the financial situation. Secondly, it
may imply that, besides employment, there are other significant resources for
homeowners. For instance, intergenerational transfers offer an additional resource for home ownership. Most homeowners have either inherited property,
assets or money, or expect to inherit something in future. Therefore it may be
that permanent employment with a regular income is needed (and acknowledged) particularly in those cases where people cannot rely on the help of
their parents’ accumulated housing equity to buy their own houses.
The tenants seem more likely to recognise the value of a good job when
buying a house than the homeowners do. Employment and finances are the
main factors which impact on their housing decisions. This may be due to the
unfortunate fact that they do not have a good job themselves and have not
inherited property or money (with the exception of one tenant interviewed).
A couple of the homeowners in our sample who have not been so lucky
with their housing finances are of the opinion that mortgage payments tie
homeowners more tightly to the employment situation they are currently in.
Those who are unemployed or have previously experienced periods of unemployment are evidently concerned about their employment situation and the
possible finance problems, which may be caused by breaks in their working
career. A female homeowner with a history of unemployment is pessimistic about the possibilities of the younger generation becoming homeowners
because of the growing share of temporary employment and increasing insecurity in the labour market:
“It [the role of owner-occupied housing] will change now because of this uncertainty
— — you have a temporary job and so on — — you may work in Pori5 and live
here and — — a lot of people are still building their own houses6 but not as many
5 A town about 150 kilometres north of Turku.
6 A considerable share of owner-occupied detached housing in Finland is, at least to some extent, self-built.
[ 83 ]
as before — — it was possible to build at that time because people had guaranteed steady jobs and they lived their whole life in the same place — — but not any
more” (homeowner, female, 55 years old).
Even though full employment self-evidently provides important financial resources for buying a house, this does not imply that permanent employment
is regarded as an essential precondition for becoming a homeowner. On the
contrary, only three homeowners regard the insecure employment situation
of the fictional young couple in vignette 1 as sufficiently critical to have an
impact on their suggestions for what the couple should do. The majority of
homeowners (13) would advise the young couple to buy a home of their own.
Six homeowners believe that the couple should rent first, and three of them
explain their suggestion on the grounds of the potential risk of the relationship breaking down and not because of the insecure job. However, the tenants
recognised secure employment as a necessary precondition for becoming a
homeowner and framed their suggestions accordingly.
The use of housing resources
For many owner-occupied households in Finland, the flat or house is the most
valuable piece of property they own. Respondents in Turku not only believe
that home ownership is an affordable type of housing, but they also tend to
believe that it is a profitable investment as well. However, as will be seen later, in the Finnish context a house or a flat where you live is not regarded as
being similar to other financial investments, but instead is considered to be a
very special kind of investment.
Generally, respondents’ views on the overall profitability of housing as an
investment are based on their profits from the sales of previous properties,
on estimates of the value of either their own or somebody else’s property and
on the constantly rising house prices over the last ten years in the cities in
the south and west of Finland. Furthermore, many owners mention that they
have benefited from the tax deductions on mortgage interest. Only one owner thinks that her household has not benefited financially from housing. The
reason for this is that the family built the house at a time when interest rates
were high and building was very expensive. Just like the owners, the renters
tend to believe that home ownership is currently paying off. As some renters
comment, home ownership must be highly cost-effective because the prices
of both rental and owner-occupied housing are so high. However, two tenants
want to point out that they cannot see housing in terms of a financial investment at all, but instead as an investment in well being.
For the interviewees using housing as a financial resource primarily means
being able to buy another, better, bigger house. Occasionally respondents even
seem to think that using housing equity for purposes other than buying a new
home or financing repairs and extensions to the old one is simply not appro-
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priate, unless there is a really pressing need to release money. Spending the
money on leisure and travel is considered to be a frivolous use of hard-earned
housing equity. A middle-aged man believes that it is financially worthwhile
to be a homeowner, but for him using the housing equity for other financial
purposes is not even conceivable:
“It [an owner-occupied house] could be that [a financial investment] for somebody
else. For people who inherit property it probably is a financial investment, but for
me it isn’t — — because I don’t have any plans either to spend the money or gamble with my house” (homeowner, male, 49 years old).
In the past, respondents have used housing as a financial resource in three
main ways: Firstly, they have used the profit from the sale of a previous dwelling to
buy a new one. This is the most common way in which respondents have used
housing equity. Secondly, they have used the house or the dwelling as a collateral security for a loan, either for housing or some other purchase. Thirdly, they
have used the profit from the sale of a property or part of their mortgage to pay off
other debts. Quite a few maintain that they have not used their housing as a financial resource at all and some are a little confused about what is actually
meant by making use of housing as a financial resource. Furthermore, when
the interviewees were asked an open-ended question about whether they believe their housing would provide them with a financial resource in the future, a number of them were hesitant to answer. They replied initially that
they had not considered their housing to be a financial resource of any kind.
This reflects perhaps partly the fact that schemes for using housing equity
have not been available in Finland until very recently.
Similarly, the future purposes that the respondents consider they could
use their housing equity for are most often related to housing: either for purchasing a new property (better-equipped, bigger, better location) or for further home improvements (rebuilding, redecorating). Only few would consider
using it for purposes such as consumer goods or care needs. Instead, for many
it is important to pass on the ‘nest egg’ they have built up in their house to
their children to ensure their well being.
Whilst only a few would themselves consider using housing equity for purposes such as consumer goods or care needs, more of the respondents, however, were ready to accept the idea that fictitious friends (in vignette 2) could
increase their income or pension by releasing housing equity via an equity
release scheme. The respondents who are ready to accept the scheme argue
that this allows elderly people to be more independent and fights over the
inheritance to be avoided. Those who reject the scheme think that it disregards the needs and wishes of inheritors, that it is not a very reliable way
to obtain an income because most of the profit will go to the banks anyway or that the state should take care of those people whose pension is too
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small. The third group of interviewees might approve of the scheme, if it was
improved or used only under certain conditions, such as (a) if the homeowners have no children or other heirs or (b) if there is a really serious need for
Overall, the idea of using housing equity as a source of finance seems still
very new and strange for many respondents. For some people housing and,
particularly the owner-occupied home, represents a kind of a ‘sanctuary’,
which should not be mixed up too closely with economic considerations.
4.4 Security and insecurity
When asked about whether their housing makes them feel secure, most respondents irrespective of tenure answered ‘yes’. In the interviews there are
only few references to the more prevalent elements of insecurity (financial
stress and worries). Also judging by the low perceived likelihood of risks occurring, the households seem to be in a relatively safe position – or at least
they seem to feel that this is the case! The recession of the early 1990s and
the restructuring of policies in its aftermath have only had a minor impact on
the lives of the average Finnish households, and this evidently did not affect
everyone, but mainly those who had lost their jobs or their assets or had had
to content themselves with a lower standard of living.
The households’ feelings of security or insecurity do not in any consistent way correspond with the divide between owners and renters. Homeowners feel safe because home ownership provides security of tenure: no one
can sell their housing and drive them away, or at least not that easily. However, it is not possible to conclude from this that in general homeowners feel
more secure than tenants. There are, however, qualifications to the general
feeling of security. One owner-occupier even points out that home ownership
means “security, but only if my pocket can stretch to it” (homeowner, female,
40 years old).
The securities of renting
The perception of security varies more within both tenure groups than between them. The social tenants, living in housing owned by a municipal or
other non-profit organisation, feel their tenure to be secure because they
know that they cannot be evicted unless they misbehave, commit a crime or
fail to pay the rent over a long period. They also feel relatively financially secure, because their landlords are obliged to do all the maintenance and, furthermore, they know that they will be eligible to receive the municipal housing allowance or social assistance in the case of economic hardship. Some
tenants reflect on security by contrasting their present situation with the potential situation of the homeowners. They feel secure because they know that
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they will not have the problem of paying a large mortgage if they become unemployed, are seriously injured or ill.
The situation is more complex for the tenants in the private sector. Out of
four private tenants in the sample, there are two contradictory and two relatively vague cases with regard to the security of tenure. On the one hand,
there is a completely unworried middle-aged couple who have a trusting attitude towards their landlord because they regard him as being very reliable.
They believe that they do not need to worry about being given notice to leave.
On the other hand, there is an unemployed young lady who feels very insecure about her tenure. In her case, a rental flat she is occupying with her husband and son was recently sold to a new owner, and the family heard about
this only when they were signing their new contract. The fact that the information had been concealed has obviously had an impact on her feelings of
insecurity. For her, being a tenant implies insecurity and stress, because she
does not know how long they can remain living in their home.
The security of home ownership
Homeowners do not necessarily feel more secure than renters, but they nonetheless spend more time thinking about the issue. They also refer to a wider variety of aspects concerning housing-related risk and security than renters do. One important aspect of security related to home ownership derives
from the knowledge that there is a ‘nest egg’ or ‘seed money’ invested in the
property, which the owner will receive (with a profit at best) when selling the
property. One homeowner explains the benefits of home ownership and her
feeling of security:
“When you have been paying for your own property — — in small amounts — —
but anyway, you build up a kind of ‘nest egg’. One day perhaps, if you urgently
need to sell your property, you can cash in the ‘nest egg’” (homeowner, female, 26
years old, male, 29 years old).
Even the owners whose equity is not that large tend to believe that their
home is an investment that will naturally pay off. Furthermore, if the owner
has a family, the ‘nest egg’ gives a feeling that the children are likely to have a
comfortable start to their life and housing career in the future.
The homeowner who is quoted is young and has no personal experience
of the housing market crash. However, the strong belief that there will be a
‘nest egg’ to be collected one day seems to be embraced more generally by
the other homeowners, since only one reflects on the potential risks of a fall
in house prices or a rise in interest rates. And even that respondent feels that
these risks are not very likely to come to anything. This, perhaps, indicates
the firm confidence Finnish homeowners have in the workings of the property market.
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Those who have experienced financial, social or other hardships at some
point in their lives usually feel more insecure than the others. Unemployment, divorce, death, illness, injury, bankruptcy, aging and eviction are incidents and turning points in life that have caused the respondents to reflect
on the security of their housing and finances. However, even though these
people may feel insecure and anticipate risks, they do not relinquish the idea
that home ownership provides them with security. The explanation is that for
them home ownership itself functions as a means of insuring oneself against insecurities. The response of one unemployed homeowner to a question about how
home ownership contributes to her feeling of security is as follows:
“It’s simply that I’ve got a bit of money stashed away when or if — — I sell it [the
dwelling], I’ve got about twenty grand, [but home ownership does] not [contribute
to security] in any other way in particular” (homeowner, female, 39 years old).
Besides financial security, homeowners often contrast their security of tenure
with the insecure situation of (private) tenants. Homeowners’ security of tenure and financial security together may provide a safe base from which to tackle other kinds of insecurities in life. This point is inherent in the ‘life-story’ of a
middle-aged immigrant, for whom owning a home has brought feelings of existential security. At the time she was looking for housing in Turku, she had
lost the close ties with her relatives and had experienced the sudden death of
her fiancé. Furthermore, she had undergone a difficult operation and was also evicted because her flat was sold. All of these experiences had made her
think of the fundamental insecurities of life, such as being disabled, sick or
helpless. How could she go on living, if she did not even have a place of her
own? Therefore, home ownership provided her with some compensation for
the lack of ontological security caused by the tragic incidents and the absence
of kinship ties.
Another interesting factor is the notion of growing self-confidence associated
with home ownership by a middle-aged Finnish homeowner who has previously rented. She says that she feels secure because she has more self-confidence now than she did when she was a tenant and is able to take part in the
decision-making process relating to her house and its surroundings.
Housing-related risks and the role of housing in risk perception
In their overall assessment of the potential risks which threaten their housing
situation, both tenants and homeowners give the impression that they have a
relatively trusting attitude towards life. Risks related to housing seem somewhat unclear and diffuse and, for the most part, the respondents believe the
risks to be possible, but not very likely.
Homeowners take into account a wider range of risks than tenants. They
mention risks such as accidents, deaths, serious illnesses, losing children or
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husband, disabilities etc. These are risks that do not come up in the tenants’
interviews. Homeowners are mainly concerned about their health and problems that might prevent them from working. Homeowners over the age of 40
feel anxiety about health-related problems and about their continued ability to remain in their current homes. Women are usually worried about the
health of their husbands. These worries are intertwined with concerns about
paying the mortgage on their own or maintaining the house. For older homeowners, financial risks are more unlikely because their mortgages are already
relatively small or have already been paid off. However, younger homeowners also feel relatively confident about their prospects of finding another job
if they become unemployed.
The concern of homeowners about a wider range of risks may be explained
by the fact that they realise that they have a lot to lose if a misfortune were to
happen to them and they were forced to give up their home. Their home may
be something to hold on to, a point of reference which represents their whole
life. If their home, which is a place of security and a haven in a harsh world,
is threatened, people feel that they are very much at risk. For homeowners,
being forced to move may equate to losing their independence, not to mention the effort, time and money they have put into their home:
“Now I feel that...as long as I stay healthy I won’t leave my home at any price...
I’ve had a hell of a job sorting out the house (laughs)...I’ve repaired the whole place
from the rooftop to the cellar and... and it has a sort of sentimental value, you
know...” (homeowner, male, 63 years old).
For tenants their finances are critical and they regard financial risks as being
more likely than homeowners do. The renters also mention the deterioration
of the neighbourhood as a possible risk. However, the social renters are confident of managing even in the case of unemployment, as they believe that potential increases in rent will be relatively small. Overall the tenants occupying flats owned by municipal or non-profit organisations tend to feel more secure than the tenants living in the private sector of rental housing (although
their security is not seen as being equivalent to that of homeowners). Being
a tenant is not considered a risk per se, but unfortunate incidents in other
areas of life (unemployment, divorce etc.) may influence the housing situation, acting as a catalyst which causes deterioration and uncertainty. All in
all, the risks seem rather distant and hypothetical for most tenants. One reason for this may be that younger tenants who are living in social rental flats
acknowledge that the risks relating to their current housing are minimal because “they simply cannot go any further down the scale”. The tenants who
are firmly heading towards home ownership and consider their tenancy as a
temporary phase may easily overlook the risks of their current housing, because they are more occupied with calculating the risks of ownership.
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“We’re probably at the bottom of the food chain here (laughs) — — so, there’s no
way of falling further down. — — Of course, when I think of my own work situation and so on, there are certainly risks — — like breaks in employment — — But
even then, let’s say, if I was unemployed, I could easily stay living here” (tenant,
male, 29 years old).
Despite the fact that the tenants in our sample are less wealthy, less prosperous, less secure (insured) than the homeowners and more often meet the criteria of marginal status than owners do, their perceptions of risks and security do not differ much from those of homeowning households. As mentioned
above, the feeling of security in the present housing situation does not clearly
follow the divide between homeowners and tenants, and there is more variation within the groups than between them. Within each tenure group the feeling of security is more closely related to the past experience of insecurities and
risks than to the socioeconomic situation of the household. For those respondents who have experienced major difficulties or tragic events in their lives, the
risks are more concrete and more readily anticipated. A woman who was shot
at in her garden on the housing estate where she lived previously feels that
there is a real risk of her current and otherwise calm and decent neighbourhood deteriorating. She uses the word ‘fear’ when referring to antisocial neighbours. The respondents who have not experienced insecurities of this kind are
more ambiguous and obscure in their assessments of possible risks.
Risks and insecurities predominantly concern those people who have experienced serious threats in their life and those who have memories of financial or social hardship. However, in our study, the deep recession of the 1990s,
the high rate of unemployment and the housing crash seem not to have made
owners more sensitive or cautious about the risks of home ownership. On
the contrary, many of them seem to be even bolder than ever. A ‘tough’ attitude towards individual risk-taking was identified particularly amongst the
younger homeowners and the owners in more marginal positions (two factors
which often coincide). The younger owners do not have personal memories
of social crises, such as the housing market crash. They may also have been
have grown up in a more risky institutional environment than the older generations have. Some of the owners actually feel safe and secure even when
they are expressing their awareness of the ‘objectively measured’ insecurities
of their own situation. For example, a young single mother who acknowledges her risky situation which involves a relatively large mortgage and a fixedterm work contract says she feels that being a homeowner has a lot to do
with experiencing security. On the other hand she still comments:
“But really, I’m not sure if it actually makes any difference [owning or renting],
because if the worst came to the worst, it would probably mean losing my home”
(homeowner, female, 30 years old).
[ 90 ]
It seems that losing one’s home might be even worse than losing one’s prosperity!
For some owners the risk is an inherent part of home ownership. Risks are
natural and facing up to them is a worthwhile step on the way to becoming
a homeowner. One of the owners, who initially suggested that the couple in
vignette 1 should rent, believes that buying might be the right decision to
“If you have such bad luck that you can’t get a steady job within a few years, it
seems to me that you might well have to change your views [on buying a home]
— — A certain degree of risk-taking might be worthwhile, because it would eventually be for your own benefit” (homeowner, female, 55 years old).
In contrast to the risk-taking homeowners, the tenants, who are in the most
vulnerable position financially and in terms of the labour market, are very
sceptical about the possibility of satisfying their housing preferences. The
changes in Finnish society seem to have made them cautious about home
ownership. They regard financial security as being highly critical; they do not
want to risk their finances by getting into debt and will continue to rent even
though they much prefer home ownership and believe that it is more affordable than renting. A tenant describes how she feels about a potential move to
home ownership:
“There is a kind of feeling of insecurity, if you aren’t able to look after your finances, as so many people have lost their properties. In the 1990s a lot of people got
themselves into huge debt trouble. — — I think we’ve returned to the same situation, where people are taking out very large loans without the means to pay them
back. — — But I always try to play safe so that there won’t be any risk” (tenant,
female, 50 years old).
4.5 Safety net strategies
Precautions against possible risks – elements of safety net strategies
For respondents in Turku saving money and having insurance are the most
common precautions taken against possible risks to housing. The interviewees usually rely on multiple safety nets, in other words they have both savings and insurance policies and, in addition, they rely on some extra sources of support, such as social networks. Family and friends are possible sources of help, especially for the younger respondents, but only if the help needed
is relatively small or short-term.
The renting and homeowning households are relatively dissimilar in terms
of the nature and level of the safety nets they have in order to counteract hous-
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ing-related risks. The renting households in our sample are far less likely
to make private arrangements to secure their finances and housing careers
than the homeowners. The renting households tend to rely mainly on publicly provided welfare and compulsory social insurance7 in the event of getting into difficulties, whereas homeowners count more on private insurance,
savings, loans and flexible arrangements with the banks. Some homeowners even have their loans insured, and one 26-year-old owner points out: “I
don’t believe we are taking any risks, because our mortgage is insured anyway.” This is a relatively new phenomenon in Finland, although mortgage
insurance is becoming more and more common for new housing loans. Renters not only have less insurance than homeowners but also have fewer savings, not to mention investments in stocks, shares, funds or properties other
than their home. These are rare among tenants, whereas some owners have
made investments of this kind.
Concerns about children and the insecurities of life have a major influence on
the planning strategies of the respondents. In this case, the insecurities of life
refer to all the factors that may cause uncertainty in relation to finances, such
as unemployment, illness, divorce, increases in rent etc. For homeowners
owning property and having a mortgage are important factors as well, whereas housing seems not to influence the tenants’ decisions. Many homeowners
feel that they have to take more responsibility for financial matters after purchasing a home: “The debts must be paid first and any money that’s left will
be spent on everyday life”, as a 38-year-old homeowner remarks. Paying the
mortgage plays a decisive role in the older homeowners’ economic planning:
“That’s why I rented a house first and then moved to a small house of my own and
then to a bigger one and so on — — and when I started to buy things I always
made sure that I could definitely pay off my debts — — whatever happened”
(homeowner, male, 63 years old).
Whilst the respondents believe that home ownership is a financial investment that pays off, selling one’s own home, however, is not the primary strategy that they would choose in the case of economic hardship. For instance,
the threat of unemployment (vignette 3) does not affect the respondents’
strong preference for keeping their homes. The majority of both owners and
renters would advise the couple with a mortgage in their mid-fifties to consider all the other options first before selling their home in a situation where
the husband was being made redundant and the wife’s salary was not enough
to cover their expenses. Particularly if the couple definitely wants to stay on
7 By compulsory insurance we mean social security, which is financed by the deductions from employees’ salaries
and by the membership fees for trade unions.
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in their current house/flat, they should first negotiate with the bank for new
repayment conditions or try to find new jobs. Some respondents advise the
couple to cut back their expenses and live more thriftily. Only a few people
would advise the couple to sell their home and look for a cheaper one to buy
or rent instead.
It is reasonable to assume that, if home ownership itself acts as a risk prevention strategy, in other words a home that you own provides a long-term
base from which to tackle other insecurities in life, the home is not likely to
be treated as a source of funds for day-to-day living requirements or any other purposes. This might also explain why respondents are not very enthusiastic about using the financial resources in their home (‘housing equity’) for
various purposes.
To what extent do people count on social security?
In general, homeowners are more likely than tenants to rely on private arrangements, such as personal insurance policies, savings, loans and negotiations with banks for flexible payment schemes, in order to secure their finances. Tenants have savings and insurance policies as well, but in addition they depend on publicly provided welfare and compulsory insurance if
a disaster were to happen in their lives. Only a few homeowners believe that
they could turn to the public authorities (municipality) for help in the case of
housing problems, whereas the majority of the tenants would feel quite comfortable with this possibility.
Respondents in Turku tend to believe that individuals bear the main responsibility of their housing problems, but if the individuals are not themselves
the cause of the financial troubles they are suffering from, ‘society’ should
offer some sort of publicly funded aid:
“People are responsible for their own affairs. That’s how it should be in the first
place. If they end up [in trouble] because of illness or something, then society should
— — help them, and the banks should also come forward so that — — they can get
over the difficult times, so that their lives will not fall apart because of a single incident. But I still think that people are responsible for their own lives” (homeowner,
female, 50 years old).
About half of the homeowners support this kind of mixed model of responsibility. The other half is divided equally between those who assign the main
responsibility to individuals without any qualification and those who allocate it to a collective body – for example, a network of public and third sector organisations. Most of the tenants share the homeowners’ mixed model
of responsibility. One interesting variant of this argument is a case where the
interviewee reasons that owner-occupiers should bear the responsibility for
their housing cost problems individually. However, if selling the property does
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not help the owner-occupier household to resolve its problems, the public authorities should help. And they should also help the tenants, who do not own
any property. In this case public assistance is reserved for the people without
their own properties. Those who most unambiguously favour the idea that
the state and local authorities should bear the main responsibility for housing cost problems belong to the group of tenants:
Q: “In your opinion who should be responsible for helping households that are in
A: “The state. Well, unless someone tries to take advantage of the state or the local
authority. — — That needs to be controlled very strictly. But if you really are in a
difficult situation, then the state should definitely help” (tenant, female, 30 years
However, those who think the state should bear the main responsibility are
also a minority among the tenants.
4.6 Conclusions
Although our small-scale qualitative study does not allow us to draw conclusions about whether and to what extent the recent developments in the institutional context and socioeconomic environment described at the beginning
have impacted on the Finnish households’ views in general, we can, however,
discuss whether and to what extent these developments are reflected in the
interviews with the respondents in Turku.
When exploring the meaning of housing and the housing preferences and goals,
we did not encounter any major surprises. As a rule our respondents in both
tenure groups prefer home ownership to renting, which is very congruent
with the traditional Finnish viewpoint (with regard to tenure). As stated above,
this is by no means self-evident. The negative experience of the housing market crash during the economic depression could have made people more suspicious of home ownership, the revitalised rental housing market might have
changed their views about renting, the individualisation of lifestyles that
many housing researchers have identified might have made people reluctant
to be tied down to housing debt etc. Such attitudes were, however, not prominent in our data.
For our interviewees the superiority of home ownership derives from several qualities that respondents associate with this form of tenure. First of
all, home ownership is preferred, because in the long run it provides a more
affordable means of housing than renting. Secondly, paying a mortgage is
seen as preferable to paying rent to a landlord because it allows you to accumulate wealth for yourself and not for someone else. Thirdly, whilst home-
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owners and tenants basically assign exactly the same qualities, privacy and
safety, to the home, there are some tenure-specific characteristics, such as
independence, freedom to do what you want, pride and a sense of achievement, that are unique to home ownership. In conclusion, for homeowners
housing provides a place to identify with, whereas in the case of renting it
is often regarded purely as a means of satisfying housing needs. In addition,
home ownership is usually perceived as an investment which is likely to be a
profitable one, not only in the narrow sense of finances, but also in a broader
sense, as a welfare resource.
Our results concerning the superiority of home ownership are supported
by the recent survey on the housing preferences of young Finns. According to
this study (Ilmonen et al., 2005) the younger generation is not giving up on the
idea of home ownership, as was suggested at the beginning of new millennium, when it seemed that the desire and the opportunities to purchase property were decreasing in the country (see Matala, 2000). In the middle of the
first decade of the new millennium, most young Finns see renting as being
only a temporary phase and are firmly heading towards home ownership. In
2005 the majority of people aged between 18 and 29 regarded ownership of
a detached house as the best option for them (Ilmonen et al., 2005 p. 74). Socalled pull factors in the home ownership market, such as easier terms for
obtaining mortgages, improved availability of various financial products and
the very low interest rate resulting from, for example, competition between
the banks have been much stronger forces than was initially assumed and
have made home ownership even more attractive.
On the level of the possibilities and conditions for satisfying housing preferences,
our results suggest contradictory trends. On one hand, there is a strong conviction amongst interviewees that home ownership will naturally pay off, even
in the cases where the financial and other risks are relatively large and also in
the cases where the housing equity is relatively small. In part this may indicate a trend towards improving financial conditions for buying and retaining
a house. It may also reflect the change in attitude or behaviour. The younger generation in particular has no personal memories of the economic hardships of
the 1990s and seems to have a lower threshold for risk-taking than the older
generations. In our sample, the younger homeowners, who presently face various ‘objectively measured’ insecurities, such as fixed-term contracts, unemployment, single parenthood, low income or large mortgages, have a relatively bold and tough attitude towards the risks of home ownership. This attitude
is clearly represented in the following reply: “A certain degree of risk-taking
might be worthwhile, because it would eventually be for your own benefit.”
We can conclude that both the improved conditions for buying and retaining
a house, together with the tougher attitude towards individual risk-taking as
an adaptive model of behaviour in circumstances of growing insecurity, contribute to the continuing superiority of home ownership.
[ 95 ]
On the other hand, in the meantime the material and social inequalities
between Finns have increased and the social security system has suffered
cutbacks and restructuring (less universalism) and these developments have
probably also affected people’s options for satisfying their housing preferences. Our purposive sample also includes tenants in a more marginal position
with regard to employment, income, wealth, education and health. They lack
the financial means to satisfy their housing preferences and are very sensitive
to the individual risks of home ownership. In sharp contrast to the risk-taking
homeowners, who seem not to be bothered by the problems of the Finnish
labour market or the social security system, this group is evidently affected
by these developments. These people are prevented from fulfilling their housing goals because of low income, unemployment or part-time employment
and lack of savings and other financial resources. They regard financial security as being highly critical; they do not want to risk their finances by getting
into debt and will continue renting even if they clearly prefer home ownership and believe that it is a more affordable means of housing than renting.
Under the current institutional and socioeconomic circumstances, where
there are, on the one hand, an increasing number of financial options available to households for buying housing and, on the other hand, growing material inequalities and less social security provided by the welfare state, it seems
likely that there will be increasing differentiation between people’s opportunities for achieving their housing goals. In particular those people who rely
on publicly provided social security will lose out under these circumstances.
There is research evidence to support this view. Anneli Juntto (2004a and b)
has found that disparities between the income deciles had notably increased
as regards the tenure status, type of housing, housing space, dependence on
housing allowance and housing-related consumption between 1990 and 2001.
People belonging to the highest income group had increased their lead in the
housing career over the others, whereas the relative position of the lowest
income groups had deteriorated as compared to the situation in 1990.
However, despite the fact that recent social developments have a negative
impact on the prospects of households in the more marginal labour market
and housing market, it is important to indicate that the overall situation is
relatively positive. On average, Finnish households are more prosperous than
ever before. This is evidently reflected in the respondents’ perceptions on security in relation to their present housing situation. Nearly all of our interviewees consider that their housing provides them with security. In our sample, differences in perceived housing-related economic and social security do not follow tenure divisions. This is slightly surprising as the widening income gaps
and differentiation of people’s housing careers would suggest that tenants,
who in general are less well off, would feel less insecure than homeowners.
However, increasing differentiation may be reflected in the fact that experiences of security and insecurity vary considerably within both tenure groups.
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Homeowners do feel that they enjoy more security of tenure than tenants,
but among them are those who feel insecure because of their weak economic
position. Tenants in municipal and non-profit rental housing have a relatively
high level of security of tenure, whereas some tenants in private rental housing feel their situation to be insecure and stressful. In the tenants’ case the
institutional division between regulated semi-public and private rental housing is directly reflected in interviewees’ experiences.
Among homeowners, those who have experienced payment difficulties
feel more insecure and for them the whole issue of security and insecurity is a more concrete one than for others who have not had difficulties of
this kind. Home ownership itself seems to function for our respondents as a
means of insuring themselves against insecurities. There is a ‘nest egg’ to be
used, albeit reluctantly, in times of financial trouble and to be passed on to
one’s offspring. Moreover, security of tenure over one’s own home provides a
base from which to tackle other kinds of insecurities. There are, in fact, some
grounds for believing that owner-occupied housing has the potential to act
as a buffer against risks. House prices have risen quite rapidly since the late
1990s, and therefore the wealth stored in housing has accumulated in the
home ownership sector.
For most respondents in Turku the risks relating to housing are possible rather than likely. Homeowners, who are predominantly older than renters, worry mainly about their health, housing maintenance and the ability to
remain in their homes. For tenants, financial worries are at the top of the list.
Tenants in municipal and non-profit housing are positive about managing
even in the case of unemployment. As tenants in our sample represent more
vulnerable households, it is worth noting that they have a relatively trusting
attitude towards life and the Finnish welfare system, in spite of the pressure
on the welfare state to cut expenditure and increase means testing.
A certain differentiation (dualism) is evident when discussing safety nets
and precautions taken against risks. Homeowners have various private
arrangements, for example insurance policies, savings and even investments
in funds and properties, whereas tenants rely more on publicly provided welfare and compulsory social insurance. Homeowners’ financial strategies are
motivated mainly by mortgage payments and maintenance of the home. Tenants plan their finances largely according to their employment situation and
disposable income. Our interviewees believe that the individual household
should bear the main responsibility for its housing, but if it ends up in serious difficulties, society should come to its aid, especially if the trouble is not
self-inflicted. There is a clear homology with the way in which the basic principle of the Finnish housing regime is characterised at the beginning of the
chapter. Perhaps the view of individual responsibility coupled with collective
responsibility for the deserving poor is the typical Finnish approach to housing.
[ 97 ]
Doling, John & Hannu Ruonavaara, 1996, Home Ownership Undermined? An
analysis of the Finnish case in the light of British experience, in: Netherlands
Journal of Housing and the Built Environment 11 (1), pp. 31-46.
Forsander, Annika, 2002, Globalising capital and labour – old structures, new
challenges, in: Forsander, Annika (ed.), Immigration and Economy in the Globalisation Process, The Case of Finland, Sitra Reports series 2, pp. 81-112.
Hiilamo, Heikki, 2004, Changing Family Policy in Sweden and Finland during
the 1990s, in: Social Policy and Administration 38 (1), pp. 28-40.
Ilmonen, Mervi, Jukka Hirvonen & Rikhard Manninen, 2005, Nuorten asuminen 2005 (The Housing of Young Finns in 2005) Helsinki (Ministry of the Environment).
Juntto, Anneli, 2004a, Erotteleeko asumisura suomalaisia? (Do the housing careers of Finns differ?), in: Kirsti Ahlqvist & Raijas Anu (eds.), Erilaisia kulutusuria Suomessa (Diverging Consumer Careers in Finland), Helsinki (Statistics
Finland), pp. 91-112.
Juntto, Anneli, 2004b, The Heroes and Losers in Housing Consumption: Looking for cumulative effects, Paper presented at the ENHR Conference, July 2-6
2004, Cambridge, UK.
Juntto, Anneli, Markku Säylä & Olli Kannas, 2006, Housing wealth and indebtedness – growing differences between generations?, paper presented at the
OSIS seminar 23-24 November 2006.
Jäntti, Markus & Veli-Matti Ritakallio, 1997, Income Inequality and Poverty in
Finland in the 1980s, in: Gottschalk, Peter, Björn Gustafsson & Edward Palmer
(eds.), Changing Patterns in the Distribution of Economic Welfare. An International Perspective, Cambridge (Cambridge University Press), pp. 326-350.
Kalela, Jorma, Jaakko Kiander, Ullamaija Kivikuru, Heikki A. Loikkanen & Jussi
Simpura (eds.), 2001, Down from the Heavens, Up from the Ashes. The Finnish Economic Crisis of the 1990s in the Light of Economic and Social Research, VATT Publications 27 (6), Helsinki (Government Institute for Economic Research).
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Kautto, Mikko & Hannu Uusitalo, 2004, Welfare policy and income distribution: the Finnish experience in the 1990s, in: Matti Heikkilä & Mikko Kauto (eds.), Welfare in Finland. National Research and Development Centre for
Welfare and Health: Saarijärvi, pp. 83-102.
Kautto, Mikko, Antti Parpo & Seppo Sallila, 2006, Huono-osaisuus erilaistuvan
tulokehityksen Suomessa (The condition of the underprivileged as representative of the differentiating income development in Finland), in: Kautto, Mikko (ed.), Suomalaisten hyvinvointi 2006 (Finnish Welfare 2006), National Research and Development Centre for Welfare and Health, Helsinki, pp. 236-263.
Kemeny, Jim, 2006, Corporatism and Housing Regimes, in: Housing, Theory
and Society 23 (1), pp. 1-18.
Kiander, Jaakko, Outi Kröger & Antti Romppanen, 2004, Finnish Economy.
Structural Indicators 2004, Jyväskylä (Government Institute for Economic Research).
Kärkkäinen, Raimo, Marie Reijo, Keijo Tanner & Timo Tähtinen, 2006, Changes
in the housing of families with children 1995-2004, Reports of the Ministry of
Social Affairs and Health 39, Helsinki (Ministry of Social Affairs and Health).
Lehtonen, Heikki, Simo Aho, Jarmo Peltola & Mika Renvall, 2001, Did the Crisis Change the Welfare State in Finland?, in: Kalela, Jorma, Jaakko Kiander, Ullamaija Kivikuru, Heikki A. Loikkanen & Jussi Simpura (eds.), Down from the
Heavens, Up from the Ashes. The Finnish Economic Crisis of the 1990s in
the Light of Economic and Social Research, VATT Publications 27 (6), Helsinki
(Government Institute for Economic Research), pp. 102-129.
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younger generations giving up on home ownership?) in: Hyvinvointikatsaus
4, pp. 17-22.
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Ruonavaara & Jón Rúnar Sveinsson, Varför så olika? Nordisk bostadspolitik i
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[ 100 ]
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[ 101 ]
5 Germany
Home ownership, a Janus-faced advantage in time
of welfare restructuring
Gudrun Tegeder & Ilse Helbrecht
5.1 Introduction
Germany is a parliamentary democracy with a federal political system. The
state consists of 16 Bundesländer (federal states), which have sovereignty in
certain political areas (for example, education). Germany is the most populous state within the European Union (Eurostat, 2006) and also one of the
most densely populated (National Board of Housing, 2005, p. 12). In May 2004
there were 39.1 million households with approximately 82.9 million inhabitants. 15.4% of the population lived in rural areas, 48.8% in urban areas and
35.8% in suburban areas (Statistisches Bundesamt, 2005a). In comparison with
1994 the proportion of people living in rural areas (18.7%) and in suburban areas (32.4%) had decreased, while in urban areas it had stagnated. On average
231 people live in one square kilometre.
The population has been growing slowly but steadily since reunification in 1989. The marginal growth of the population is expected to continue
until approximately 2013, when a noticeable decline is expected. Nevertheless, experts expect a continuing growth in the number of households until
approximately 2017 (BBR, 2004 p. 5), which will accelerate the demand for
housing. The number of households has increased since 1991 by 11%, whereas
the average size of households has decreased. In April 1991 2.27 people shared
a household, whereas in March 2004 the figure was 2.12 people. This development is mainly driven by the steady rise in single households. The proportion
was 37.2% in 2004 (BMVBW, 2005 p. 29). In general there has been an increasing demand for housing in recent years, which has required the housing markets to adapt in terms of both quality and quantity. However, the processes
differ tremendously between the various regions. For example, the differences between the former socialist German Democratic Republic and the former
areas of West Germany are most noticeable. While the population grew in the
west by about 0.5% between 1991 and 2000, it shrank in the east by about 0.5%
annually (BBR, 2004).
In addition to reducing in size, the German population is also expected to
age (Dickmann, 2004 p. 13). Since the pension and welfare system, together
with the spatial structure and infrastructures, have for years been planned
on the basis of economic prosperity and population growth, this development has already had or is expected to have significant consequences in the
near future. An increasing number of empty properties in residential estates,
under-used infrastructure and effects caused by the reduction in population
in peripheral regions are expected (Röhl, 2004 p. 322). In addition, the pension
and welfare systems will also be transformed. The tightly-knit welfare system, which has slowly been introduced since the era of Bismarck at the end of
[ 102 ]
the nineteenth century, needs to be modified to accommodate future developments. The status quo of the German welfare system is poorly suited to meeting new social challenges and is similar in this respect to the developments
in the welfare systems in all EU countries (Esping-Andersen, 2002 p. 147). Currently the welfare system is undergoing total restructuring and is subject to
profound financial cutbacks. Yet in comparison to other EU countries, German
state social protection offers extensive coverage and high levels of support.
Collecting the data
The interviews were conducted in the course of the summer of 2005, mainly in the city of Hanover, which is situated in the north of Germany. It is the
capital of the province (Bundesland) of Lower Saxony. The resident population
of the city of Hanover is 515,7291. The percentage of foreign residents is 14.6%
and therefore considerably higher than the national German average of 8.9%.
Population growth has only been moderate over recent years and it is currently stagnating. The suburban areas, which are the main destination of people leaving the city of Hanover, have seen an increase in population. However,
there is a net migration gain of people aged between 20 to 35 years for educational reasons (university town). The estimated student population is 40,000.
Despite the decline in the population, the number of households is constantly
increasing. Currently there are around 298,000 households.
The economy of Hanover mainly provides skilled and professional jobs.
Service-oriented businesses (for example, financial and insurance services,
tourism and trade fairs), together with scientific and research institutes, are
relatively well represented. In addition, a number of government institutions
are concentrated in Hanover. A range of manufacturing companies is located
in the city, offering low-skilled or unskilled jobs (for example, Continental AG,
Bahlsen). Nevertheless, the unemployment rate in Hanover is above the German average. 11.4% of the inhabitants of Hanover are unemployed (Germany:
In general, the housing market in Hanover is considered to be stable. The
proportion of empty housing is around 2.8%, whereas 2% is considered necessary to enable mobility. The percentage of owner-occupied housing in Hanover (35-40%) is only slightly below the national average (41-43%). There has
been a moderate increase in the number of owner-occupied properties within
the city of Hanover.
In line with general developments in Germany, renting costs have hardly
increased since 2000. The national average rent is € 6.09 per square metre,
while in Hanover it is € 5.5 per square metre. The cost of building land has
decreased; depending on the location one square metre costs between € 150
1 On January 1, 2006.
[ 103 ]
and € 200 and is therefore only slightly more expensive than the average in
the western parts of Germany (€ 140 per square metre). The mean price for a
detached house of average quality in Hanover is about € 182,000. Compared to
other German cities with more than 500,000 inhabitants this price is relatively
low (for example, Hamburg: € 260,000; Cologne: € 310,000; Munich: € 485,000).
The profile of the households interviewed
Thirty households were interviewed during June and July 2005. They are characterised by the following features:
nthe respondents are aged between 25 and 67;
n11 households are renting, whilst 19 are homeowning households still paying a mortgage;
nin 8 households one person was unemployed and looking for work;
nuntil now none of the households has experienced foreclosure, although
some have had payment difficulties, and have cut back on other spending
or received support from the state;
n7 households can be considered to be marginal2.
5.2 The main developments in the labour market and social security
Development of (un)employment, flexibility of labour
The current development of the German labour market is primarily influenced by increasing flexibility, rising unemployment, a shift in the age structure and national reforms. Although the German economy has started to
strengthen, this has not yet had a direct effect on the labour market (see Figure 5.1). The proportion of temporary employment has been gradually increasing. In March 2005 the unemployment rate3 was approximately 10% (4.3 million unemployed people). The noticeable increase in unemployment in 2004
was caused by one of the most important reforms (referred to as Hartz IV or
Arbeitslosengeld II), which came into effect at the end of 2004. It merges unemployment and social assistance and aims to reduce the average unemployment benefits, on the one hand, and to improve the re-integration into the labour market of the long-term unemployed, on the other hand.
There is extensive protection for employees against dismissal, although a
2 Being marginal includes a combination of criteria: low household income (per head), low standard of education
and training, little financial means and lack of safety nets.
3 The German unemployment rate includes part-time workers, who work less than 15 hours a week. Around a
quarter of the German unemployed are estimated to be under-employed part-timers. Thus, the unemployment
rate is only partially comparable to unemployment rates in the United Kingdom or the United States.
[ 104 ]
Figure 5.1 Unemployment rate in Germany, 1991-2006
Source: Statistisches Bundesamt, 2006 p. 24
number of measures which make dismissal protection less restrictive have
been taken from 2004 onwards. In particular the number of social criteria that
employers have to take into consideration in dismissal decisions has been
reduced. In addition the number of employees above which dismissal protection legislation applies has been increased from 5 to 10 (OECD, 2004). In principle, the period for dismissal is set by state regulations at between a minimum
of one month and a maximum of seven months, depending on how long the
employee has worked for the employer. So, for example, if an employee has
worked for a company for ten years, the employer has to give four months
notice to the end of the calendar month. Generally, three months notice is
agreed upon in the employment contract.
Flexible and non-conventional labour conditions are growing in importance:
nPart-time employment has increased. In 2004 7.2 million people worked
part-time, 2.3% more than in 1993. The proportion of female part-time
employees is approaching 85%. More than half of them would prefer fulltime employment, but are unable to find a full-time job (Statistisches Bundesamt, 2005, p. 37).
nThe proportion of temporary workers has increased by 25% between 1993
and 2004. 2.3 million people have temporary jobs.
nThe number of people employed by a temporary employment agency (Zeitarbeitsfirma) has also risen by 28.8% between 2002 and 2005 (BZA, 2006).
Generally, younger people and women are most affected by the current instabilities in the labour market, such as unemployment and temporary contracts
(Statistisches Bundesamt, 2004a, p. 42). The average age of gainfully employed
people has been constantly rising. Currently it has reached around 40.8 years
(Statistisches Bundesamt, 2004a, p. 39). This is not only the result of the de-
% 0
[ 105 ]
Figure 5.2 Development of German GDP, 1951-2005*; annual change in %
% 0
* Direct comparison between 1951-1991 and 1992-2005 is not possible due to different evaluation units (the former
Federal A Republic of Germany without the GDR before 1991 versus the current Federal Republic of Germany).
Source: Statistisches Bundesamt, 2006, p. 7
mographic changes, but also one effect of the delayed entry of younger people onto the labour market. The length of training and education periods has
increased, which is due to the perceived risk of unemployment among younger age groups, on the one hand, together with the educational programmes
which are intended to reduce the potential proportion of working people (Esping-Andersen, 1990, p. 148).
There is also an increasing number of self-employed people, in particular in the form of one-person companies with no additional employees. The
objective of a reform which has recently been implemented by the state in
response to the increasing flexibility of the labour market is to support initiatives of this kind. The introduction of the so called ‘me Inc.’ micro enterprises (Ich-AG), on the one hand, and the establishment of mini-jobs, on the other
hand, represent two new forms of small-scale self-employment which receive
financial support from the state during their first years of existence. In both
cases the main responsibility and costs of social protection are transferred to
the employees. Short-term employment with a variety of employers is also
These changes in the labour market indicate both a growing flexibility and
a more insecure position, in particular for younger people. It has become relatively difficult for young people to buy a home because of the length of the
repayment period, the need for regular payments and therefore for stable
employment. As a consequence, home ownership has become less and less
affordable for young households. Therefore the very slight increase in home
ownership among young households, which Faller et al. (2001, p. 20) noticed in
2001, is unlikely to change in the future.
[ 106 ]
The development of the economy (GDP)
Although Germany is the largest economy in Europe, its recent performance
has not been very dynamic (Figure 5.2). Currently the economy is recovering slowly. However, the poor performance of the labour market continues to
affect the perceptions and the confidence of the German people. Consumption rates remain low, whereas saving rates are continuing to increase (Statistisches Bundesamt, 2006, p. 24). The lack of growth in real wages has added to
people’s reluctance to spend (GdW, 2006, p. 73).
Economic activity is projected to strengthen from 2006 onwards (OECD,
2006a). This growth is mainly due to a strong increase in exports, traditionally the backbone of the German economy. GDP is projected to grow by 1.75% in
2006 and by 1.5% in 2007 (OECD 2006b). The government deficit is expected to
remain slightly below 3% in 2006, before falling to 2.25% in 2007, as revenues
are boosted by an increase in value added tax.
Developments in social security
Between the end of the nineteenth and the beginning of the twenty-first century, the social security system was constantly expanded and supplemented.
A highly regulated and tightly-knit system was established which included
provision for unemployment, health, pensions, accidents and care. It was considered to be an effective and financially self-supporting system of social protection, which provided citizens with cradle-to-grave security. However, as Esping-Andersen points out, Germany “is a welfare state built on the traditionalist conservative and Catholic principle of subsidiarity, meaning that women
and social services (outside health) belong to the domain of the family” (1990,
p. 224). A bias in favour of the traditional male breadwinner concept is evident in the distribution of welfare. As social insurance is interlinked with employment, the welfare system protects in particular those with a stable, lifelong career. It is not adequately equipped to meet the social needs of workers with irregular careers and also provides insufficient provision for women, who constitute the majority of part-timers. The increasing proportion of
non-conventional households together with flexible and variable labour conditions present a challenge for the German welfare system.
In addition, as a result of demographic shifts, the reunification of Germany in 1991 and international forces, the former welfare system is no longer affordable. This affects the pension system, the unemployment system,
the care and healthcare systems in similar ways. In each of these systems, a
number of steps have been taken to reduce government expenditure. Measures such as increasing co-payments, reducing the catalogue of fully funded health services, stricter eligibility requirements and a general cut in benefits have been gradually phased in. As the process of restructuring the welfare system to produce a fiscally sustainable system is not yet complete, the
future form and amount of these benefits are currently unclear.
[ 107 ]
However, social protection spending in terms of a percentage of GDP remains
among the highest in Europe. In 2005 30.2% of German GDP was spent on social
protection. Until now people in need have received financial support from
the state. Health insurance provides up to six weeks4 sick pay and also covers temporarily employed and part-time workers. The state still covers the cost
of unemployment insurance. Benefit payments for long-term unemployed or
disabled people still cover their minimum living costs. But the regulations for
claims have become stricter and co-payments have also increased. It is increasingly important for people not only to rely on state support, but also to establish a mix of public and private social security measures. Therefore private
insurance policies are becoming more and more important. In addition to pension and life insurance, people perceive home ownership as a secure private
provision for old age (Arndt, 2005). Home ownership is also a means of investment, which is not taken into account in the case of long-term unemployment.
If a long-term unemployed person owns their own home, its value is not offset
against the benefits, provided that the size of the property is considered to be
‘adequate’ (a term which has to be interpreted in each case). As a result, people
can still receive financial support from the state even if they own a house or a
flat. Therefore, home ownership is still regarded as a stable form of financial
security, because to a certain extent it remains untouched by the state.
Unlike many European countries, social security benefits are not provided
via a centralised state-run system. Instead, the German government provides
these benefits via a complex network of national agencies and a large number
of independent regional and local entities – some public, some semi-public
and many private.
Housing-related social services and benefits
Together with social expenditure, housing-related subsidies have also been
reduced over recent years. The majority of direct means of support, which
came into effect as a result of the housing shortages caused by the destruction of World War II, have been abolished.
nUntil 2006 the state allocated funds directly to first-time buyers. This was
called the Eigenheimzulage. Over a period of eight years the German state
paid 1% of the construction costs of the house (up to a maximum of € 1,250
p.a.), as well as € 800 for each child. As the Eigenheimzulage was granted only
once in a lifetime, it is regarded as having helped to develop the German
mentality and sociocultural pattern of buying a house only once in a lifetime (Behring & Helbrecht, 2004). Following the announcement of the abolition of the bonus, many people who wanted to own their own homes tried
4 If a person is ill for a longer period, the compulsory health insurance fund provides a small sickness allowance
per day.
[ 108 ]
to buy a property in 2004 in order to benefit from this payment.
nThe annual state bonus (Wohnungsbauprämie) for current and future homeowners is currently under discussion, but is still in place. However, this
bonus is related to contract saving exclusively for home ownership. Depending on the margin of income, it amounts to 8.8% of the annual savings. The
Arbeitnehmersparzulage is another tool, also related to contract saving, which
provides indirect support for current and future home ownership. If a person’s or a couple’s assessable income does not exceed € 17,900 p.a. or €
35,800 p.a. respectively, the state offers a bonus of 9% of the annual savings
up to € 400.
Only taxation is still used as a means of promoting home ownership. Owner-occupiers do not have to pay tax on their hypothetical equity earnings in
the form of saved rent (Konsumgutlösung). Owner-occupied residential property is not subject to tax. As a consequence the owner can keep the saved rent,
on the one hand, but, on the other hand, it is not possible for him to deduct
expenses for maintaining the property from his taxable income. In contrast,
owners of rental housing are able to benefit from tax exemptions. Unlike other European countries (for example, Finland and Luxembourg), in Germany
homeowners are not able to deduct part of their mortgage interest payments
from their taxes or taxable incomes. However, this is possible for homeowners who rent their properties out.
There are also a few additional programmes in the federal states (Bundesländer) in Germany which promote home ownership. However, these have
also been gradually reduced over recent years. Nowadays the federal states
mainly subsidise environmental housing.
5.3 The main developments in the housing market
Until now home ownership has been supported by different ideologies and
therefore by different political parties. The conservative alliance (CDU/CSU)
in particular used to stress the importance of home ownership, because from
their point of view there was a strong correlation between home ownership
and family policy (Häussermann & Siebel, 2000, p. 147). In practice, however, priority has often been given to current social and political challenges. The
extensive destruction of the urban landscape in the course of World War II resulted in a serious lack of housing. As this led to a fundamental social and
housing crisis, after 1945 the German state offered a range of incentives to accelerate building by the private sector of homes for owner-occupation and private rented housing. Various forms of tax abatements and savings grants were
used to support owner-occupation. Nevertheless, during the reconstruction
[ 109 ]
period political emphasis was put on the provision of subsidies to encourage
new investment in rented housing. In order to reduce the housing gap quickly, social housing programmes (Sozialer Wohnungsbau) were also implemented. The government used rent control to prevent rent increases resulting from
the post-war housing shortage.
During the period of full employment in the 1960s rent control was gradually suspended. The housing market was characterised by deregulation. The responsibility for constructing new housing was successively transferred from
the state to private investors. Funding for social housing was gradually cut
back by the state and then withdrawn altogether in the 1980s. In the past Germany had a strong, well-developed social housing sector. In the course of successive changes in the welfare system, social housing has been privatised on
a large scale. Today, hardly any social housing is provided directly by the government. Instead, the regional and municipal governments are responsible,
often in co-operation with housing societies. These, however, are to some extent financially supported at a national level (Soziale Wohnraumförderung). In
the course of the deregulation activities during the 1980s and 1990s, the government put more and more emphasis on supporting the individual in need
(Wohngeld), instead of investing in the construction of new social housing. The
objective is to offer the beneficiaries access to wider housing segments, extending beyond the small segment of very low-priced housing. As a result
government social housing programmes provide indirect subsidies for rented housing, but unlike in Britain, for example, do not contribute to the social
rented housing stock.
The inflation during the 1970s caused a boom in housing construction. Another result of inflation was an increase in interest rates and a corresponding
rise in the costs of social housing (Tormann, 1990, p. 920) which meant that
additional expenditure was needed. In order to compensate for the possible
consequences of rent increases, the government passed a tenant protection
act in 1971, which was supposed to protect tenants against eviction. In addition an index of the average rent level was introduced (Mietpreisspiegel), which
is constantly modified and. is still used today. This enabled tenants to assess
whether the rent they paid was fair. This instrument played an essential part
in establishing a strong rental housing sector. During the 1980s housing policy was dominated by further deregulation. In 1990 70% of newly constructed houses were no longer subsidised by the state (Donner, 2000, p. 191). Now
the deregulation of the housing market has been completed. Despite some remaining government instruments relating to social housing and owner-occupation, the state has reduced its influence.
In the 1990s the German housing market was highly influenced by the process of reunification. While the quality of housing in the western parts of Germany gradually increased, the decay of the housing stock in the former socialist German Democratic Republic (GDR) was highly obvious. In a similar way
[ 110 ]
Table 5.1 Housing conditions in the former GDR 1994-2002 assessed by
the head of household, in %
Needs partial renovation
Needs full renovation
Needs partial renovation
Needs full renovation
to the West German housing market, the East German
housing market was domi24
64 nated by the rental housing
28 sector. However, in the GDR
8 rental housing was built and
Source: Statistisches Bundesamt, 2004c, p. 515 administered by the state,
which invested very little in
housing maintenance because
of a lack of finances. Despite the nationalisation of private property, some of
the former owner-occupied housing remained privately owned. Due to the
economy of scarcity these housing estates were also characterised by decay
and temporary construction.
After the reunification in 1990 policy makers were faced with a situation
characterised by two main factors in the eastern parts of Germany, where private home ownership had been prohibited:
nHigh vacancy rates and large derelict areas within the cities meant that
intensive redevelopment was urgently needed. Using the state of the housing as assessed by the head of household in Table 5.1 as an indicator of the
housing quality, it is clear that investment in housing has helped to improve
nSimultaneously, German reunification triggered an immense building boom in the area of the former socialist German Democratic Republic
which reached its peak in 1993 and 1994. Although the building boom of
the 1990s has gradually diminished in size, it is still in evidence. Particularly in the suburbs, spacious new housing estates are still being created
which are leaving inner city areas empty (GdW, 2006, p. 34). Reunification
has also led to a fundamental divide in the German housing market. As job
opportunities are limited in the former socialist parts of East Germany and
unemployment rates are considerably higher, many people have moved to
the western areas. The population of cities in the east is gradually shrinking
and therefore the number of vacant flats and houses is increasing.
Since 1945, the owner-occupied sector in Germany has remained at a constant level of approximately 40% – a fairly small proportion compared to the
rest of the EU. Currently, this trend seems to be coming to an end and a decrease in the owner-occupation rate has been observed (GdW, 2006, p. 39). This
is mainly ascribed to age-group-related changes5 and the abolition of the gov-
5 People born in the 1960s, a decade characterised by high birth rates, are now past the age of buying their first
homes. Consequently, their demand for home ownership has been satisfied. Birth rates are much lower in the
subsequent age group.
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Fig. 5.3 Differences in owner-occupation rates between German regions 1950-2002 (regions of the former
GDR are indicated by a dark-grey background)
Lower Saxony
North Rhine Westphalia
0 25 50 75 100 km
Scale 1:500,000
% Owner-occupation rate
’50 ’61 ’72 ’82 ’93 ’02
Data Source: Statistisches Bundesamt 2004, p. 522
ernment bonus (Eigenheimzulage) in 2006. The latter triggered a small building boom in 2005, which satisfied the demand for the coming years. The owner-occupation rate varies significantly between cities, regions, and federal
[ 112 ]
Table 5.2 Age and income structure of households by tenure, in Germany (in 2002)
Age of head of household
<30 years
Monthly household net income*
<500 euros
* Only households with income declaration.
in 1,000s
Source: Statistisches Bundesamt, 2006
states (Länder) within Germany. In the region of the former German Democratic Republic (GDR), as well as in regions which are highly urbanised (for example, Hamburg, North Rhine-Westphalia), the owner-occupation rate is relatively low (Figure 5.3). In addition the price of property varies fundamentally depending on the region. The expensive regions include selected agglomeration areas in southern Germany, followed by other agglomeration areas in
the north. Areas where property prices are low are mainly located in the east
of the country.
Transaction costs in Germany are considerably higher than in other European countries (National Board of Housing, 2005). In addition to the cost of the
property itself, each homeowner has to pay property tax, which is imposed
by the municipality. Although property tax is calculated using standardised
rules in Germany, the municipalities require different amounts to be paid.
On average it amounts to 3.5% of the property value. Property tax has to be
paid on flats, houses, other property and part-ownership. Additional costs
are incurred for inclusion in the cadastral register and for the solicitor. These
amount to between 2% and 4% of the property value. Overall, the average
transaction costs range from 7% to 11% of the property value, depending on
whether an estate agent is used or not (Donner, 2000, p. 185). Together with
other factors, these fairly high transaction costs contribute to the relatively
low home ownership rate in Germany. Access to home ownership is strongly
influenced by income and life cycle (see Table 5.2).
Due to the long tradition of moderate rent control and rent acts, the rental market remains attractive (Helbrecht & Schmauß, 2003). Landlords must
have a good reason for terminating a tenancy agreement and usually need
to give three months notice. The Rent Regulations Act, which was passed in
1971, regulates rent increases for those with existing tenancies. Rent increases must not exceed a maximum limit indicated by an index. This instrument
is intended to guarantee security of tenure. As this act does not apply to new
lettings, the rent structure on the rental housing market remains flexible. As
a consequence of the tenant protection system, the subjective motivation
and the objective necessity of private households to afford home ownership
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are not as high as in most other European countries. Private investors dominate the rental sector. 50% of all the approximately 22 million rental apartments belong to private individuals (Behring & Helbrecht, 2000, p. 164). Housing co-operatives (which also became private landlords during the period of
deregulation), commercial and public investors make up the remaining 50%.
Compared to other European countries professional involvement in the supply side of the housing market is therefore relatively low, which consequently brings a financial advantage for tenants. Net rents in Germany have hardly
risen at all over recent years, while the additional charges for heating, water
and electricity have raised the average price of gross rents. Again, the differences between the regions within Germany are clearly visible, with high rent
levels in the metropolitan areas of the south and low rent levels in the east
and north.
5.4 Housing decisions and the meaning of tenure
After having outlined the institutional framework that determines the situation of the German housing market, the household interviews will now be analysed. The focus will be on the households’ perceptions of security and insecurity with respect to housing.
Perceptions of home ownership and renting
Although the home ownership rate in Germany is relatively low, this tenure
is nevertheless of major importance to most respondents. In this case homeowners and tenants share similar views. Home ownership is favoured mainly
because the home:
a.can be decorated and modified to meet the owner’s requirements without
the need to consult a landlord;
b.is said to offer the best living conditions for families;
c.is still considered to be a safe, stable investment, although some homeowners are worried about future developments in the housing market;
d.in the long run seems to be a favourable economic housing option, because
the housing expenses will decrease once the mortgage has been paid off.
a) Freedom to build
Both homeowners and tenants enjoy the idea of building a home to suit their
own preferences and needs. However, many tenants also modify or modernise their rented flat or house to suit their preferred lifestyle, but they complain
that it was “a waste of money”, either because they have to return the house
or flat to its original state when they move out or because they do not benefit
from the investment in the long term, as they will move out at some point.
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b) Best living conditions for families
Home ownership is regarded as the most suitable tenure for families. Child­
ren have enough space both inside and outside the house to be noisy and creative. This applies especially to detached houses. In addition owner-occupied
houses offer a reliable location and environment where children are familiar
with the neighbourhood and the infrastructure and therefore feel safe.
“It was important for us to have a garden for our child and to stay in the city. We
wanted to give our child an environment where she can play freely without restrictions. So the garden was very important” (homeowner, female, 35 years old).
c) Safe and good investment
“Generally, I’m very cautious and that’s why I think it’s OK to invest money in
housing. It’s a safe investment in the long run. You don’t get good interest rates, but
in return it is safe. A safe investment and provision for old age” (homeowner,
female, 52 years old).
Homeowners and tenants believe investment in home ownership to be sensible, although many of them worry about the uncertainty of future developments in the housing market. However, they ignore the fact that they are exposed to the potential risk of a negative development in the housing market.
d) Economic housing option
The argument of financial rationality is frequently mentioned in the interviews. Owning is regarded as more economic than renting in the long run, because paying the mortgage leads to a reduction in the monthly payments. In
addition you are paying into your own pocket and not into someone else’s, as
one male respondent puts it.
Although home ownership is generally preferred, renting is not stigmatised
in any way. Unlike in Great Britain (Doling et al., 2003, p. 221), it does not automatically indicate a low social status. Instead it is associated with a high
level of flexibility (in terms of job changes, relationships and financial situation) by both tenants and homeowners. Renting offers better financial scope
and enables people to adapt to changing living situations more easily. Renting
seems to be the favoured form of tenure, primarily when people move out of
their parents’ home. All the homeowners interviewed had experience of the
rental sector from this period of their lives. Usually, homeowners have a history of several moves within the rental sector before buying a house. The relationship between tenant and landlord is usually described as pleasant. Only a few people experienced major conflicts. Even those who did have problems and have now changed to a different form of tenure say that their bad
experience of the rental market was not the decisive factor in their move to
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home ownership. However, they value their autonomy. Older tenants are content with their form of tenure but they prefer home ownership when discussing the ideal housing situation. If older tenants have chosen to rent because
it provides suitable conditions for a certain way of life (for example, sharing a
house with other people who will look after each other during illness and old
age), they do not favour ownership.
Owners and tenants surprisingly tend to have similar views about the emotional meaning of housing. The home is most often associated with privacy
and shelter. The first term refers to a place where people can lead their own
lives (also as a family) without unwanted ‘intruders’. They can decide who is
allowed to come into their home and who is not. The home is the private centre of the family’s life, a meeting point and a place where the family or the
individual can live according to its own chosen lifestyle. This leads to the second term shelter. This captures the meaning of housing as the opposite of the
outside world (job, society etc.) which often comes with negative connotations. Housing is perceived in emotional terms as a shelter from the harshness of day-to-day life, which also serves as a place for personal recreation
and recovery. People refer to it as a refuge, a fort or a castle.
“Firstly, home is a place where I can relax; it’s like a fort where I can ignore everything that’s happening at work, stress, problems. Instead, it’s like - I call it - a sort
of ideal world. Home for me is closely connected with harmony, happiness and complete satisfaction” (homeowner, female, 41 years old).
The combination of these qualities associated with ‘home’ contributes to the
respondents’ social and physical integrity. This again leads to a certain feeling of security, which is by no means only mentioned by homeowners. The
home as a safe haven represents a constant in life, which is not affected by
the outside world. So housing offers a feeling of security, because people are
sure that they can lead their lives in an individual and yet unchanging way,
despite external factors such as the general future of society and politics.
“I know it’s my home – despite everything that’s going on outside. The economy is
in complete turmoil at the moment. When I go to work in the morning, I don’t even
know whether I’ve still got a job. But my home and everything that’s there will always be mine” (homeowner, female, 50 years old).
This feeling of security is strengthened by independence from a landlord. In
this context independence involves two factors. Firstly, homeowners cannot be evicted by a landlord. Secondly, the landlord cannot influence the lifestyle of the homeowners. The homeowners’ perceived power to decide about
everything to do with their home reinforces its significance as the opposite
of the outside world. The freedom to decorate and design the home as they
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want also establishes a greater emotional bond with the house, which is not
as strong amongst tenants.
“We put our heart and soul into our house, we put in a great deal of energy and effort, because we did a lot of the work ourselves. (…) We did everything ourselves.
And that’s why we want to hold on tightly to our home and would do a lot, almost
anything, to keep it. More than you would do for a rented flat. It’s a completely different emotional relationship. It’s much stronger” (homeowner, female, 50 years old).
There is one group which is an exception to this. These are homeowners who
have bought different houses depending on their circumstances and show the
same low level of emotional bond with their housing as most of the tenants.
From their point of view home ownership is about a place to live or a good investment, or both.
Unlike tenants, almost all homeowners regard their current housing as the
final place they will live in. They would only move in the case of necessity.
This correlates with the results of other studies, which show that most people only buy a house once in their lifetime (for example, Behring & Helbrecht,
2002). For homeowners as well as tenants owning a house or flat means being
settled, which some homeowners approach with positive and others with
mixed feelings, as they feel that their life will be less flexible.
“My approach to home ownership is rather ambivalent. Well, it means that you’re
tied to a specific area. In the past I used to move jobs and job locations often. Sometimes I was too spontaneous, both when I was still alone and then later with my
family. If I had owned a house at that time, I wouldn’t have been able to be as flexible. I’ve also noticed that other people feel the same way. Home ownership does
make people inflexible in some ways. Our company quite often has job vacancies
and we wonder why people don’t apply. Then we find out that people own their
own houses and don’t want to move. They won’t move to a different town even for
a much better salary” (homeowner, male, 49 years old).
The relationship between housing decisions and the labour market, social
security and personal well being
A person’s position in the labour market and family situation are the most
crucial factors which impact on housing decisions. Three key areas of housing
decisions can be identified which are strongly influenced by these factors.
nChoice of housing location – The choice of housing location is mainly influenced by a suitable infrastructure for children (crèche, schools, playgrounds
in a ‘good and safe’ social environment and where the people who take care
of the children live near by). In order to meet as many of these criteria as
possible, parents obviously put less emphasis on their own requirements
for specific housing conditions or personal lifestyle factors. These usually
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also have an impact on the choice of a specific location (for example, the
importance of a certain social environment and infrastructure).
nHousing career – Work, study or marriage and cohabitation are most often
mentioned as reasons for people to move from one home to another. These
are also the central motives for people to leave their parental home. Increasing expectations of quality and comfort also prompt a house move. These
are closely interlinked with the respondents’ life course and career. In the
early stages of their housing histories, people usually have low incomes
and therefore are prepared to accept low standards of housing. In many
cases, people want to experience different housing conditions, for example flat-sharing. As people grow older and their family situation changes,
their expectations of living standards increase. Because home ownership is
considered to offer the best quality of life, for most interviewees it is the
theoretical goal of their housing career. The circumstances which respondents lived in as children also influence their views on tenure. If their parents owned the home where they grew up, their long-term tenure preference and objective will also be home ownership, which is generally taken
for granted rather than regarded as being something special.
“My parents used to own three houses and therefore I always knew that I would
like to own a house myself one day. (…) It was always clear to me that I would take
the plunge and buy a house as soon as it was financially possible” (homeowner,
female, 35 years old).
As soon as home ownership becomes a realistic option in financial, occupational and family terms, this group tries to change their form of tenure.
nChoice of tenure – Households’ position on the labour market and their
income are crucial factors in their choice of tenure. As soon as the household is judged to have a reliable income – it does not necessarily need to
be high – buying a house becomes feasible. This attitude applies to both
tenants and homeowners. All homeowning households bought their
homes on the basis of two incomes or at least one full-time and one parttime income. Female participation in the labour force is closely linked
with home ownership (Doling, 2005). However, it is impossible to find evidence for the direction of the correlation. The participation of both partners in the labour force could be a financial precondition of home ownership. Or it could be the result of a decision made freely by both partners
on the basis of their individual attitudes to work and gender. In any case
the income criteria are very closely connected to the family situation. If a
satisfying and stable job coincides with a growing family, people are more
likely to buy a home than if they have no children. As long as the circumstances of their job, income, family and partnership remain unsettled, people tend to prefer to rent. The same applies to people whose jobs
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require a high degree of mobility. Generally, the more affluent people are,
the more home ownership comes into consideration. This affluence could
either be a result of a good income or of inheritance. For example, two of
the couples interviewed bought a house because they inherited money
and simply did not know what to do with it except to invest it in property.
To a lesser extent the housing situation also has an impact on living conditions. Generally, tenants consider themselves to be less affected by housing
than owners. The financial responsibility and the emotional bond with their
home is less well-developed. Most of them feel free to move if they need to or
if the conditions of their rental change.
“Not a lot can happen to me, because, well, I’m not responsible. Well, I do have a
certain kind of responsibility, but I can move out of this flat. If the rent goes up or
something like that, I’ll simply move out” (renter, female, 29 years old).
The impact of housing on financial matters is mentioned both by homeowners and tenants with little financial scope6. Both have cut their spending on
leisure and holidays. However, homeowners have an advantage in the long
run. Owners who have been paying back their mortgage for a while will benefit from decreasing monthly repayments. The money which this makes available can be spent in areas where spending had previously been restricted because of the high outstanding debts.
“It’s a good feeling, because I’ve noticed that the amount I pay to the bank is falling
every month. I didn’t think about that before we owned our own home. (…) We’ve
repaid a lot already which also means more freedom, because I have to pay less.
Freedom to spend the money on other things” (homeowner, female, 41 years old).
Home ownership apparently affects the way in which people spend their
spare time. The home becomes the spatial and social centre, where most of
people’s spare time is spent. Homeowners can invite people to their houses,
have parties etc. This applies to a lesser extent to less affluent people, who
may not have sufficient disposable income to spend on leisure.
Although the position on the labour market has an impact on housing,
housing hardly seems to have any effect on jobs. None of the respondents
ever considered (or would do so in the future) using equity from the house
for occupational purposes (for example, setting up a company or investing in
a company). They would not use the equity for purposes of early retirement
6 Homeowners who claim to have little financial scope either have a relatively low income or have deliberately
chosen a high loan-to-value ratio, because they prefer not to have high levels of outstanding debt.
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either. Housing has hardly any influence on the choice between full-time and
part-time work. Most homeowners work full-time, because the outstanding
mortgage does not allow them to work part-time, although they would prefer to. In the case of job mobility, homeowners in search of another job (either
because of unemployment or the desire to change jobs) feel restricted to the
town they currently live in. They emphasise the feeling of spatial immobility
that complicates the search for a job.
Use of housing as a financial resource
In Germany homeowners and tenants alike are not familiar with the idea of
using housing as a financial resource. Most have not considered using their
housing in this way. However, they often implicitly regard housing as a ‘pension in stone’ or as a financial asset which they can rely on in the case of
need. This shows a certain general awareness of housing as a financial resource even though it is not mentioned directly. Instead there appeared to be
a ‘learning curve’ while talking about the financial possibilities of housing. Although most respondents approve of this concept theoretically, they would
hesitate to put it into practice. There are many reasons for this, which in most
cases remain vague. People do not like sharing their home with strangers (if
they had to rent part of it). If they had to remortgage, they would worry about
not being able to pay the mortgage off. They simply do not feel comfortable
with the idea of borrowing twice or even more against their home.
Only a few owners used their housing as a financial resource in three different ways:
nOne option was to use property to be able to move to a slightly larger or
more suitable house. In this case most people simply transferred the equity
from one property to another.
nSome owners remortgaged their houses for modest amounts in order to be
able to afford the costs of improvements, which were intended to add value
to the property.
nA few people rent out a second property in order to finance their current
housing. This either helps to pay the rent or to repay the mortgage. Renting out a second property seems to be the most convenient way of taking
financial advantage of housing. Obviously, other options (such as down-sizing, renting out parts of the house) appear to homeowners not to be attractive or architecturally possible. As Hanover is a research city where exhibitions and trade fairs are held, a minority of homeowners and tenants take
the opportunity to accommodate visitors for a couple of days. This seems
to be a good way of earning some extra money without entering into major
emotional and spatial commitments.
People would only consider using their housing as a financial resource in the
future if there were no other alternatives. Selling the dwelling to move to a
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smaller property or renting out parts of the property are seen as the most acceptable ways of accessing equity. The theoretical motives for this are based
on clear priorities. Maintenance of the property, care needs and the children’s
education are considered appropriate reasons. Additional spending on consumption (such as leisure activities and holidays) or for occupational purposes are not regarded as suitable reasons.
nMaintenance of housing – Housing-related activities are considered the
most appropriate use of housing equity. Furthermore, maintenance and
home improvements are viewed as a means of adding value to the home.
nCare needs – Many people worry about financing unexpected care needs or
care in old age. In this case home ownership provides a feeling of financial security. As most owners do not regard their current housing as being
architecturally suitable for the provision of care, the most common idea is
to sell the house in order to rent an appropriate flat. For reasons of pride,
remaining independent of their children’s (financial and practical) help if
they need care or when they become old is very important to most homeowners and tenants. Therefore, they would rather use their housing equity
to remain financially independent than receive support from their children,
which would allow them to keep their inheritance intact. As a result many
interviewees approved of the concept which is currently unknown in Germany of using your property to supplement your pension income. Although
you own your house outright, you take out a new mortgage on the house. In
turn, you receive a capital sum but only pay interest on the loan. The capital
sum borrowed is repaid on the owner’s death when the house is sold.
nChildren’s education – Using housing resources to fund children’s education
seems to be regarded as important and worthwhile. A good education is seen
as a life-long investment and the best ‘insurance’ against unemployment.
5.5 Security and insecurity
The security of home ownership and renting
Different notions of security can be identified in the interviewees’ statements
and world-views. Many homeowners feel a sense of financial security and insecurity at the same time. On the one hand, they value the feeling of owning a property, which guarantees certain financial advantages. Living rentfree after the mortgage is paid off and having a financial buffer for unexpected eventualities are the benefits most often highlighted. On the other hand,
some owners feel that they have a financial burden because they are not sure
about their financial future.
However, the feeling of security provided by home ownership seems to
outweigh the sense of insecurity. Although people worry about future negative developments in the housing market, home ownership still contributes
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to their security as they cannot be evicted in old age and they do not have
to leave a familiar environment. It is interesting, however, that this fact is
only emphasised by homeowners. Tenants say that they feel equally secure
because they rely on the tenancy agreement. Against the background of perceived uncertainty about the future of the German pension scheme as a result
of political changes and general cuts in welfare spending, homeowners have
a feeling of security because they will always have a place to live, a ‘roof over
their head’, regardless of their pension income. In this case marginal homeowners have a greater sense of financial security than marginal tenants,
although their financial responsibilities and therefore their financial risks are
much higher. They argue that, if things go wrong, they could always sell their
house in order to pay off the mortgage.
In addition to the emotionally reassuring idea of always having a place to
live, home ownership is regarded as advantageous by marginal homeowners or owners with a precarious job situation (for example, with a series of
temporary employment contracts) with regard to the state long-term unemployment benefit (Arbeitslosengeld II). If an unemployed person owns a home,
it is not taken into account in the calculation of unemployment benefits, as
long as the size of housing is estimated to be ‘adequate’. For example, owneroccupied flats or houses are not allowed to exceed a maximum of 130 square
metres. In the case of bigger homes, the owner may be obliged to rent out
a part of the property. If the owner has not yet paid off the mortgage, interest payments will be made by the state, which also covers additional housing
costs. Therefore despite the fact that they own a house or flat, people can still
receive financial support from the state.
Marginal tenants, who are in precarious job situations and who have to
rely only on state aid in the case of unemployment, feel less secure. Although
state aid covers the rent, certain requirements have to be fulfilled, for example the size of a flat must not exceed a certain number of square metres per
person. Consequently, some marginal tenants fear that they may have to
move to another flat if they become unemployed, as otherwise this might
result in a fall in their standard of living. The majority of tenants, who have
a more or less average level of financial resources and safety nets (for example, savings, social network), do not have a great feeling of financial insecurity. If their position on the labour market is good or they are relatively affluent,
people feel financially secure regardless of their type of tenure. For affluent
tenants the need to buy a property for financial reasons appears less important, because they rely strongly on their income, their job position or other
financial resources.
Overall, tenants regard themselves as being more flexible and able to adapt
to changing financial circumstances by moving flats. Additionally, some mentioned that they feel financially more secure than they would as owners, as
they do not have to cope with unexpected repair costs or maintenance in the
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same way as homeowners do. Two renters, who used to own a house, even
feel a sense of relief that they no longer have to be responsible for their housing. One female renter puts it this way:
“In some ways it’s just like buying a kind of service. The landlord owns a house,
cares for it, maintains it and I pay for it” (renter, female, 32 years old).
Perceptions of risks to housing
When assessing risks, renters and homeowners both have a confident attitude towards life. However, homeowning households in particular reflect upon the potential risks and try to prevent them occurring as far as they can in
financial and practical terms.
Unemployment and unexpected health problems requiring long-term care
are recognised as presenting the greatest risk for the housing situation.
“If I had to retire now or could not work any more because of illness and care needs,
I could not afford this flat any longer. I would have no other choice but to sell it”
(homeowner, male, 58 years old).
Although only a few people say that they have a totally secure job (for example, teachers employed by the state), both the respondents’ job history and
their financial background seem to have an impact on the perception of housing-related risks. Those who have positive experiences in terms of their job
history, income stability and financial resources worry less about the severity
of the risks. Finances can be used to cushion the impact of a number of eventualities and a greater variety and number of insurance policies can be taken out. Homeowners and tenants in precarious job situations or with fewer financial resources are aware of their vulnerability. They would be more severely affected by risks, as they have only a small financial cushion to rely on.
Homeowners see a greater variety of risks affecting their housing security
and also believe that the possible risks will cause a greater burden for them.
This is obviously a result of the increased financial responsibility, the greater emotional bond and the reduction in spatial mobility. The death of a partner, the inability to work, unemployment which requires a move to a different
city and the deterioration of the neighbourhood are identified as risks which
will change their housing circumstances significantly. Divorce and relationship
breakdown are mentioned as a theoretical risk but one which is only mentioned
by those respondents who have either experienced this themselves or in the
case of their parents’ relationship. In general, homeowners perceive the possible loss of their housing to be more of an emotional issue, as the occurrence of
a risk could significantly change their housing situation. In the worst case they
would have to move to a different type of tenure, which always involves a feeling of losing a certain social status and which is also more visible to others.
[ 123 ]
5.6 Safety net strategies
Safety nets
Respondents generally combine different methods of protecting themselves
against housing risks (Table 5.3). Homeowners are usually better protected
than tenants both in terms of the amount of insurance and the variety of protection methods.
Insurance is the most important protection instrument. In general homeowners and tenants have taken out good insurance cover within their financial
scope. However, homeowners are insured against a greater variety of eventualities. All of them have an endowment or life insurance policy as a condition
of their mortgage and at least compulsory health insurance (CHI). The tenants also have health insurance. In the case of unemployment the state covers the costs of the CHI. All the employed respondents also have compulsory long-term health insurance. With regard to the home itself, it is common to
take out buildings insurance, household insurance and an owner’s insurance
In the case of unemployment, most people tend to rely on state unemployment benefit, which covers 60% of the previous income for a certain period depending on the length of time that the person has been working. Few
of the homeowners who have already experienced unemployment have still
invested in housing, knowing that property is not taken into account for longterm unemployment benefits. Although there has been a major restructuring of state unemployment support, most people still seem to be confident
about their benefits. Many respondents also have a private insurance policy
for occupational disability.
All homeowners and tenants hope to receive at least a small state pension
which will cover their minimum living costs. However, they worry about the
amount that they will receive. Therefore some of them have also taken out an
additional life insurance policy or private pension insurance. As the homeowners plan to have paid off their mortgage by the time they retire, they view
their property as a protection against financial difficulties in old age. If they
are not able to maintain their property, they could sell it in order to buy or
rent a flat.
Households with a relatively low income usually have the compulsory
insurance policies, which are not particularly expensive because they are calculated on the basis of a certain percentage of the income.
Both marginal and non-marginal households and both tenants and homeowners consider their savings to be an essential short-term buffer for all
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Table 5.3 Differences in safety nets between homeowners and tenants in Germany
Insurance policies
Social network
Home ownership
Dependent on financial means
Greater variety of insurance policies
Considered as a buffer against all eventualities
Build up savings for maintenance
Important, but most people would try to avoid
asking the family for support
Possible for a limited period of time
Deliberate increase in monthly repayments to
pay off the mortgage as soon as possible
Dependent on financial means
Less insurance than homeowners
Considered as a buffer against all eventualities
Less money saved than homeowners
Important, but most people would try to avoid
asking the family for support
Possible for a limited period of time
eventualities. The amount of savings varies considerably and about a third of
the respondents – most of them tenants – only have a very small amount of
money saved. This would not cover their living expenses at all and certainly
not in the long term. The homeowners try to build up their savings to cover
the additional costs of housing maintenance. For this purpose, many homeowners have also renewed their contract saving (Bausparkassen-Versicherung).
As a consequence homeowners usually have more money saved than tenants.
Home ownership
Some people increase their mortgage repayments voluntarily in order to pay
off the mortgage as quickly as possible. Although they have to cut back their
spending on consumer goods and leisure, they are taking advantage of their
situation, which they consider to be good at the moment, but uncertain in the
future, because of the precarious labour market. The knowledge that they own
the house outright apparently makes them feel less at risk.
Social network
Financial or practical support from friends and family is usually considered
possible for a limited time. Some people have already received this kind of
support during a period of unemployment. Almost all the respondents could
at least go to live with their family or their friends for a period of time. However, most do not count on this and would try to avoid it for reasons of pride
or shame.
The following finding does not help the respondents to manage risks in financial terms, but instead seems to help them to cope with severe risks where
there is a lack of a safety net. Tenants with limited financial means tend to
have a similar attitude towards possible risks. They either assume that the
state will support them in the case of need or they discredit private protection methods, saying that they are an indication of a narrow-minded or overcautious approach. In the latter case, people seem to turn their financially insecure position into a view of life which is chosen voluntarily. This attitude allows them to suppress their worries about the future or about insecurity.
[ 125 ]
Importance of the social security net
The social security net has an important place in people’s lives. Regardless of
the ongoing welfare cutbacks, both homeowners and tenants still benefit from
a well-developed social security net. Certain kinds of welfare provision which
form part of the safety net are not even mentioned by most respondents, as
they are taken for granted. This applies to health insurance and care insurance.
“Well, everyone has health insurance! I just have the compulsory health insurance”
(homeowner, female, 52 years old).
“Those are the normal insurance policies, like health insurance, that everyone has”
(homeowner, male, 58 years old).
A minimum level of health and care insurance is available to all respondents.
If they are worried about health problems affecting their housing security,
they are thinking about long-term and severe problems, which might entail
high costs not covered by the CHI, for example, because of the need for a special treatment. The level of additional insurance against health problems does
not differ between homeowners and tenants.
As a result of various state-led restructuring activities in the labour market and the rising unemployment rate, the respondents feel uncertain about
their future labour market position. However, they are confident that they will
receive unemployment benefit if they need it and this is calculated on the
basis of their former income level and period of work. All the respondents feel
reassured by the knowledge that they will receive unemployment benefit or at
least social security benefits. While savings and shares are taken into account
in the calculation of long-term unemployment and social security benefit, home ownership of properties up to a certain size is disregarded. Therefore, home ownership is more attractive to respondents than other assets and
savings. Furthermore, as there is a poor selection of private unemployment
insurance products, home ownership is viewed as a financial resource and a
way to retain a certain standard of living even during difficult times.
“The state does provide support for people who are in financial difficulties. (…) I
think that’s good. It also applies to home ownership. People who own a house don’t
have to sell it immediately, just because they are receiving long-term unemployment benefit. I’d like to stress that I think that’s good. But at the same time, people
also have to change their attitudes. They can’t always expect the state to help them
any more” (homeowner, female, 47 years old).
However, people are not sure how to deal with the general risk of unemployment in the long run, as they feel that they are not able to do anything to prevent it.
[ 126 ]
“What are you supposed to do if you become unemployed? Everyone who works
will receive unemployment benefit if they need it. And that’s the only thing that employees can do to protect themselves against unemployment” (homeowner, female, 49 years old).
In the case of pensions, respondents rely less on the state than they do if they
are unemployed. Here, home ownership becomes most crucial. Respondents
feel highly uncertain about their future pensions and expect a gradual reduction in payments. As property has proved to hold its value during long periods
of inflation and currency reforms in the past (Häussermann & Siebel, 2000), it
is still considered to be a safe investment, even though many respondents are
aware of possible falls in housing prices.
“Recently, I had another letter from the bank saying that I should come and talk to
them about financial provision for my old age. But I think property is more secure
than shares or things like that, because you never know what will happen. That’s
the point. I don’t have any confidence in future developments, but property is always safe” (renter, female, 36 years old).
Strong path dependency becomes evident. Although property will not inevitably retain its value in the future, people stick with traditional attitudes. People
also feel reassured by the tangible nature of home ownership. At least they
can live rent-free in their old age.
“We did make some indirect provision for our old age before we bought our house.
We just made sure that we didn’t spend all our money and tried to put some aside.
We also invested some smaller amounts in long-term shares. And now we have put
everything into home ownership. This means that our house is our provision for our
needs in old age, where we can live rent-free. We are already living in the provision
for our retirement” (homeowner, female, 50 years old).
Most respondents were aware of the need for the welfare system to be restructured, but they were concerned and complained about future welfare
provision. They would prefer to retain the existing welfare system and this
confirms the findings of similar studies (for example, Svallfors & Taylor-Gooby, 1999; Esping-Andersen, 2002).
5.7 Conclusion and further discussion
The German state used to provide a well-organised welfare system which
was biased in favour of employees and had origins that traced back to the
end of the 19th century. German citizens became used to paying high social
[ 127 ]
costs, but also to relying on an effective social security system, which protected them against most eventualities. The long-term positive growth in the
labour market and economic development also contributed to people’s natural confidence in their ability to cope with difficulties of all kinds. People
who are currently entering retirement had never regarded unemployment as
being a probable risk (Esping-Anderson, 2002, p. 10). However, home ownership was valued as being the most stable type of investment, because property was the only asset which had proved its value during periods of inflation
and currency reform in Germany. As a result of changes in national and international factors, the German state is currently restructuring its welfare system, in line with many other European countries. The ongoing restructuring
process is transferring responsibility for protection against risks, which had
formerly been the role of the state, to the individual. German citizens are being confronted with a new economic, social and political order in which they
have to take more and more responsibility for potential individual risks. The
open-ended nature of the future welfare system and the decline in economic
prosperity are both contributing to citizens’ confusion and often lead to concerns about future living conditions. In these circumstances to what extent
does home ownership provide citizens with a feeling of financial security? Or
is home ownership instead perceived as a source of financial disadvantage
as increasing income volatility complicates long periods of mortgage repayments?
Overall the security of home ownership outweighs the insecurity, although
both homeowners and tenants say that their form of tenure makes them feel
secure and insecure in different ways. Home ownership engenders a feeling
of security which is based on the benefit of future rent-free living and the
financial resource that the property represents. However, tenants do not have
the same financial responsibility as homeowners do. Homeowners often feel
both an emotional and a financial pressure. The financial pressure is not only
caused by the outstanding mortgage, but also by possible repair and maintenance costs. Renting also offers security, as tenants are more flexible and able
to react to changing living and working conditions. Young people in particular
do not want to tie themselves down to one area and take on financial responsibilities in the face of an unsettled employment situation. Home ownership
is seen as an obstacle that is financially and geographically incompatible with
occupational flexibility. This is probably a result of the general belief that people only buy a property once in a lifetime.
Homeowners and tenants alike regard job stability as a precondition for
home ownership. Once people have bought a property, their feeling of financial security, which was originally based on positive job expectations, increases. Therefore the perception of financial security is seldom triggered by home
ownership itself, but instead derives from the perceived stability of the labour
market position. On the basis of this interpretation, home ownership is an
[ 128 ]
expression of perceived financial security resulting from positive labour force
participation and, in its in turn, home ownership strengthens the perception
of financial security. Usually a growing family and stable employment coincide. Children are the major influence on the decision in favour of home ownership, as this kind of tenure is believed to offer the most suitable environment for bringing up children. In this case home ownership is seen as an
investment in the children’s quality of life. It is regarded as a means of providing children with a safe place to live, which might also suggest a certain
financial status.
The respondents have not yet paid much attention to the potential of home
ownership for extracting equity from housing. Homeowners refer to housing
as a theoretical financial resource and ‘a haven for their old age’, but have
never thought about taking advantage of the financial equity. It is difficult for
them to imagine using their housing to finance other areas of their lives, for
example investing in a business or buying consumer goods. Against the background of the ongoing process of transferring responsibility for risks to individuals and welfare cutbacks, this could offer advantages for both homeowners and state finances. It increases owners’ independence from the state and
improves their social position. When owners use housing assets to finance
support in their old age or care needs, they remove a financial burden from
the state (Doling & Ford, 2003, p. 232). However, homeowners are not aware of
this possibility and this is not just because of the prevailing mentality. Lending practices in Germany do not facilitate the use of equity to a great extent
and in particular not in old age, as is the case in Great Britain, for example.
Nevertheless, some respondents approved of this method of using housing
equity in the context of health and care needs in old age, because it would
offer a way of enjoying financial security while remaining independent of relatives and the state welfare system. Passing on the equity to their children is
less important than the desire for independence.
Respondents do not perceive ownership as a financial instrument for individual protection except to the extent that it offers the benefit of rent-free
living and a ‘safe haven’ in old age. Neither do they believe the social position of tenants to be more precarious. Tenants do not feel at a social disadvantage because they rely on their tenancy agreements and rent regulations.
This attitude reflects the historical pattern of a strongly regulated rental sector. However, home ownership provides a feeling of financial security especially among marginal owners, despite their expectations of negative developments in the housing market. They do not apply these general developments
to their individual circumstances and instead appreciate the fact that they
have financial equity. The historically undisputed importance of home ownership as a stable asset still echoes in most people’s minds. It is only in the
younger age groups that a few respondents indicate that they are also considering other forms of financial investment, which might be a more secure
[ 129 ]
alternative in the future (for example, funds, shares, insurance). These kinds
of investment usually require less long-term responsibility and are therefore
more compatible with changing, unconventional labour conditions. In general, home ownership has not yet been assigned greater importance as an
instrument for countering individual risk within a diminishing welfare state,
although it is still associated more with financial security than insecurity.
Whether home ownership will become more important in terms of individual financial security will depend on future housing market developments and
policies, changes in lending practices, the future growth of investment alternatives and – most importantly – the future of welfare policy.
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und Rahmenbedingungen unterschiedlicher Wohneigentümerquoten in Europa (Home ownership in Europe. Causes and conditions of different home
ownership rates in Europe), Ludwigsburg.
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der Wohneigentumsbildung (Obstacles to home ownership), Bonn (Bundes­
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(Federal Association of the German Housing Industry), 2005, Wohnungswirtschaftliche Daten und Trends 2005/2006, (Data and trends from the housing
industry 2005/2006), Berlin.
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Einführung in den Wandel und Ausdifferenzierung des Wohnens (The sociology of housing: an introduction to the transformation and differentiation of
housing), Munich.
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(the architect), 3-4, pp. 27-29.
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Institut der deutschen Wirtschaft Köln (Cologne Institute for Economic Research) (ed.): Perspektive 2050 (Perspectives 2050), Ökonomik des demographischen Wandels, (The economics of demographic change), Cologne, pp. 321344.
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[ 133 ]
6 Hungary: Escape into
home ownership
József Hegedüs & Nóra Teller
6.1 Introduction
Hungary has a population of 10 million people, of which approximately two
thirds live in urban areas. Around 1.8 million people live in the capital, which
represents almost 20% of the total population. Hungary became a member
state of the European Union in 2004, 15 years after the transition to a democratic market society.
Hungary: A transition country of super home ownership
Political changes have brought about major reforms in the structure of the
government, economy and society. The two main processes of the transition
were privatisation and decentralisation. In 1990, the share of state ownership
in the economy was over 85%. However, following the privatisation that has
taken place over the last 15 years, the share of the state sector has shrunk to
20%. During the decentralisation process local governments were given a wide
range of responsibilities for public and social services (water, sewerage, public transport, urban planning, housing, basic health care etc.). Although GDP
and related living standard indicators had reached their pre-transition levels
by 2000, reforms had not been completed in some of the major sectors, such
as energy, health care, public transport and education. The autonomy of the local governments, resulting from decentralisation, helped the restructuring pro­
cess. However, conflicts between central and local government over responsibilities and public resources tended to lead to ‘perverse’ behaviour by the public institutions, such as ‘rent-seeking’, tax competition, morally dubious behaviour and underuse of the local tax base1. More striking changes came about
in the social structure. The emergence of visible poverty due to mass unemployment, low labour market activity (resulting from early retirement, forced
postponement of education etc.) as well as increasing income and regional inequality contributed to social and political instability. Social security which, although at a low level, was guaranteed by the state has disappeared since the
transition, and the formation of a new welfare regime (system of safety nets)
has left some social groups basically unprotected. Housing, as one of the basic
1 The effects of the otherwise successful decentralisation were diminished by these ‘perverse’ behaviour patterns.
Rent-seeking meant that local government focused in a one-sided way on maximising the central grant at the
expense of real local needs. Morally dubious behaviour occurred when a local government signed a contract with
private players (banks, public service companies) expecting the cost of the contract to be paid by central government, for example taking out a loan which they are not able to pay back, or accumulating unpaid expenses, such
as hospitals, occasionally schools, and public transport companies.
[ 134 ]
human services, played a prominent role in the process of social change. After the give-away privatisation scheme was implemented in the housing
sector, home ownership became a dominant form of tenure in Hungary, as
was the case in most of the other transition countries. However, even after 15
years of transition, no new housing regime has been established. The housing
sector that exists today developed as a consequence of the economic transition and the trends in the housing system can be interpreted as an ‘outcome’
of the restructuring processes in the political and economic system, such as
decentralisation, privatisation, the emergence of private banking, the reform
of the social security system etc. Hungary is one example of a country where
‘super home ownership’ prevails and where the majority of the homeowners have full equity (there is still no substantial mortgage market). When the
housing system was restructured, both the risk and security aspects of home
ownership turned out to be relevant and have to be interpreted in the context
of the social problems related to the transition from a centrally planned economy to a democratic market society.
This chapter is based on the results of 30 interviews conducted in Hungary
during the summer and early autumn of 2005. The interviews aimed to clarify the role of home ownership with regard to the behaviour and attitudes of
the households interviewed in other areas of their lives (labour market, education, savings strategies, family life etc.).
The interviews were carried out at various locations in Budapest and one
respondent was chosen from a nearby agglomeration area. We covered multi-unit buildings in good and less good locations, single-family houses, large
housing estates and suburban areas. This means that various layers of the
housing market and most social strata have been included in our sample.
We used two recruitment methods: we approached most interviewees
through gatekeepers, but we also used the snowballing method in some cases.
The rationale behind using both methods was that family care centres were
able to provide us with respondent families in hardship, but the original aim
of relying on housing managers to recruit households with mortgages (high
status households) proved to be somewhat unreliable and inadequate. Therefore, in the case of the latter group, we predominantly relied on interviewees
to give us further contacts.
As a result, notwithstanding the benefits of the methods and the results of
matching the predefined quotas for the interviews, we were only able to compile a sample which overemphasises the interviewees from the rental sector and those living in hardship. While analysing the housing careers, another weakness of the sample became apparent: due to the urban focus during
recruitment, there are only few respondents who have reported their own
experiences of the relationship between housing decisions and access to the
[ 135 ]
job market. It seems that employment is considered as an issue only in the
first stage of the housing career, because staying in the urban environment of
the capital city means that there are plenty of job opportunities available and
therefore a relatively good labour market position.
This chapter discusses the main developments in the labour market and
the social security system after the beginning of the 1990s. It then explores
the changes in the housing sector, focusing on the privatisation of the public rental sector, which resulted in super home ownership in Hungary. Subsequently, the households’ housing decision strategies are elaborated upon
in the context of tenure structure, and the perceived aspects of security and
insecurity are examined. Lastly, safety net strategies are analysed and we
conclude that there are at least three aspects to be observed while discussing the risks and security of home ownership in Hungary, namely the effects
of the transition, the importance of the family background and the short- and
long-term consequences of poor decisions in the housing career on other areas of life and vice versa.
6.2 The main developments in the labour market and social security
The Hungarian economy underwent a transitional recession at the beginning
of the 1990s and, as a consequence of an austerity programme, the economy had slowly begun to recover by 2000. However, the much-needed structural changes in sectors including education, health care and social services had
not been carried out. The lack of reforms and the generous income policy of
the government from 2000 to 2006 caused a huge fiscal deficit, and forced the
government to prepare a second austerity programme encompassing the necessary structural reforms. In the 1990s, the changes in the labour market resulting from the closure
of many previously state-owned companies and the restructuring of the production sector meant that the employment rate decreased dramatically –
more than 1 million employees left the job market (see Figure 6.1). The falling employment rate has put an extraordinary burden on the public economy, which is a more serious problem than unemployment (which is slightly
better, i.e. lower, than in other European countries, although quite high compared to the almost full employment before the transition). Unfortunately,
alternative employment solutions (i.e. flexible employment) have not gained
much ground in the Hungarian labour market and this is also clear from the
stagnating activity rate in Hungary (around 54% from 2004 onwards).
Household incomes fell at the beginning of the 1990s, but reached the pretransition level in 2001). Between 2002 and 2004 there was an increase in
income brought about by the public sector income policy. As this increase was
[ 136 ]
Figure 6.1 Unemployment rates (%) and the number of employed people in Hungary, 1990-2004
Unemployment rate (%)
Employed people (millions)
1990 ’91
’94 ’95
’96 ’97
’98 ’99 2000 ’01 ’02
’03 ’04
’05 ’06
0 %
Source: EUROSTAT, Central Statistical Office
Table 6.1 Indexes of income inequality in Hungary, 1982-2004*
Income ratio of the lowest and
highest percentiles P10/P1
Robin Hood index
Gini coefficient
* The Robin Hood index is equal to the portion of the total income that would have to be redistributed
for there to be perfect equality; while the Gini coefficient is a measure of inequality of a distribution,
defined as the ratio of area between the Lorenz curve of the distribution and the curve of the uniform
distribution to the area under the uniform distribution.
Source: M. Keszthelyiné-Rédei & Zs. Szabó, 2006
not justified by economic performance, the rise in living standards increased
the government deficit. (The government deficit increased in the election
years: 1994 8.4%; 1998 6.8%; 2002 9.2% and in 2006 it will be more than 10%. The
only other EU countries with figures as high as this are Portugal and Greece). During the 1990s poverty became one of the most important social issues.
While the average income decreased, income inequalities increased dramatically in the first part of the 1990s, and remained stable over the last decade (Table 6.1). The ratio of the average income in the lowest percentile to the
average in the highest percentile increased from 4.6 in 1987 to 7.6 in 2004; the
decrease between 1995 and 2004 was less significant. (The other two indices
support the same conclusion).
There was a decrease in the welfare functions of the state during the first
half of the 1990s and a slow increase after 1998 (Figure 6.2). In 2004, the total
welfare expenditure amounted to 32% of GDP. The majority of the social welfare budget was spent on pensions (25.8%), education (18.2%) and the health
care system (17.1%) and only 28.4% of it (around HUF 1,845 billion) was spent
on social welfare functions.
[ 137 ]
Figure 6.2 Public sector expenditure on services in Hungary, in billion HUF
(at 2004 prices)
Welfare function
General public services
Economic functions
Debt services
billion HUF
1991 ’92
’99 2000 ’01
Source: Benedek et al., 2006
Table 6.2 Composition of social welfare expenditure in Hungary in 2004
Billion HUF
As a % of total social
As a % of GDP
welfare expenditure
Services in kind*
Price subsidies of social services**
Tax allowances
Insurance-based transfers
Means-tested benefits
Universal transfers
* For example, housing allowance, social meals, medication, funerals etc.
** For example, care for the elderly and nursery school fees, benefits paid to vulnerable families for
school books.
Source: Benedek et al., 2006
Means-tested social benefits account only for 5.9% of total social welfare
expenditure (Table 6.2), and the targeting efficiency of these programmes
could be criticised. According to Benedek et al. (2006), some universal programmes (for example, child benefit) reach the poor quite efficiently without
means-testing procedures. However, the social welfare programmes, overall,
are very poorly targeted, and the neglect of social sector reform contributed
to the fiscal crisis of 2006.
Poor targeting of social welfare programmes is also related to large-scale tax
evasion and poor income measurement in social programmes. The informal
[ 138 ]
economy was estimated to be as much as 25-33% of GDP between 1990 and
1997 (Laczkó, 2000). The fiscal crisis is related to the welfare policy, which, given that it seeks to maintain a broad range of social services at a low level of
willingness to pay taxes, is not a feasible or sustainable option.
As a consequence of the postponement of reforms, several groups in Hungary were confronted by an inadequate welfare system, among them pensioners, the unemployed, the sick, families with three or more children and single
and single-parent households. Due to the decentralised nature of some social
benefits, they also sometimes vary among settlements. Typically, these are the
groups that face hardship in paying housing costs because of low incomes or
disproportionately high housing expenditure.
In a similar way to the other former socialist states, before the transition
housing was considered primarily to be part of the social commitment of the
state, and it was rapidly excluded from state control and financing after the
political changes. The more extensively the state withdrew from housing supply, allocation and control, the more the market mechanisms prevailed. The
East European Housing Model (Hegedüs-Tosics, 1996) was built into the centrally planned economy that can be characterised as a socioeconomic system with high job security2, low, highly subsidised housing service prices and
small income differentials. In the housing system in this economy, the vast
majority of services were provided ‘in kind’ or at below-cost prices and were
allocated according to consumers’ ‘merits’ (Kornai, 2000). As a consequence of
the low, subsidised housing prices, an enormous shortage developed, leading
to the emergence of a dual housing market3. In the formal housing market,
there was no need for housing assistance (because of the subsidised, low-cost
housing services), but the informal market was not officially acknowledged
and therefore no income support was offered in this area.
6.3 The main developments in the housing sector
6.3.1 Introduction
In the pre-transition period the main features of the Hungarian public rental sector were the very low rent level, the huge backlog in maintenance and
the ‘ownership’ rights of tenants. The public rental sector made up around
2 To be unemployed was considered a ’crime’, which led to a high level of ’inside unemployment’ (meaning that
many jobs with low salaries and almost ’no work’ were retained in companies).
3 ‘Dual housing market’ refers to the existence of an informal housing market alongside the state-controlled
housing sector: self-help construction, private transactions in the public rental sector, private property market
transactions, markets for subtenancies and a small private rental sector (Hegedüs, 1992).
[ 139 ]
Table 6.3 Tenure structure in Hungary, 1970-2001, in %
Public rental
Other rental
20% of the housing stock, but
reached almost 40% in urban
areas. The rental sector operSource: 2001 census, Central Statistical Office
ated as a ‘unitary’ system (Kemeny, 1995), in the sense that
there were no major differences in the social composition of the tenants among the sectors. Moreover, a
critical analysis of the socialist housing system indicates that access to public
rented property was distributed unevenly among different social and income
groups, and the better-off families had a better chance of obtaining rental
housing (Szelényi, 1983; Dániel, 1985). However, this fact could be explained
partly by the allocation policy (‘the role of the state’) and partly by market allocation. Between 30% and 35% of the tenants in 1992 accessed their housing
through private transactions, in other words they obtained their housing on
the ‘grey’ market and became renters. (Hegedüs, Mark & Tosics, 1994). At the
same time, it is important to mention that by 1990 the proportion of owneroccupation in Hungary was significant and was already higher than in many
western European countries (see Table 6.3 for an overview).
The collapse of the centrally planned economy brought about radical changes in the housing sector. The new housing regime gave preference to privatisation and liberalisation in the housing sector, which increased the significance of home ownership, both as a source of security and as a source of
After the political changes at the end of the 1980s, three stages in the housing policy can be identified:
n1989-1994: crisis management (privatisation of the state-owned rental units
to the sitting tenants, privatisation of the construction and development
companies, consolidating the collapsed portfolio of ‘old loans’);
n1995-2000: developing new institutions (emerging housing finance institutions: contract saving banks, mortgage banks etc., changes in legislation);
n2001 onwards: new housing programme supporting the middle class through
housing finance subsidies, and the slow start of social programmes.
6.3.2 Crisis management (1989-1994)
In the first period (1989-1994) the government tried to manage the housing
crises related to the economic decline and the ‘deep subsidy’ system of the
socialist period. The government ‘moved out of the housing sector’ by cutting subsidies and reducing their direct role. Decentralisation was part of this
process as local governments were assigned to manage the housing allowance
programme, partly financed from their own resources. The housing policy of
this period could be characterised basically as crisis management. The Housing Act (1993) and the Social Act (1993) made it clear that the government was
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not taking responsibility for housing, but was leaving it open to future intervention. The subsidy system was changed in order to decrease the burden on
the budget, but no major changes were made in the concept of the housing
policy. The decisions taken in this period made it clear that politicians did not
accept the idea of targeting. Nevertheless, this idea became an increasing part
of the government programmes. The privatisation process speeded up, resulting in ‘super home ownership’ in Hungary.
Until 1994, local governments were free to make decisions on privatisation.
The majority of local governments supported privatisation on the basis of
both short-term political and longer-term financial considerations. The political reason for privatisation on the part of local governments was to ‘favour’
their residents, and they were supported by ‘faith’ in privatisation in general4.
There were several financial reasons for privatisation, such as the backlog
in maintenance, and the continuing operational losses, as the rents only covered 30-45% of the actual costs. A key element in local governments' decision to privatise residential property was the future rent levels that could be
imposed. The local governments expected heavy political pressure in the case
of rent increases. In fact privatisation speeded up during the early 1990s and,
after the ‘soft’ right-to-buy Housing Act of 1993, a new impetus was given to
Direct financial considerations and increasing security were determining households’ willingness to buy the units. The main financial motivation was to capitalise on the potential 'value-gap' of the rental unit, in other
words to capture the difference between the value of the property as a rental unit and as an owner-occupied unit. The average price a household had
to pay was around 10% of the market price. The absolute figure of the ‘value gap’ increased with the quality and location of the unit, which had a huge
regressive allocation effect. The selling prices were set at 15% of the market price5, 10% of which had to be paid in cash and the remaining amount in
monthly instalments for 15 years at a 3% interest rate. (It was not a loan, but
a ‘delayed’ payment.) Alongside the ‘value gap’, security was the most important issue. It is true that public tenants had enjoyed a high security of tenure
over the previous forty years, and they had paid low rents, with rent increases below inflation. After the regime change, most of the tenants expected rent
increases and a reduction in their ‘ownership’ rights (for example, the right of
tenure swapping or inheritance).
Altogether less than 5% of the stock remained in the ownership of the
municipalities. In the overwhelming remainder of the flats that could not be
4 Housing privatisation was also strongly encouraged by most of the international donor agencies.
5 The price was set at 30% of the market value if extensive modernisation had been undertaken within the previous 5 to 15 years, and 40% if the modernisation had been undertaken within the previous 5 years.
[ 141 ]
sold, the sitting tenants remained as renters of municipal units. There were
a number of reasons for this that are connected to the insecurity aspect of
home ownership, namely, that in their case buying the flats would not have
been possible due to lack of financial resources or existing arrears. They could
not have borne the financial burden of paying the rate of interest or even any
expenses related to housing maintenance (for example, repair costs). As a
result, the municipal housing stock residualised, because higher value housing had already been sold by 1993, and after 1996 40% of the privatised stock
belonged to the lowest value quintile. According to the results of a survey carried out in 1999, the lower the status of the household, the more likely it is to
live in municipal housing: 44% of households where the head of a family is
an unskilled worker live in municipal rental housing, whereas this figure is
only 8.4% among white-collar workers. In 10 years, household income in the
public rental sector decreased from 86% to 74%, expressed as a percentage of
household income in the owner-occupied sector by 2003. It is an interesting
fact that the most active group of households that chose to privatise by 1999
were those with a head of household over 60 years of age (CSO 2001).
In the middle of the 1990s a number of new laws made the creation of a
market-based housing finance system possible. As a result of these changes
in the legal framework, legal tools for securing property loans and ensuring
rapid access to collateral in the event of the borrower defaulting on a mortgage were established6.
6.3.3 Developing housing finance institutions
In the second period (1995-2000) new institutions were established and the legal background improved. Meanwhile, the level of the subsidies gradually decreased as a consequence of the falling housing output. Two basic financial
institutions were set up: the contract saving banks and the mortgage banks.
The law on contract savings banks was very controversial as the subsidies
given to savers made the housing subsidy system more regressive, and there
6 For example: 1. The 1993 Act on the Regulation of Rent and Sale of Housing exempts private landlords from
the requirement to provide alternative housing to an evicted tenant; 2. Amendments to the sections of the Civil
Code on mortgages and liens adopted in 1996 and a 1994 act covering court procedures permit foreclosure and
repossession without the lengthy judicial proceedings required under previous law; 3. The Civil Code now permits
the lender to sell the property itself without court intervention if the parties have agreed on this in the loan documents; 4. Amendments to the Civil Code provide that, for residential property, the parties may agree that the
borrower must hand over the property unoccupied in the event of foreclosure; 5. The 1997 Act on mortgage banks
and mortgage bonds changed the priority for payment to a mortgage lender from the proceeds of a foreclosure
sale from last place to fourth place, ahead of taxes, social security and other public debt.
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was no direct relation between the subsidies and the increase in housing investments. The changes to the legal background of housing finance were an
important element of this period. The attempt to tackle the problem of the inflationary environment and changes in the subsidy system had a temporary
effect on the housing sector. The housing policy concept declared the need
for reform of the subsidy system, but changes mainly served the purpose of
reducing the budget burden. From 1998 a new rhetoric was presented in the
housing policy, namely the need to support middle-income citizens, but for
two years nothing significant happened.
6.3.4 The middle class in focus: new housing
programmes (2001 onwards)
In the third period (2001 onwards) the government started an active programme backed by positive macroeconomic changes. The programme introduced new subsidies (interest rate subsidy, mortgage rate deduction from personal income tax and mortgage bond subsidy) primarily in the owner-occupied sector, but also in the public rental market. To enhance the effect of the
programme, the subsidies were increased step-by-step. The new government
of 2002 inherited a very controversial system consisting primarily of housing loan subsidies and were faced with the problem of how to restructure it.
The left-wing government elected in 2002 promised in its election campaign
to keep the subsidies in the housing sector unchanged and even guaranteed
increases in some elements of the subsidy system (for example, an increase
in premiums for contract savings and in the advance down payment subsidy
for new construction), but in the end the unsustainability and low targeting of
the subsidy programmes caused radical changes in 2003-2004. During these
four years of subsidised housing loans the housing loan portfolio grew eightfold or ninefold in size and the percentage of GDP represented by loans increased from 1% in 2000 to 7% at the end of 2003 (around 500.000 households
took out loans in this period). This substantial increase was facilitated by the
fact that the portfolio was at its lowest point at the start of the millennium
(previously subsidised loans had mostly been paid back and there was only a
small number of new loans), therefore the development started from almost
zero. The amount and extent of subsidised loans were reduced and more emphasis was put on upfront down payment subsidies, socially targeted housing allowances and rent subsidies. The number of subsidised loans fell as the
share of (cheaper) foreign currency-based loans increased by 2005.
As part of the housing programme launched in 2000, a grant programme for
local governments was introduced, which supported five housing areas: the
rental sector, energy saving measures, rehabilitation programmes, land development and renovation of housing owned by churches.
The most important element of the grant programme was the support of
[ 143 ]
Figure 6.3 Housing subsidies 1998-2004 in billion HUF in Hungary
Tax expenditures
Housing loan subsidies
Direct subsidies – owner-occupied sector
Direct subsidies – rental sector
billion HUF
Source: MRI, 2005
the public rental sector. The programme gave an investment grant to local
governments of up to 75% of the investment costs for various purposes: social
rental, cost-based rental7, housing for young families, homes for the elderly.
In the years between 2000 and 2004 several hundred local governments took
part in the programme. The total investment amounted to HUF 60 billion and
close to 13 thousand units were established. After the change in the government, there was also a shift in the housing
policy. The mortgage programme with the modification made prior to the
election of 2002 was unsustainable, unjust and inefficient. The changes in the
composition and the real increase in the housing subsidy programmes clearly show the shift to mortgage subsidies as opposed to other programme elements (see Figure 6.3). Budget expenditure increased, which, in parallel with
other popular measures (for example, the large increase in public employees’
salaries), created a fiscal problem. The first victim of the budget cut was the
social rental programme, which was stopped after 2004. The ‘high’ cost per
unit was the justification for curtailing it. (However, the value of the mortgage programme subsidy at the time was higher, and it had a clear regressive
income effect as opposed to the rental programme’s social effect.) The products that were most popular, but that since then have been severely cut back,
were subsidised loans for newly built homes (5-35 years, both fixed and variable interest rates of 7.5-9.5%, with a loan-to-value ratio of 40-60%) and for
existing homes (similar terms but with an interest rate of 7-11.5%). In addition to this, substantial PIT exemption was offered between 2002 and 2005,
which was later reduced. Since then, foreign currency-based loans have taken over the leading position among housing loans. This type of loan has only
existed since 2004, but, as the subsidies were cut back, it quickly became pop-
7 Cost-based rental was allocated according to the locally defined procedures (typically by social criteria), and
basically forced the local governments to charge a minimum of 2% of the investment cost per year.
[ 144 ]
Figure 6.4 Rents in different submarkets in 2005 in Hungary
ular. However, in 2004 it made
up less than 20% of the outstanding loans, but represented quite a considerable pro2,1
portion of the newly issued
loans. (Hegedüs & Somogyi,
As part of the safety net
rent at
social rent
rental: upper
rental: lower
features, the housing allowmarket middle market market
ance is one of the means-tested social welfare programmes
Source: estimates based on CSO, 2003
that apply to the housing sector. The Hungarian scheme
introduced in 1993 had a very limited role because of a lack of incentives
for local governments to provide substantial contributions to housing costs.
The context of the scheme consists of what are generally the two approaches taken by welfare programmes in Hungary: one approach uses programmes
defined by the central government (parliament), and the other uses programmes managed by local governments (mixed finance). The housing allowance system, introduced in 1993, remained a ‘low budget’ programme (100%
financed by the municipalities) and, consequently, utility and rent arrears
increased during the 1990s. According to the Hungarian Household Panel survey, in 1992 11.7% of the households indicated that they had real difficulty in
paying utility costs and rents. By 1997 the proportion increased to 15.4%. (HHP,
1998). The housing surveys of 1999 and 2003 indicated that 6-7% of the households were in arrears (CSO, 2004). However, other sources have estimated that
an even larger proportion of households had arrears problems. Realising the
significance of the social problems related to arrears, from 1997 the government began launching programmes to offer incentives to local governments
to manage the arrears issue.8 Nevertheless, no substantial results were forthcoming and in 2003 a new housing allowance scheme was developed and an
arrears management programme introduced (Hegedüs-Teller, 2004). In 2004,
the management of the housing allowance programme changed, and the
funding is now shared (10-90%) between local and central government and
the eligibility criteria and minimum subsidy amount are now set centrally. By
this time, housing allowances made up around 4.8-3.6% (decreasing) of the
total social welfare benefit programmes in 1998 and 20029. 2004 brought about
a new rent allowance initiative, which opened up the way for the private rent4,4
8 Local governments are theoretically interested in arrears management, since normally at least part of the utility
companies (mostly water and sewage treatment plants) are (co-)owned by the local governments.
9 Other income transfers should be taken into consideration, for example, pensions, family benefits etc.
[ 145 ]
Table 6.4 Major changes in the housing policy in Hungary, since the transition in 1989
General policy
1989-1994: crisis
1994-1998: Socialist
and Free Democrat
1995-2000: developing new institutions
After 2000/2001: new
2002 onwards: Social- housing programme
ist and Free Democrat supporting the middle
(re-elected in 2006) class through housing
finance subsidies, and
slow start of social
Some concrete actions
Government moves out of the housing sector, privatisation of state-owned rental units to sitting tenants,
privatisation of the construction and developing companies, consolidation of the collapsed loan portfolio
of ‘old loans’, Housing Act (1993), Social Act (1993),
decentralisation of housing tasks and benefits, new laws
and amendments ensure the formation of housing loan
products on the financial market.
Two basic financial institutions are set up: contract savings banks and mortgage banks, related legislation is
passed in 1997, advance subsidies for new housing construction are increased, which had a short-term effect on
housing output.
Introduction of new subsidies: interest rate subsidy, PIT
mortgage rate deduction, mortgage bond subsidy in
2001, at the same time grant programme for social housing introduced.
Radical changes: a cutback in mortgage subsidies and
a halt to social housing construction, at the same time
to compensate for the negative effects, the government
raised the upfront subsidies in 2003/2004, a new (but
not very effective) housing allowance scheme and rent
allowance scheme was introduced in 2004, new mortgage programmes were initiated for social rentals at the
end of 2006, but no investments have yet been made
under the scheme.
al sector to become a part of the housing policy. The government decided to
launch a rent allowance programme using public private partnership (PPP)
schemes for rental investment in 2004 (Hegedüs-Teller, 2005). The proposal
failed because the guaranteed rent level (requested by the investors through
the proposal) was unacceptably high (twice the existing market rent). At the
same time the importance of the social rental sector was never questioned in
government documents, but the cutback in the subsidies had a severe impact
on new investments in this sector. In 2005, a new attempt was made using
housing policy to influence the private rental sector and link it to social functions. A new rent allowance programme was introduced, which aimed to use
the private rental sector for social housing purposes (MRI, 2006). Local govern­
ments could apply for a rent allowance for low-income families who had child­
ren and a private rental contract. The rent allowance paid by central government could be a maximum of 30% of the rent or € 25-30 per month, and local
government had to contribute a minimum of the same amount as central
government. The local governments could apply for 3 years’ worth of rental
allowances. The programme was a fiasco and only very few local governments
[ 146 ]
have put forward proposals.
To underline the importance of initiatives of this kind, it is worth highlighting the gap between the private and the public rental sector. In addition to
the closed nature of the social rented sector, this can be best characterised by
huge disparities between the rents in the different layers of the rental sectors.
As the 2003 survey carried out by the Central Statistical Office states, renters in the public sector normally spend 7% of their household income on rent,
whereas this proportion in the private sector is nearly four times as high at
27%. The nominal differences in rents illustrate this even more clearly (see
Figure 6.4). Therefore it is obvious that, even with a large rent allowance (i.e.
the unsuccessful rent allowance scheme, see above) for the private sector,
households in serious financial hardship will not be able to afford to live in
private rented accommodation.
To summarise, the major changes since 1989/1990 are indicated in Table 6.4.
These institutional changes began with extensive privatisation and led to a
differentiation among the tenures. At the same time the layers of the housing
market form the framework for housing decisions, and therefore explain the
effects that good and bad timing or housing decisions could have on a person’s housing career. These are defined by the changes in the labour market
and the safety net at specific times. 6.4 Housing decisions and the meaning of tenure
6.4.1 The meaning of tenure
The social meaning of tenure under the socialist housing system was developed on the basis of special legal, economic, social and cultural factors that
influenced the housing system.
In the socialist system public rental was considered to be ‘safe’ tenure in
terms of both:
ntransferability (the right to swap from private ownership to public and vice
versa, as well as the right to inherit tenure from relatives); and npredictability of the rent burden (rents were typically around 5-6% of average income).
Owner-occupation and its variations (for example, ownership of a ‘co-operative
housing’ unit) was a relatively safe form of tenure, in terms of the predictability of costs and in terms of the rights and obligations attached to it. All other
forms of tenure, such as sub tenancy, private rental, hostels (for workers) and
status as a family member etc. were considered to be a ‘socialist’ version of
homelessness. The status of tied accommodation was not as clear and depend-
[ 147 ]
Housing at some
of the interview
locations in Budapest, Hungary.
ed on the authority to own and manage it. Tenants in tied accommodation had
limited rights, but the actual effects depended on the individual cases.
The transition changed not only the structure of tenure (through privatisation, see the previous section), but also the meaning of it. Even before the
transition, in other words at the end of the 1980s, there was constant pressure
to increase rents in order to provide cost recovery in the sector (which would
have required rental rates to be four times their actual level at the time). As
our research has shown, the uncertainty created by this pressure was one of
the most important factors influencing the willingness of residents to become
homeowners during the process of privatisation. However, the uncertainty accompanying the transition intensified the impact of this factor and public rental became a non-preferred form of tenure, representing the ‘residual’
solution for households that could not buy their own homes or had no access
to owner-occupation arrangements. The status (meaning) of private rental has
not changed very much since the transition and the private rental sector has
become less regulated (no rent-setting, lack of contractual relations etc.). In
addition both the landlords and tenants reportedly feel in a vulnerable position.
The meaning of housing for residents in the first instance is that it provides
a place to live, relax, feel ‘at home’ and be secure. However, further investigation into and reflection upon the situations in question has produced a
more comprehensive description of the perception of housing. According-
[ 148 ]
ly, owner-occupation can be described in two ways: as a consumer good and
as an investment good. Typically, households think of privately owned units
as consumer goods which require a lot of investment. Nevertheless, in times
of hardship, the role of privately owned units as investment goods gains in
importance when the possibilities for solving financial problems are considered and evaluated.
The convenient setup of a unit was one of the primary needs of residents in
several cases, regardless of the particular tenure type. Most interviewees felt
emotionally attached to their flats; residents were mostly proud of the design
and decoration of their flats, especially if they had invested their own time
and skill in renovation or refurbishment.
Housing comes to be seen as an investment most often during periods of
financial hardship. Difficulties in paying maintenance costs and management fees related to condominiums for flats in blocks were prevalent among
low-income households. Despite the tendency to treat housing as an investment when hardships and difficulties arise, households’ decisions on housing
are not solely motivated by the state of their financial affairs. Although some
households’ economic circumstances would suggest that housing wealth
ought to be used, emotional attachments and the memories of the years spent
in particular dwellings lessened the investment nature of housing (the value
of housing as an investment good). On the other hand, housing is clearly considered to be an investment when the housing decisions are explained. When
choosing a place to live, households’ and residents’ considerations of the lifestyle offered by particular dwellings are combined with the aim and expectation of making a good investment. Several respondents pointed out that when
choosing their current flats or thinking about the future, it was important to
them to be aware of the position of their dwellings on the housing market.
The possibility of losing money because of a poor housing decision is an idea
common to most of the respondents and could be responsible for the note of
caution expressed by interviewees regarding this matter. This caution can be
attributed to the learning process related to the transition.11
The respondents were asked to give a detailed picture of their housing decisions in terms of tenure choice, and they reflected on this issue, among others, when answering the questions in vignette 1 about the options of a young
couple who were considering setting up house together.
The interviews demonstrated the disadvantaged position of the private
10 Our sample is biased because we have a clear over-representation of households in arrears.
11 In addition to the financial difficulties, households are also aware to some extent of legal insecurity. As a result
of the learning process dating back to the initial years of the transition period, the possibility of being cheated by
the housing mafia in any housing transaction has increased households’ awareness of potential threats to their
[ 149 ]
rental sector and gave the following features of this sector as reasons for its
ndiscrimination against families with children and Roma, resulting in limited options for them in the private rental market, as well as difficulties in
entering the market and in renting from generally distrustful landlords;
nfinancial disadvantages resulting from the fact that renting a flat on the private market is a drain on financial resources and reduces residents’ ability
to save for further housing expenditure and investments (rent essentially
being thought of as ‘payments for nothing’);
nlimited possibilities for creating a personalised environment and the inconvenience of having your privacy easily invaded by a landlord;
nlegal insecurity deriving from the lack of contractual relationships or the
attitudes of landlords, in addition to uncertainty regarding compensation
and support for investment in housing.
Private rental is seen as temporary accommodation and a form of housing
most appropriate for transitional periods of one’s life. These include the period before starting a family or setting up a household, the period after divorce
or family separation and periods of study or university attendance. It is also
seen as a means to allow households to move to larger cities with better job
The public rental sector typically shares some of the disadvantages of the
private sector, particularly the financial elements, such as residents’ lack of
control over rents and maintenance costs. However, the public rental sector
offers a higher degree of security than the private rental sector. As pointed
out by some respondents, regular rental payments and fulfilment of the contractual conditions of public rental schemes result in secure tenure, meaning that a municipality (landlord) will not terminate a contract and is likely to
propose extending the contract, provided that residents have met its requirements. We must point out that those respondents who remained in the public
rental sector (for example, those who were not able to buy the dwellings they
had lived in before the privatisation process) are typically worse off today,
with financial difficulties or family problems, mostly relating to unstable relationships. However, public rental has also provided upward mobility for formerly homeless families, who would not have been able to enter the private
rental sector, let alone the ownership sector. Another group which has made
use of the possibilities of upward mobility offered by the public rental sector
are better-off renters who cannot afford to leave the public rental market, but,
as a result of their higher monthly incomes, can afford to pay higher rents
and utility costs for better quality public rental property.
Owner-occupation is perceived to be the best type of tenure, as it allows
for the most freedom of choice and independence, combining all of the benefits of the consumer good and the investment good, in contrast to the other
[ 150 ]
forms of tenure that are perceived solely as consumer goods. Especially when
compared to private rental, owner-occupation is very different from renting and offers the important benefit of being able to accumulate your own
wealth. Before the transition, public rental properties could be ‘purchased’ on
the market, but this option no longer exists and the current marginalised and
closed nature of public tenure has led to it being devalued in the eyes of most
In contrast to public tenure, owner-occupation has become more prestigious and owning a flat is seen both as the result of a successful career and
as a necessary stable starting point for young people (the other tenure types
require more effort or are inaccessible to young people). The change in tenure
preferences is also a result of the transition learning process. As a result the
small gap between these two types of tenure before the transition has widened significantly in the past 15 years.
This gap can be illustrated by the case of a 47-year-old private tenant. When
she realised that her public rental property would be returned to the municipality after the transition process and that her children would not have the
chance to ‘inherit’ tenants’ rights, she immediately began looking for ways to
acquire privately owned dwellings for her children. Today all of her children
have their own flats (either through purchase or life annuity schemes) where
they can live independent lives:
I: “Even the lady in the neighbouring flat thought it would be the best if we bought
her home from the municipality for my daughter at a low price which would also
allow us to help her financially. (…) This means that all the kids have their own
independent private home.”
R: “Was it a financial burden at the time to buy all these flats?”
I: “No, at the time it cost around 400 to 500 thousand Forints, it was not a big
R: “Did you think about whether or not you should buy these former public rental
I: “It seemed the most natural thing in the world. We didn’t even consider not doing it.”
6.4.2 Housing decisions
Our hypothesis, based on the qualitative interviews, is that housing decisions,
at least at the stage of starting a family, are not individual but family decisions, where both the material and non-material resources of the extended
family are necessary in order to have a successful start to a housing career.
In addition to providing some material resources, family networks are important for transferring household management skills, which can be important
in times of hardship. Of course, the family background is most influential for
[ 151 ]
those in the first stage of their housing careers (first-time buyers), but it also
has an influential role when inheritance issues or economic hardships arise.
The primary role of the family in establishing a household’s current housing
conditions has been identified in many cases as being the provision of financial resources and the development of patterns for a successful housing career. A 32-year-old woman moved into private rented accommodation in Budapest around 14 years ago. Since then she has moved several times, to her
brothers’ and sisters’ homes and to other locations (all of her siblings live either in private or public rented property). All of her brothers and sisters were
prepared to offer their homes when anyone was in need of temporary accommodation. The siblings also provide each other with financial help if needed, and help to take care of each other’s children. This co-operative attitude
is considered to be a pattern of primary importance in the way in which they
have managed difficulties in their lives.
R: “Where did you move to in Budapest?”
I: “My sister already lived here, so first I moved to her place. (…) Then I moved to
my boyfriend’s place, it was a private rented flat and there were three of us living there. Then we moved to his own flat. He has always had this flat. He just
lived with his friends because it was fun. Then he sold this flat and we moved to
Újlipótváros (a district in Budapest). Then we broke up after 6 years.”
R: “Where did you move then?”
I: “Since then I have been moving around private rented flats. There was even one
flat where I only lived for 3 months.”
R: “And how do you find these flats?”
I: “Actually, through friends, not through ads. (…) If you answer ads, they get to
know that you are a Roma and they say that the flat has already been rented. (…) I
think I’ve moved around 12 times during the last 6 years.”
Beginning a housing (and life) career without family support means that difficulties are more likely, especially if you start a family early or have an unplanned pregnancy, get divorced, are made unemployed or have alcohol problems etc. It is not only a question of a lack of financial support, but also the
inability to manage a household budget, which is largely because the necessary patterns were not in place.
Family co-operation mostly takes the form of parental help for children who
are living independently. Sometimes, however, the reverse is true and children
who are living independently provide support for their parents. In these cases, it is most often the poor and inadequate pension system or the parents’
overspending on housing which obliges the children to set up a network to
support their parents. Strong family networks enable households to use their
common assets in the most appropriate way. The lack of a strong, supportive
network can lead to a poor housing career. At the beginning of the housing
[ 152 ]
career of one of the public tenants (32 years old), her family network was still
intact. All of her siblings were sharing their resources. With the onset of the
transition, however, some of them were offered the chance to buy their own
flats, while others were not. This happened during the first stage of the transition when inequalities started to increase. In the end, one of the siblings
did not share her financial gains from selling off her privatised flat and this
resulted in a conflict with the other family members. Since then, our interviewee has moved from one run-down public rental unit to another, with few
opportunities for improving the quality of her home. Meanwhile, her sister,
who is now better off, was not prepared to offer any support to her family.
In addition to the family network strategy, individuals’ personal abilities
also have a major influence on housing decisions. However, the roles these
factors play depend on the financial opportunities of the individuals’ families, namely the availability of savings, a reasonable, stable income and other assets under the control of the family, as well as on demographic pressure, for example establishing a first home, changing household structure
due to a divorce, having children etc. The interviews have shown that families or households are only able to weigh up the different options and optimise the outcomes of their decisions, if they are not under demographic pressure (setting up a household, children, divorce, becoming independent), or do
not have to deal with significant financial difficulties. Financial factors, such
as a low income and difficulties in paying utility costs, may result in households deciding to downsize. In these cases housing is a tool with which to
resolve financial problems by accessing the wealth stored in housing. However, housing decisions that result in downsizing can also reduce the stability
of the household’s status (for example, because of a failure to understand the
problems or poor money management). A 38-year-old interviewee, who is a
homeowner with high levels of debt, is currently selling off her property, with
the intention of downsizing:
I: “They (the municipality) sent me the papers three years ago so that I could buy
the flat. At that time I didn’t think it was important, and, anyway, I couldn’t afford
to buy it.”
R: “What was the rent at that time?”
I: “It was 5,000 and then they raised it to 15,000. Now I realise I should have
bought it then. Then after a while they offered to sell it to me again.”
R: “How did you manage you buy it?”
I: “I wanted to get a social grant, but they said that wasn’t possible. May 2005 I
bought it for 2.8 million. I have to make monthly payments of 14 thousand and
something for 25 years. I’ve only just been able to afford the first payment. All
the costs and I’m already in arrears, it’s horrible. (…) It’s very hard to save money, sometimes I only cook every second day (…) I can only save money on food. (…)
They say the flat is worth 16.8 million.”
[ 153 ]
R: “That sounds good.”
I: “I’ve already advertised the flat, and I would be prepared to sell it for 16 or even
15 million.”
R: “What will you do with the money?”
I: “I‘ll buy a house for 10 million somewhere outside the city, 30 or 40 km away.
And then I’ll start up a business, a small pub, to give my sons a secure future. The
eldest is just finishing school, he had to repeat a year. The younger one wants to become an engineer, I think electronics would have been a better choice. (…) I want to
move to a place where we can take the train with the girls, and my eldest son will
get a driving licence and we’ll buy a small, cheap car for him, and then he can take
his brother to town. He would prefer to live in private rented accommodation with
his friends. (…)”
R: “And who will pay the rent?”
I: “From this money we can pay for his flat for a year. Of course he’ll have to find a
job. We’ve had some big discussions about this.”
Financial factors can also derive from the institutional circumstances, for example an advantageous mortgage subsidy system, such as the one currently in place in Hungary, which has encouraged some households that might
not otherwise do so to enter the housing market. The fear of missing out on
a profitable opportunity was clearly the reason why some of the interviewees
bought their properties.
In summary, if there are no prevailing demographic or financial driving
forces, the individual decisions come into play. These can be grouped according to the basic choices households have to make. As indicated above, the less
demographic or financial pressure on the households, the more important
these factors are.
1.Housing estate versus non-estate location – Housing estates have lower value housing with high utility costs, although the infrastructure is convenient. The fact that the properties impose a particular lifestyle and are less
prestigious means that some households choose not to live on estates or
feel uncomfortable when they do. This may also have the opposite effect
because properties on estates typically cost less and this is one of the ways
in which families with average or low incomes can enter the housing market.
2.Multi-unit building versus family unit (suburban) – The question of different
lifestyles and housing quality also forms the basis for the choice between
flats and single-family housing. Taking family histories and patterns into
account, lifestyle differences can have a major influence on housing decisions.
3.Location choices: close to relatives – A further choice pointed out by the
interviewees, which was also clear from their housing histories, was the
preference for living close to relatives. We found that households tend to
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make localised housing decisions and not moving far away from relatives
is a key element in this. The desire to stay close to family members applies,
even if all the family members live in Budapest, where public transport
makes all areas of the city easily accessible. It seems that for couples starting a family, this is one of the core aspects when it comes to choosing the
location for new housing.
4.Health issues – Health problems are one of the issues that might force families to make a housing decision. They may have to move house or stay in
their current home so that they have easy access to medical care.
5.Trade-offs – One of the key points made by the interviewees is that housing decisions are predominantly characterised by trade-offs. Some typical
factors which influence housing decisions include the preference for good
quality housing versus the cost of the housing, a prestigious location versus the quality of the property, cheap housing and low maintenance costs
versus limited job opportunities. The trade-offs can be a combination of the
driving forces, such as demographic pressure and financial difficulties, and
the above-mentioned individual factors.
To conclude, there is a variety of impacts on the housing decisions made by
households. The factors can be grouped into three main categories: (1) the influence of the family network both on access to housing and on finding the
best solutions, (2) demographic and financial factors, and (3) individual factors which are closely linked to the above-mentioned aspects.
In the interviews it was relatively difficult to identify any decision-making
situations that would have showed the impact of housing on other decisions.
In most cases, income problems were relevant for a large proportion of housing expenditure, compared with other expenditure in the household budgets.
Therefore cutting back on spending on holidays, food and clothes or remaining in work for a longer period etc. in order to finance housing (mortgage payments or utility costs etc.) largely seems to be the result of a low or unstable income, and the direct link between home ownership or renting and other
areas of households’ lives can be largely interpreted in this way.
Conversely, the positive impact of housing or housing resources on other
areas of life can be observed in some cases. Despite the fact that housing is
rarely used as a resource for other expenditure, if there is a windfall gain (for
example, inheritance), the property (or equity) that is acquired can be used in
part for other purposes, usually travelling or refurbishing the house etc.
In addition to describing the short-term effects of housing decisions on
the households’ lives, most interviewees gave a long-term evaluation of their
housing career. All of them were aware of the fact that there had been opportunities for good and bad decisions in their housing career, which are not
easy to evaluate objectively. Moreover, it is almost impossible to predict the
‘effectiveness’ of the decision at the time that it is made. It must be stressed
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that the respondents tended to legitimise their decisions at the time of the
interview regardless of the objective effects. While discussing the impact of
financial factors on their housing decisions, a common feature was that most
respondents highlighted the importance of knowing how to make the most
of the opportunities offered by housing schemes, including housing privatisation and mortgage subsidy programmes. Two young owners in our sample
were involved in housing transactions at the times when house prices were
low (1996-1999) and mortgage subsidies high. They were aware of this at the
time and tried to maximise the subsidy. This allowed them to accumulate
housing equity and they were able to climb the housing ladder with its help
at a later date. Both of them felt it was very important to be aware of housing
prices so that they could sell their properties at the best time and minimise
possible losses.
The respondents were generally aware of the financial opportunities offered
by current mortgage subsidy programmes, often because they have been
heavily advertised. Because of changes in the state subsidies at the end of
2003, many respondents felt that these subsidies were unreliable. A key element of making a good decision at the right time is knowing when to pass up
on this kind of option or being prevented from making the most of it. Some
other decisions which were felt to be ‘bad’ or ‘risky’, have actually had a longlasting effect on the respondents’ housing career and indirectly on their life
One of the owners in our sample (47 years old) had a very complicated
housing career, in which, in his judgement, he had made several mistakes.
His parents divorced and they lived in cohabitation for a long time. They then
moved to a flat which was worth much less than the one they should have
I: “There are so many things that I would do differently now. (…) I: We lived in that
flat from 1957 to 1969, and we moved when I was 11. (…) The problem was that
this young communist guy was a tenant living in one of the rooms, and, of course,
it was logical that he would be offered the opportunity to buy the flat. It was already possible to privatise state housing at that time, at the end of the sixties. (…)
He bought it in the mid sixties, at that time for 3 thousand and 30 thousand in instalments, today it is worth about 30 million. It was a wonderful flat. (…) and of
course we became illegal tenants. (…) He invented something to complain about
every day. (…) I still hate him even today.
R: “And what happened then?
I: “We were given a flat in Bimbó street (a high value area), a three-room flat, but
there was an employee at the council housing department who lived in a shared flat
and he mixed up the documents, so he moved to the Bimbó street flat instead of us
and we went into the shared flat. (…) And then all of us tenants moved into four
different flats at the end of 84. (…) It all went well, we were like a big family. But
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you have to think about what could have happened if we had got that Bimbó street
flat at that time.”
The interviewee has had a life annuity contract for more than 15 years and
shares the house with an old lady. The contract was not drawn up properly
and he has practically no legal protection either against his son (they have serious disagreements) or the old lady (she has already sued him several times).
He runs a second-hand bookshop, which does not provide him with security, and his pension will be most probably small. Until the legal situation has
been cleared up, he has no other resources that he can take advantage of.
There are a number of ways in which housing and housing decisions can
impact households’ lives. Mostly, it is the financial burden caused by a low
or unstable income which has an effect on the purchase of other items, but
in marginalised households it also affects food consumption. The relationship between housing and other areas becomes obvious when households
have to divide their scarce resources between housing consumption and other consumer goods. Of course, mortgages and loans for consumer goods can
increase the problems of financial security.
Housing and employment are in theory interrelated in a number of ways.
However, the features of some other sectors (for example, the social security
net and pension system) also have to be taken into account when explaining
the relation between employment and housing decisions. Because our sample
is urban, there were just a few examples that explicitly related to this issue,
with the exception of two major circumstances. These are the risks that may
have an impact on housing and, in some cases, the explanation for the initial
move to Budapest.
I: “I had a job until 2000 and then I came to Budapest. I was unemployed and there
were no work opportunities here. Then I saw this ad, offering a job in a medical factory as a ‘hired workforce’. The ad was placed by an employment agency.”
R: “Where did you live?”
I: “The agency provided accommodation, it was a workers hostel. We lived there for
a year. Then they moved us to the agency’s own holiday resort next to the Danube
in Népsziget, which was better. The workers’ hostel was just 15 minutes from the
factory, the holiday home was a long way away.”
R: “What was it like living there?”
I: “First of all three of us shared a 20 square metre room. It was really crowded. We
didn’t have to pay the rent, the agency deducted it from our salary. In 2000 it was
about 50 to 60 thousand. They also paid for four trips home a month.”
R: “Were you able to save any money?”
I: “No, and if you compare it to other salaries in medical factories, they paid us very
little. (…) The holiday resort was much better, actually the whole environment was
better. But it took an hour to get to work, on two buses and the metro. The flat was
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the same standard as this one. (…) We were lucky because only two of us shared
one room.”
R: “And then came 2003.”
I: “Yes, I checked some ads and also listened to what other people were saying. You
can find out about opportunities when you talk to people. (…) And then I moved
to Sanofi. At the time I started to look for a normal rented apartment. I could have
stayed in the holiday resort, but this was a better option. I have been living independently since 2003.”
I: “If I what I believe is correct, I don’t have any chance there (in his home town) of
finding a job that pays a proper salary. Unless a miracle happens, there isn’t any
hope of getting a well-paid job.”
The decision to remain on the job market instead of retiring and being dependent on a poor pension system is related to income problems. Those families
who are in private rental accommodation seem to be more likely to be forced
to stay longer on the job market and have a more flexible approach to job offers
than those in the public sector or without mortgages, because the burden of the
constant high expenditure on housing and the threat of losing their home as a
result of income difficulties force them to stay active for as long as possible.
6.5 Security and insecurity
6.5.1 The roots of security
With the transition overall security was reduced in Hungary, which had a
range of impacts on people’s lives. Growing unemployment, consumer price
rises and the lowering of the real value of wages have resulted in the emergence of new strategies and a keen perception of risk factors.
In the households’ strategy, housing security and job security are closely
related. Financial security in the first place is ensured by a reasonable, stable job. On the other hand, households with insecure jobs also have insecure
housing. Home ownership contributes to the financial security of the households in proportion to the value of the dwelling, but only as a second option.
As a result of the transformation in the meaning of tenure, interviewees
highlighted the fact that, because private rented property is barely affordable,
the people living in that kind of accommodation have less financial security,
because they cannot save any money. In addition to being unable to save for a
rainy day, tenants feel even less secure because of the possibility of arbitrary
rent increases. There is a similar risk in the public rental sector, but since
most public sector landlords operate a social housing portfolio, the rises are
likely to be moderate. Therefore, households in the rental sector generally feel
much less secure than households in the owner-occupied sector.
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Financial security apparently results from a stable job and reliable income.
When investigating financial security in the owner-occupied sector, some
additional elements with a direct impact on the assets or equity stored in
housing increase in importance. Of course, the larger and more predictable
the growth in the value of the housing is, the more secure the households
feel. However, financial security in the owner-occupied sector which results
from the value of the property is also dependent on the strategy of ensuring a
share in the property (for example, having more than a 50% share) or, in contrast, excluding partners from ownership in the flat. The perception of financial security is also related to the respondents’ previous experiences, if their
housing situation has been affected by the loss of a job or the breakdown of a
partnership and the resulting change in the household income.
One of the young public sector tenants in our sample has sole tenant’s
rights, which means that her partner does not have any influence on the
housing decisions. This has further implications:
I: “Why would you buy this flat?”
R: “Only so that I have a flat that belongs to me. Look, this flat used to be like a
pigsty. Renovation meant adding an 11th coat of paint to the other ten. (…) But I
want to make sure that the money I spend on it will stay in my pocket. Who will reimburse me for all this renovation work?”
I: “Would you sell the flat in an emergency?”
R: “No. Never. Whatever I was offered, I wouldn’t sell it.”
I: “Do you want to spend the rest of your life here?”
R: “No, that’s not the reason. You see, there are people who just buy and sell. (…)
But if I’ve worked as hard on something as I have done on this flat, I start to love it.
I would not sell it.”
I: “May I ask whether this also has to do with your past, that you’re looking for certainty and stability?”
R: “You might be right. (…) You see, we’ve had to make so many compromises already, when I was living with my mother (homeless provision) and in the railway
carriage (homeless provision).”
I: “Getting back to the purchase: will you involve your partner in the decision?”
R: “No way. You see, if you’ve done all this by yourself, there’s no room for your partner. (…) You’re on your own. (…) And he doesn’t have any plans at all. I have plans
and I go through with them. (…) I’ll buy the flat in my name. I’ve never had a partner who would have contributed anything to this flat. If he does something useful,
we can talk about it. (…) I won’t put at risk something that I’ve worked so hard for.”
One particular feature of the process of increasing financial security is the
use of life annuity schemes to accumulate wealth and add to the financial resources available for housing (or inheritance). On the other hand, taking out
a life annuity means using the property as financial security (in our sample
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there was only someone who had inherited a property). While some respondents thought that this was an effective way of accumulating wealth and increasing financial security, others pointed out the controversial nature of this
type of solution (waiting for someone to die).
The households have different levels of financial resources. The marginal
interviewees who are in constant financial difficulties rarely have any other
resources than the property they live in. According to our observations, those
who are most vulnerable to health problems or unemployment have the
fewest resources, such as insurance policies or savings, since putting money aside would cause even more hardship on a monthly basis. If there is the
possibility of saving some money or if the respondent has a windfall gain, it
would be put in a Bausparkasse savings account or a very secure form of financial investment. Only a few respondents, mainly those from the older generation, have additional property assets. This is related to the former housing
regime which allowed people to invest their money in other properties. Some
respondents have a second home or a share in a second home. In all but one
case ensuring that the financial resources were secure was all about giving
the children a better start and increasing the value of the intergenerational
transfer. It had little to do with increasing the respondents’ own security.
According to our interpretation, the households’ perception of their financial security is related to the efforts they make to save some money. The ability to set some money aside each month provides most of them with the feeling of security, although it is obvious that in the case of unexpected health
problems or unemployment, these scarce resources would not be sufficient
to cover a longer period. On the other hand, the property plays a role in the
households’ financial security to the extent that the households consider the
property to be part of their asset portfolio. However, this is seldom a practical approach and is mentioned as a theoretical option. In times of hardship,
using the financial resources stored in housing would probably mean downsizing. In addition the families would be likely to spend the additional money
very quickly, and thus worsen their position even more.
A special case which was often discussed during our interviews is the case
of life annuity schemes.12 The respondents who take out a life annuity use
their housing as a life-long financial resource. The motivation for the other
party, who was (unintentionally) also represented in our sample, is the possibility of making money. This means that during the course of the life annuity scheme, which might last for decades, the beneficiary provides for the
financial security of the testator. However, this method of using housing to
12 Life annuity schemes involve an older person contracting a younger household or person to provide for his
or her basic needs and to make a monthly payment, and in return the couple or person will inherit the older person’s property after his or her death.
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increase financial security prevents the prospective beneficiary from accessing the ‘investment’ at any time.
6.5.2 Use of housing resources
When discussing the meaning of housing, we pointed out that housing is
viewed both as an investment and as a consumer good. It was easy to see that
households typically have an ambivalent attitude towards the use of housing
resources, which derives from the nature of housing as an investment. The
interviewees are aware of the value of their homes in the case of owner-occupied units. However, they sometimes ‘overvalue’ their homes. On the other
hand, they tend to be very reluctant to use their homes for consumption purposes. This is also related to the current institutional setup, as there are currently high transaction costs involved in accessing the money stored in housing (see Hegedüs & Teller, 2005). The housing histories shed light on the way
in which households use the financial resources from housing. Generally the
money from one house is used to buy and refurbish the next one. This strategy is the result of institutional factors (for example, taxes on the sale of property), but is also due to the fact that housing investments are considered to
be safer and less risky than other types of investment. This may be because
house prices had not fallen, but had only risen or stagnated up to the time of
the interviews.
There were also some examples of using housing resource to start a business, which is generally considered to be risky. The reasoning behind this
argument is largely related to the current economic structure. If there is no
other way of accessing the necessary finance, housing resources could be
used to set up a business. The transition process had taught people an expensive lesson; the risk involved in converting housing resources into business
capital still seems to be high. One interviewee, whose father has learnt a ‘lesson’ of this kind, pointed out that his father did not consider housing and
business to be different types of resources. He referred to both of them as an
investment. The nature of housing as an investment is more obvious in those
cases where households have second homes. Owning additional properties is
clearly regarded as an investment.
Most of the interviewees thought using housing equity for housing purposes in the future was the ideal solution. Using equity for other purposes is only
possible if the household decides to downsize or has a windfall (inheritance).
The reasons given for downsizing were unemployment, difficulties in paying
the monthly utility bills or in affording essential requirements, such as food.
However, the option of ‘downsizing’ is a realistic way of paying off debt (and
even making money available for additional consumption). Households in
arrears usually underestimate the risks of moving into a less expensive home,
because typically they are not aware of the fact that a lack of access to the
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job market and effective safety nets, which is often the case with lower priced
housing in smaller towns and villages, might cause them even more problems.
One of the findings of the institutional analysis was that the reverse mortgage schemes used in Hungary would solve the problems of the typical ‘cash
poor and asset rich’ households. The interviewees emphasised that using
housing equity as a pension supplement (see vignette 2) was, in theory, a
good idea. They themselves would leave their property to their children and
would only consider reducing their children’s inheritance by using the money stored in their housing if their children were sufficiently well off. Another
typical case is when elderly people move into smaller, less expensive homes
on retirement, which they can afford even with a small pension. Since we had
no interviewees who had done this, only their relatives, we were only able
to explore the perception of this kind of strategy from the perspective of the
next generation.
These findings strongly support the assumption that one of the crucial elements of the current housing regime is the importance of intergenerational
transfers in the housing career and their role in housing decisions. The potential financial resources in housing are always weighed against the prospective inheritance for the children or grandchildren. Another common factor of
intergenerational transfers is that, if the parents make a substantial contribution to the children’s housing wealth, they also partially control the housing decision, whether this is the choice of location, choice of dwelling or partownership of the property. This means that the party making the contribution (parents) feels obliged to pass on the wealth they have accumulated and
the party receiving the contribution (children) relies on the inheritance, which
they can use for upward housing mobility. Most respondents did try to avoid
stating this explicitly, particularly if their (grand)parents were still alive. Nevertheless, it was obvious that their inheritance had enabled them to gain a
foothold on or move up the housing ladder, or to make expensive property
investments. This means that the moral factor has a dual influence. On the
one hand, it is seen as morally necessary to pass on your housing wealth and,
on the other hand, the inherited wealth must be used effectively, in other
words for upward mobility.
A lack of intergenerational transfers weakens the households’ position on
the housing market. It seems that if the family network is not able to provide
an intergenerational transfer to allow children to start their housing career,
they will to struggle to leave the private (or public) rental sector and to accumulate sufficient resources of their own to take out an affordable loan.
6.5.3 Insecurity stems from four risks
As we indicated in the discussion of the changes in the meaning of tenures,
the households are very aware of risks, as a result of the learning process
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that is connected to the main features of the transition. The nature of risk
perception is strongly related to the lack of adequate safety net arrangements. Generally, there are four types of risks which families are confronted
with job insecurity, family risks (divorce etc.), health risks (accidents etc.) and
housing cost risks (rent increases, rising housing costs etc.). Typically these
risks are related and can reinforce one other, resulting in an unmanageable
Most of the respondents feel a sense of job insecurity, even in those cases
where well-educated people ‘predict’ their future position. There is a contradictory phenomenon in which higher status households overvalue the risk,
whereas more marginal households tend to underestimate their risk and
would rather rely on ‘positive scenarios’ of their future. A young couple living
in a private rented property (both aged 33) do not think that either of them
are likely to lose their jobs. Although the husband had to leave his last secure
job in a hospital because of serious health problems and now works as a baker, they are very optimistic: “I can find another job in a couple of days if I lose
this one.” Similarly, working in the public sector can involve a certain risk.
One young woman in our sample (private owners, 28 and 35 years old), who
will qualify as a doctor in a few years said that it was impossible to predict
the future. However, she added that her husband “works for a capitalist, and
he could lose his job at any time, but I work in the public sector where there
is high job security.”
Family risk was an unpopular topic. The respondents who had already experienced problems in their relationships were more likely to mention the relevance of risks of this kind and all of them pointed out that it was very difficult
to predict family risks. Very few respondents have ever made any arrangements (preparations) for a possible future ‘family risk’. Divorces or relationship breakdowns can directly influence people’s housing position, either by
forcing them to move, by causing household budget problems as a result of
the loss of one income or by obliging them to downsize.
According to the interviewees, the Hungarian social security system is obviously not in a position to deal with health risks. In the case of a serious health
problem, the security system cannot help and, in practical terms, if there is no
strong family network, households could easily lose their homes. Interestingly, the loan market has developed a specific response to this risk. New loans
now come with a special life insurance policy which covers this issue.
The fourth type of risk which households are aware of is the housing cost
risk. Utility costs have been rising throughout the last fifteen years and in
particular affect those people who cannot control their housing consumption
(for example, in houses with district heating). In this respect, some types of
tenure are more exposed to this risk than others, since both public and private landlords can increase the rents, which is a further housing expenditure
item outside the tenants’ control. Mortgage payment increases can also affect
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households, for example if interest rates rise, especially in the case of foreign
currency mortgages, as some respondents pointed out.
Housing risks generally affect all types of tenure. As indicated above, the
perceptions of the households can be grouped into four types of risks, which
impact all the households’ strategies equally and expose those living in the
rental sector to even higher risks. However, those homeowners who live on
the margins of society, who are practically ‘abandoned’ because their family network is weak or completely lacking and who have very little support
from the social security system feel considerably more at risk (for example,
divorced, ill and unemployed people or single mothers). In addition, those
households who have already experienced job insecurity, family, health or
housing cost risks have a higher risk awareness. As a result of the learning
process, some households develop strategies which attempt to compensate
for the poor safety net or lack of family cooperation etc. (see Section 6.6).
Objective measures of insecurity can be defined in several ways: lack of
knowledge of the possible transaction costs related to housing, low job security, poor health, unstable relationships, high housing cost to income ratio and
the lack of savings or safety nets. Most of the households interviewed face at
least one of these types of insecurity. However, crises rarely occur. The level of
perceived risks is mostly lower than would objectively be appropriate.
6.6 Safety net strategies
Perceived housing risks are related to other types of risks, such as job market
risks, family risks, health risks etc. It is very rare for households to encounter housing risks separately. Therefore the households have combined strategies for managing these risks. There are some basic patterns in the way the
households attempt to counteract risks. Relying on the family network in the
first instance is one of the main approaches. If the family and close relatives
do not have sufficient means to help one another or if the family network only plays a limited role in the households’ lives (because it is lacking), the second option is to rely on individual strategies. A third approach is to make use
of the opportunities provided by the safety nets.
6.6.1 Family networks
In most cases in our sample the ‘family safety net’ is the most important element. The family network plays a special role both at the stage when respondents are starting their own family and in times of hardship. The advantages of the collective strategy are that it maximises the potential use of the
subsidies and optimises the gains and losses from housing transactions and
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Nevertheless, the power of the family safety net might be limited, partly because the family’s capacity in terms of financial resources and housing
assets is not enough to help family members who are in major difficulty and
partly because social values put constraints on financially viable solutions.
The family safety net serves as a last resort, and seemingly there are families
which are more open to solutions of this kind and others which are reluctant
to make use of this option.
6.6.2 Individual solutions with constraints
Alongside family network solutions for counteracting risks, individual solutions seem to be the second approach that the respondents would take. Individual solutions mainly comprise savings, insurance schemes and, as some
respondents pointed out, the side-effect of the wealth accumulated in housing. We observed that the significance of the individual safety net solutions is
increasing, which is also related to the learning processes resulting from the
transition. However, families with a lower income typically neglect this option, because this would cause an additional burden on their monthly budget.
One example in our sample is a 58-year-old homeowner who remained in the
public sector but had the chance to move in recent years to a more expensive
and better quality property. Even in his case, insurance schemes of this kind
are a major burden:
I: “Have you or your partner inherited anything from your parents or grandparents?”
R: “No, we haven’t. My wife had a small holiday house when we married. Besides
that, no, we don’t have anything. We just have the car, but we are still paying off
the loan. And I have a life insurance policy, which will mature in four years if I survive this illness (cancer). With the money we get from the policy we might be able
to buy another car without needing a loan. The payments are just horrible. (…) My
doctor told me that I should take things more slowly.”
6.6.3 Safety net: the last resort
The third approach to counteracting housing risks is to rely on the social security safety net. Although some of the respondents have considerable difficulties in their everyday lives, they try to avoid using this solution. In some
cases they were unable to find the necessary information which they would
have needed to get the best possible support from social security. Applying
for social assistance is considered by most of them to have a stigma attached,
and they think that they should only rely on social security if they reach rock
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I: “Do you have any payments that are in arrears at the moment?”
R: “Well, yes. It’s just one electricity bill. But you know, school has just started and
all four kids needed a lot of things. (…) And the girls’ father didn’t help either, he
bought a school bag and that made me really anxious because this is something we
really didn’t need at all. (…) And I haven’t paid the management fee yet, because
the bill hasn’t come. (…) And the payments on the loan for the flat, I’ve only paid
the first two months, but not the rest.”
I: “And what did you do then? Did you go to get some help?”
R: “I heard from a friend that the family welfare service has this debt management
system. And guess what happened. The first time we went there, we found out
where it was (…) and my friend came with me. And so we went there, it was at the
beginning of the summer and there were a lot of gipsies sitting outside. We went on
past as if we weren’t going there at all.”
I: “Were you afraid to go into the office?”
R: “No, but when you see all these people, you know that being poor is something to
be ashamed of. (…) But in the end I was in such difficulties that I had to go.”
In conclusion, there are three layers of strategies for counteracting risks. In
addition to the family network, which seems to be the most reliable form of
security, many respondents use individual solutions. However, these solutions
are costly and may put a large financial burden on the households. The groups
most exposed to risks cannot take advantage of the numerous insurance and
savings programmes that would give them more security in the long run. The
third strategy for counteracting risks is open to the poorest people and those
with the weakest family networks and fewest resources. Social security provision focuses on the most vulnerable households. The attitude towards social
security, especially those services which are linked to debts or an extremely low income level (and not to normative thresholds, such as the number of
children, illness etc.), is that it comes with a major stigma attached.
The three above-mentioned planning strategies seem to interrelate to the
extent that those respondents who cannot count on help from their family
network are more likely to set up individual strategies or turn to the social
security safety net if they are in trouble. Those people who do not have the
resources to set up individual solutions are forced to turn to social security for
assistance. The tools for counteracting risks come from a variety of sources.
It is worth emphasising that the pattern which households tend to follow is
based on their previous experiences, on structural factors and also on models
which they have observed through socialisation. In addition, since the most
vulnerable households can be found in the social rented sector, the reliance of
households of this kind on social security is more obvious than in the case of
those households which own houses or are in the private rental sector.
The main findings we can draw from the interviews are biased in this
respect, since marginal households were recruited through social care cen-
[ 166 ]
tres and therefore we have some families who are already making use of the
social security safety net. However, as we pointed out above, if the two first
levels of safety net are not available to a household, the social security system
will help them to maintain at least a minimum standard of living. Some of
the interviewees have strongly criticised the social security system (for example, a homeowner aged 51 who is in arrears with payments, see the example
below, and homeowners aged 54 and 47 also in arrears, see the second quotation). From others’ statements we also gained the impression that relying
solely on state welfare is a very inadequate strategy.
I: “And what do you think are the roots of your difficulties?”
R: “I’m sure that it’s the state. What kind of a state is it, if it doesn’t stop you losing
your home just because you’re ill or unemployed?”
I: “Did you go straight there?”
R: “No, they’d asked me at least ten times. I’m not used to asking for help. I was
always the one helping other people. It was very difficult to ask.”
I: “And how much do you have to pay?”
R: “And that’s the other thing. In the end I have to pay HUF 900 more than I used to
pay. (…) I’m not paying less at all, there’s my own part of the payment and then I
have to pay the rest as well.”
I: “If I’ve added it up right, this is around 20 thousand. Is this something you
should be paying?”
R: “Yes. But the reason why we have these arrears is because we couldn’t pay the
bills. Now we have to pay even more. (...) But this is the other side of the coin.”
R: “And this something you can’t mess about with. You have to pay it. And, in
addition, I have to go there every month to show that I’ve paid the bills.”
The Hungarian welfare system has improved over recent years. By broadening
its the targets and the measures available, it has become more generous. On
the other hand, it is obvious that the social benefits are very low, and do not
function effectively in many cases. Sick pay, unemployment benefit and maternity pay only provide for the basic necessities and the housing allowance
scheme on average only covers up to 20% of the total housing costs. For families in need, these services are important, but at the same time they do not
allow them to stabilise their situation and the families are very likely to become poorer as a result.
6.7 Conclusions
The effects of the institutional changes in Hungary – among them the fact
that ownership became the secure type of tenure par excellence after the
[ 167 ]
transition – have been clearly demonstrated by the results of the interviews.
Moreover, some aspects that were less pronounced in previous research findings were given even more weight: the importance of family networks, the
households’ strategies for optimising their financial resources, counteracting risks, provision for increased security based on previous experience of bad
choices and the effects of the transition. In addition, in the analysis of the interviews some structural factors came to light that illustrated the relationships between the different layers of strategies.
In conclusion, some key points can be identified in terms of factors which
have an impact on the security and insecurity of home ownership and renting and the nature of the differences between the effect of the same factors
on the different tenure sectors. The most important findings relating to the
effects of the transition, the role of the family background and the consequences of bad decisions are explained in detail below.
Effects of the transition
The transition in Hungary has affected the housing system and the welfare
system to a large extent. In addition, economic instability, the restructuring
of the job market and the emergence of new housing institutions have had an
influence on the households’ current strategies. As a result of the move to a
market economy and the change in the tenure structure, previously unknown
risks have emerged and only a fragile set of security measures have been put
in place by the state and the households.
The risk elements which emerged in the housing sector during the transition years resulted in a variety of responses on the part of social, institutional players and on the part of the households. It seems that the state (social
housing) plays an increasingly small role in the housing and welfare systems,
the safety net puts a greater and greater burden on the families and it provides help only to the neediest families (very low income households and
those in a crisis situation).
The restructuring of the tenancy system in Hungary has been marked by
latent differences between the tenure types, which were accompanied by different forms of adaptations at all levels. The households identified insecurity factors and tried to avoid them by strengthening their position and moving to more secure forms of tenure. The new players on the market economy transferred the cost burdens, which had previously been hidden, to the
consumers and this increased the risks involved in housing. This has elicited
responses from the social bodies and from politicians. As we have shown, the
most important new elements of the developing housing regimes in the transition countries can be interpreted as an outcome of the adjustment strategies put in place by the different players, in which ‘risks’ played an important
role. Housing privatisation and affordability problems (arrears and access to
housing) can be reinterpreted in the context of this analytical framework.
[ 168 ]
The role of the family background in risk and security elements
Qualitative research produced evidence that the family background plays a
key role in the individual housing career, both from the perspective of security and risk. This finding is particularly valuable, because quantitative research
typically does not give deep insights into the nature of this problem, nor is
an institutional overview capable of highlighting the importance of the family
network in the context of housing.
When people are starting a family and becoming first-time owners or tenants, support from the family is crucial. Almost all the respondents who have
a stable housing situation (‘not marginal’) received substantial family support at least in the early stages, and almost all the respondents who are in a
marginal housing situation failed to receive family support. In the later stages, family support becomes less important, but the housing position of the
households is very much influenced by their starting point. This fact has an
important consequence for policy conclusions: the safety net and housing
programmes should primarily focus on households without a supportive family background.
It is not only the potential resources of families (that is, the amount of
assets they have) that are important, but their standards, behavioural rules
and the capacity to co-operate as well. The efficient use of family resources
depends, for example, on the co-operation of the family members, in other
words how efficiently they can use their assets and how effectively they can
co-ordinate their job market strategy. The capacity of the families (especially
after relationship breakdowns) to handle different types of hardship depends
to a large extent on this factor.
The consequences of ‘bad decisions’ on life chances and housing career
There are a number of background conditions which influence both housing
careers and life chances. Marginalised households are typically exposed to all
the risk elements, but bad decisions on housing transactions can play a very
influential role. Bad decisions are defined by the structural and institutional circumstances of the housing system and in Hungary these structural factors are related to the features of the transition and the developing housing
finance system and welfare state.
As we indicated during the discussion of factors that influence housing
decisions, the awareness of housing as an investment, especially during the
housing privatisation period, offered the possibility of increasing wealth and
financial security. Households that did not take up the privatisation option
(not those who were unable to buy their properties at the time) are in a considerably worse situation today. Ignorance about increasing transaction costs
in a turbulent housing market produces similar results.
In addition to the failure to make the most of housing privatisation, bad
investments in housing can also be regarded as poor decisions. This includes
[ 169 ]
poor positioning of housing on the market and reacting too slowly to structural changes. For example, moving to houses which were less affected by
the considerable price increase at the end of the 1990s has prevented some
households from accumulating housing wealth. Moreover, postponing housing decisions in recent years has had a similar outcome. Because access to
the beneficial housing system was restricted at the end of 2003, households
who postponed their housing transactions until after this deadline have
missed out on a profitable opportunity to maximise the available housing
However, it is important to explain that bad decisions and life chances also
have a reciprocal relationship. Households without adequate information
(about the housing market, financial products, subsidy schemes etc.) because
of their marginal position, are more likely to make decisions that will further worsen their life chances. In addition, there is often a lower level of risk
awareness among these families.
We can conclude that the rising risk awareness which is strongly related to
the learning process that people have undergone in Hungary since the beginning of the 1990s has pushed households towards home ownership, a form
of tenure which offers greater security than both private and public rental.
Home ownership is also considered as an investment, especially since the
housing market experienced a boom between 2000 and 2005, but most importantly it is an asset that can be inherited and bequeathed, and therefore plays
a crucial role in intergenerational transfers. Houses can, however, also be
sources of insecurity: increases in the prices of consumer goods and energy
often result in dangerous payment arrears for the marginalised population
groups. In the case of a job loss or an unexpected health problem, there is a
significant lack of support mechanisms to protect homeowners from having
to downsize. It seems that the dynamic processes of the past 10 to 15 years,
in other words the emerging housing finance system, have reinforced the
dominance of the home ownership sector. In contrast there has been a slow
improvement in the public rental sector which has helped to make this residual sector more sustainable and to develop social services and housing allowance schemes which have a wider coverage and are better targeted than the
embryonic schemes at the beginning of the 1990s.
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[ 173 ]
7 The Netherlands: Positive prospects and
equity galore
Janneke Toussaint & Marja Elsinga
7.1 Introduction
The Netherlands is a country in North Western Europe with a population of
16.3 million, living in an area of 41,526 km2. With an average of 395 people per
square kilometre, the Netherlands is the most densely populated country in
Europe. In the last decade the population has grown by 6.4% (Eurostat, 2005),
which is considerably higher than the EU average.
The Netherlands has had a centre-right coalition government in recent
years. This government has continued and, in some areas, accelerated the
ongoing developments in welfare policy. The overall direction involves a move
from a combined corporatist and social democratic model towards a more liberal model. The challenge is to find a compromise between market incentives
and the protection of vulnerable people. Recently the welfare scheme for disabled people was redesigned and the whole health care system was restructured. There is a similar trend in housing policy. There has been a shift from
bricks-and-mortar subsidies towards housing allowances. Social housing
associations have become financially independent and bricks-and-mortar
subsides have been abolished.
The interviews for the research in the Netherlands were held in Haarlem,
a city in the west of the Netherlands near Amsterdam. It has a population
of approximately 148,000, which makes it the 13th largest city in the country. One of its features is its sizeable creative class. In addition, the educational level of Haarlem residents is equal to the Dutch average. The proportion
of single person households in Haarlem is relatively high at 43.3%, compared
with the Dutch average of 33.9%. The working population of Haarlem has a
slightly higher annual disposable income than the average Dutch citizen, at
e 16,400, as against e 16,300 (in 2000). Unemployment, at 4.1%, is somewhat
lower than the average in the Netherlands, which is 5.0% (in 2003).
Over half (51.2%) of the people of Haarlem own their own home, 35.3% rent
in the social sector and 13.5% in the private rental sector. The figures for the
Netherlands as a whole are 54.2% owner-occupied, 36.8% social rental and 9%
private rental. In comparison with other urban municipalities in the Netherlands, Haarlem has a large proportion of pre-war housing (51.7%, compared
with an average of 27.1% in the Netherlands). This gives the city its historic
character, but also means that the dwellings are relatively small. House prices
in Haarlem have risen rapidly nonetheless, and have doubled since 1997. This
increase is comparable with house price developments in the Netherlands in
A relatively small geographical location was chosen within Haarlem: the
Rozenprieel district and its surrounding area. This is a neighbourhood where
[ 174 ]
Figure 7.1 Growth rate of real GDP per capita in the Netherlands, in percentages
EU (25 countries)
% 0
Source: Eurostat, 2005
the average disposable income is slightly lower than the Haarlem average,
and unemployment a little higher. It was thought that this would make marginal owner-occupiers easier to find.
7.2 The main developments in the labour market and social security
7.2.1 The labour market: economic downturn, no increase in flexibility and mobility
In 2005 the Dutch labour market had a relatively high employment rate of
73%, compared to 64% as an average of 25 EU countries, a relatively low unemployment rate and a large proportion of part-time workers (Eurostat, 2005).
The 1990s were characterised by relatively good labour market performance
in the Netherlands, which is usually put down to wage restraint and the increase in part-time working, two important components of the so-called ‘polder model’. The climate of permanent negotiation between the government,
unions and employers resulted in relatively harmonious industrial relations,
increased labour flexibility, reform of the social security system, a policy of
encouraging participation in the labour market and a generally effective macroeconomic policy. There were jobs in abundance and wages increased. However, since 2001 the labour market has been shrinking and the rate of unemployment rising, from 3.5% in 2001 to 6.5% in 2005. In contrast with the 1990s,
economic growth in the Netherlands has lagged well behind that of the rest
of Europe and the world (see Figure 7.1).
In comparison with other European countries, a large proportion of employees in the Netherlands work part-time. The majority of working women are
[ 175 ]
employed on a part-time basis (71% in 2003). But, as well as often being a preferred solution for women, part-time work is also being taken up by more and
more men. In 2000, almost 18% of men worked fewer than 35 hours a week.
By 2003 that figure had reached 20% (CBS, Statline). The proportion of fixedterm and flexible-hours employment contracts rose from 4% in 1970 to 10% in
1998, although it has since fallen again. In 2003, 7% of employment relationships were defined as ‘flexible’ (CBS, Statline).
Hence, there is no sign in 2005 of uncertainty in the labour market caused
by flexibility and mobility. Instead it seems that employers value having a stable workforce. And employees, too, appear to prefer a permanent employment
relationship (SCP, 2004). The unfavourable repercussions for pensions and
careers also play a part in this. The figures from Statistics Netherlands (CBS)
show that the extent to which people change jobs is not so much increasing over time as linked to the state of the economy. People are more likely to
move from one job to another in prosperous periods than during a recession
(SCP, 2004; CBS, Statline).
7.2.2 Social security: emphasis on returning people to
the workforce and targeting
While the labour market seems to remain relatively stable, the government
has taken drastic measures relating to the social security system. In 2005,
government policy places more emphasis upon returning people to the workforce. By taking part in the labour process, says the government, people become more economically independent, more socially integrated and have better prospects for the future. Underlying these measures is the idea that individual citizens can, to a greater or lesser extent, exert an influence over risks,
such as unemployment and illness. The assumption is that a policy directed
towards returning people to work results in a falling benefits bill and therefore lower taxes, since the financial base expands. The government is encouraging older people to participate in the labour market by dismantling early
retirement provision. Those previously deemed incapable of working are being re-examined under stricter medical criteria. The government is also attempting to increase the differential between net wages and benefits, in order
to ensure that the social security system supports the return-to-work policy.
To this end, collective benefits were frozen in 2004 (SCP, 2004). In comparison
to the 1980s government support has decreased and benefits are intended for
only a small group of the most unfortunate people, ‘those who really need it’
(targeting). In line with the international trend the system has become more
selective and is only guaranteeing a minimum level of income.
These policy changes are being driven in part by a perceived urgent need to
keep the budget deficit within set limits over the next few years and in part by
more fundamental considerations, such as the affordability of the system in
[ 176 ]
Figure 7.2 Development of housing tenures in the Netherlands, 1947-2005
private renting
social renting
home ownership
Sources: Kersloot, 1999; MVROM, 2004
the long term and a response to the growing trend towards personal responsibility in society as a whole. Moreover, it is hoped that they will help overcome
future obstacles to the social security system. The most worrying and most
discussed phenomenon with an influence on social security is the ageing
population. Individualisation and an increasing variety of lifestyles present a
second challenge for the Dutch social security system. Another development
affecting social security is the fact that the Netherlands finds itself, like other
countries, in an increasingly dynamic and competitive international environment. European economic integration, in particular, is extremely important to
the future of the Dutch welfare system (Caminada & Goudswaard, 2003).
7.3 The main developments in housing
7.3.1 The development of housing tenures
In 1947, the proportion of owner-occupied homes within the total housing stock was approximately 28%. Private renting was obviously the dominant form of tenure in the post-war period. In the years that followed, home
ownership and social renting both grew significantly and steadily. In the mid
1980s the social rental and owner-occupied sectors were roughly equal in size.
In the last two decades home ownership has become the majority tenure in
the housing market as Figure 7.2 shows.
Figure 7.3 gives an overview of housing tenure by income band (10%) for the
period 1981-2002. This figure shows the situation in 1981 during a crisis in the
housing market, in 1989 when the market had recovered and in 2002 after
more than a decade of substantial house price increases (see also Figure 7.4).
Among the higher income deciles home ownership has increased considerably since 1989. Among the lower income deciles home ownership decreased
[ 177 ]
Figure 7.3 Housing tenure in the Netherlands by income deciles, 1981, 1989 and 2002
private rental
social rental
10 1989
9 1989
8 1989
7 1989
6 1989
5 1989
4 1989
3 1989
2 1989
1 1989
Source: Housing Demand Survey, Statistics Netherlands
between 1981 and 1989 and increased a little after 1989. This figure also shows
that the social rental sector lost the higher income groups during recent decades, while the share of lower income groups increased.
All tenants enjoy tenure protection. Contracts for rental dwellings in the
Netherlands are normally permanent. The landlord can only terminate the
contract for a limited number of reasons as described in the Dutch Civil Code.
Not only the contracts but also the rents of 95% of the rental dwellings are
regulated. This regulation specifies a maximum rent for each dwelling as well
as a maximum annual rent increase. The entire experience of renting results
in feelings of security among tenants (Elsinga, 1998).
7.3.2 The development of house prices, rent and mortgages
After a serious collapse at the beginning of the 1980s, house prices in the
Netherlands increased and during the late 1990s prices more or less explod-
[ 178 ]
Figure 7.4 Nominal and real house price and rent development in the Netherlands, 1975-2002,
index: 1975=100
Nominal house price
Nominal rent
Real house price
Real rent
index (1975 = 100)
Source: U
Source: Ministry of Housing, Spatial Planning and the Environment, 2004
ed. Over this period of more than twenty years there were no serious falls
in house prices and repossessions were very rare (Boelhouwer & Neuteboom,
2003). However, there was a major collapse at the start of the 1980s during the
serious economic recession, as is shown in Figure 7.4.
Since the 1970s rents have increased more steadily. Until recently the relative increase in rents was quite high compared to house prices. This can be
explained by the government policy of allowing relatively high rent increases in order to phase out subsidised rents. The two lines representing the real
house price and the real rent, show that the prices in the home ownership
and in the rental sector doubled over a period of 27 years. This enormous
increase made access to home ownership more difficult.
A number of studies showed that homeowners have benefited from house
price increases in recent decades (Boelhouwer 2002, Elsinga, 1996). For lower
income groups, renting appears to be the better choice, because for them the
income tax advantages of home ownership are smaller and, in addition, housing allowance is available in the rental sector (Elsinga & Conijn, 2001).
The affordability of home ownership is highly influenced by the opportunities and criteria that are used in the mortgage market. The development of
mortgage systems was closely linked to the fiscal system that allows unlimited mortgage interest payments to be deducted from taxable income. As a consequence, in the 1990s an extensive system of mortgage forms was developed
[ 179 ]
Figure 7.5 Maximum avialable mortgage for average and double average incomes in the Netherlands,
2 x average
maximum available mortgage in euros
Source: National mortgage guarantee, NVM (processed by OTB in 2006)
that took maximum advantage of the tax opportunities1. In addition to the
unique supply of housing mortgages in the Netherlands that exploit the fiscal
opportunities made available by the government, the calculation of the maximum financing limits is also particularly high in international terms (Neuteboom, 2002).
On balance, the maximum borrowing capacity of an average household has
risen sharply. Figure 7.5 shows the development of the maximum available
mortgage for average (€ 27,500 in 2004) and double average incomes. The calculations assume a financing burden of 35% (of the gross income), which is
reasonably similar to the standards actually applied by the major mortgage
lenders. It must also be noted that for higher income groups the growth has
been substantially higher (mainly because of higher income growth).
Until the beginning of the 1990s, an average household could finance the
purchase of an average house. As a result of high house price increases and
despite low interest rates, it became more and more difficult to buy this average house, as Figure 7.5 shows. For households with higher incomes the situation is somewhat better. And people with average incomes on the transfer market, who have property to sell, are in most cases able to buy at least
1 On average, homeowners can deduct their interest payments at 35% (maximum 52%).
[ 180 ]
an average house. First-time buyers are rarely able to buy an average house
(€ 260,000 in 2005). Therefore the accessibility of home ownership has recently moved back onto the political agenda.
7.3.3 Developments in housing policy
The government is involved in the affordability of housing both for homeowners and tenants. Although the policy is presented as increasing freedom
of choice and the independence of the consumer, the Minister of Housing has
the clear intention of promoting home ownership. One of the most important
measures for stimulating home ownership is fiscal policy.
The owner-occupied dwelling is considered to be an investment good for
income tax purposes, which implies that interest on the mortgage is deductible and imputed rent should be added to the taxable income. In 2001, for the
first time in many years, there was a substantial change in the income tax
policy relating to home ownership. Mortgage tax relief was limited to a period
of thirty years. Another relevant change was the restriction of the reduction
in mortgage interest for second mortgages for other purposes than investment in the house. In general the taxation instruments can be considered the
most important means of encouraging home ownership. This fiscal treatment
of owner-occupied dwellings is simultaneously a subject of political discussion and a taboo.
Further, the mortgage guarantee, which was launched in 1956, still plays
an important role in providing access to home ownership for lower income
groups. This guarantee was ‘privatised’ in 1995 and is now provided by the
Home Ownership Fund. This fund is a financially independent foundation
that offers guarantees at a price that is intended to cover costs. Central and
local government will act as backstop if the fund gets into financial trouble.
This guarantee enables people who meet the criteria to obtain a mortgage to
cover all the costs of acquiring a dwelling and therefore improves access to
home ownership (see also Section 7.3.2).
To encourage the sale of rental sector units and home ownership among
low income groups, the Encouragement of Home Ownership Act (Wet bevordering eigen woningbezit; BEW) was introduced in 2001. This act provided for an
income-related subsidy, payable to all lower income households (not only tenants), subject to a ceiling on both the purchase price of the property and the
loan taken out. Until now only a few hundred households have succeeded in
acquiring this subsidy.
In 1995 an important change took place in the Dutch social rental sector:
the grossing and balancing operation. This operation involved cancelling all
government loans against the current subsidy obligations. Although housing associations became completely independent in financial terms after this
step, they still require approval under the terms of the Housing Act. The tasks
[ 181 ]
Table 7.1 Policy instruments for housing-related benefits for owner-occupied and rental housing in the
Income tax
Mortgage guarantee
Housing allowance for
homeowners (BEW)
Housing allowance for tenants
Rent regulation
Tenure protection
Imputed rent is taxed (% of house price)
Mortgage interest is deductible at a marginal
tax rate
Guarantee to the lender which enables high
loan-to-income ratios and a reduction in the
interest rate
Income-dependent subsidy for homeowners
Government expenditure
1.5 billion euros income
9 billion euros expenditure
Income-dependent subsidy for tenants
Limits rents and rent increases for social
housing associations and private landlords
The Civil Code specifies the conditions
1.6 billion euros (claimed budget)
(The government is the backstop for the
privatised fund)
1.4 million euros (claimed budget)
Source: Ministry of Housing, Spatial Planning and the Environment, 2004; Ministry of Finance, 2005
and other operating conditions of the housing corporations are laid down in a
separate government order drawn up pursuant to the Housing Act. The Social
Rental Sector Management Order (Dutch abbreviation: BBSH) stipulates that
approved housing corporations have the task of providing good, affordable
housing for those who are unable to pay market rates and of ensuring that
the neighbourhoods are liveable places. In exchange for this the corporations
are granted tax benefits, can buy council land at reduced rates for the purposes of building public housing and can have their loans guaranteed by the
Social Housing Guarantee Fund (WSW). The WSW is a private body that guarantees associations’ loans. The government provides a safety net if too many
claims are made on the WSW.
There are no more supply subsidies available for housing associations. Central government’s involvement in the affordability of housing consists of the
housing allowance and rent regulation. The housing allowance for tenants is
considered to be a key instrument in housing policy, according to the recent
policy document. This income dependent subsidy is available for tenants in
the social as well as the private rental sector. Around one million households
receive this housing allowance of on average € 130 per month (MVROM, 2004).
The government is also involved in the rental sector through the rent regulation policy (see Table 7.1). Social rental and private rental dwellings up to a
monthly rent of € 570 are subject to rent regulation. This regulation implies a
maximum rent for each dwelling and a maximum annual rent rise. Only 5%
of the rental stock is exempt from rent regulation. Because of this regulation
and the social rent policy of housing associations, rents in the social rental
sector are below the market level. In 2004 and 2005 this rent regulation policy was the subject of political debate. The Minister of Housing, Spatial Planning and the Environment introduced a new rent policy in 2004. The aim of
this policy was to increase the non-regulated part of the rental market from 5
to 25% and to further relax the regulation in the regulated part of the market
(MVROM, 2004). This rent policy is part of the broader aim of the Minister of
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Housing, inspired by EU policy, to deregulate the housing market and reduce
the size of the social rental sector.
7.4 Housing decisions and the meaning of tenure
7.4.1 The meaning of tenure
In general, the homeowners and tenants interviewed give the same meaning
to a dwelling: a home, safety and a place where you can be yourself. Nevertheless, the forms of tenure do have a different meaning. In the current context a preference for home ownership is discernible among both tenants and
owner-occupiers. There seems to be a widely held belief that it is better to buy
a house if you can afford it. The main reasons are the financial benefits and
the wider choice. When questioned about the financial aspects, the interviewees say that when you rent, your money just flows away, but when you buy, it
comes back to you and you can build up capital. For most of the interviewees
owner-occupancy also means the freedom to adapt their home to their own
taste. Some feel proud that they have bought a home. Others say that they attach no special importance to being an owner-occupier. If the choice in the
rented sector was as great as in the owner-occupied sector and the expense
was the same, they would be just as happy to rent.
Some tenants have a clear preference for owner-occupancy; in particular
those who have owned their own home in the past. Tenants see the advantage of being independent of the landlord and of really having something for
themselves. They watch the value of properties increase and feel that they
have missed the boat. Younger tenants often have the prospect of buying a
home in the future when, for example, their income increases. Others prefer
to buy if they are setting up a home with a partner. However, another tenant
explains that she felt that renting was the obvious thing to do and never really thought about it. This interviewee feels that the importance of home ownership is greatly exaggerated in the Netherlands. She says that more and more
people are getting into financial difficulties because of the increasing number
of mortgages. She would not consider owner-occupancy because she is happy
with her present situation.
If you have to rent, then it is best to do so in the social sector. Therefore,
many people hope to find a long-term home in the social rented sector. The
tenants indicate that for them renting means no maintenance and therefore
“Suppose you’ve bought a house and discover rot somewhere, it can cost you thousands. In that sense I feel safe, financially as well” (tenant, female, 32 years old).
[ 183 ]
Housing at
some of the
interview locations in the
in Haarlem, the
Interestingly, most of the owner-occupiers specifically stress another positive
characteristic of renting: the freedom to move around. A rented home means
mobility. When asked about the downside, most of the owner-occupiers and
some of the tenants mention ‘money down the drain’ and dependence on a
Several interviewees, both tenants and owner-occupiers, quote rent increases as an argument against tenancy. Some specifically mention the Minister’s plans to deregulate part of the rental market (see Section 7.3.3). Another
group of tenants puts this threat into perspective, saying that they are legally protected and that rents can only be raised within certain limits. They are
confident that the rents would still be affordable. Many regard the social rented sector as one that offers people with lower incomes ‘more house for less
money’. A single mother says she has considered buying, but is not happy
about the properties she can afford.
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Table 7.2 Overview of the meaning of different types of housing tenure in the Netherlands
Home ownership
Build up equity by repaying mortgage
Wider choice
Freedom to adapt the house
No special meaning
Profit from rising house prices
Connected with relationships and family life
The inconvenience of debt
Social renting
No maintenance means security
Money down the drain
Dependent on landlord
Uncertainty about the level of future
More house for less money
Anti-social neighbourhoods
Little choice
Waiting lists
Private renting
Quickly find a place to live
For young people starting to live
Conflicts with landlords
Unpleasant dwellings
Antisocial neighbourhoods
Stop-gap solution
Freedom and flexibility
Stories about antisocial neighbourhoods with social rented housing dominate
the responses of the owner-occupiers in particular. Despite such objections,
some owner-occupiers say that, given the chance, they would like to live in a
social rented dwelling. Among them are single women living with or without
children. They appreciate the freedom enjoyed by tenants and the fact that the
maintenance costs are paid by the housing association. And they prefer not
to have the inconvenience and obligations of a mortgage. Some are not eligible for social rented housing because they are not economically or socially tied
to the city. If they had been eligible, they would have been confronted with the
fact that there is very little choice in the rental sector. Interviewees point at
the long waiting list for rented property; it takes, on average, 7 or 8 years to get
a dwelling in Haarlem, most of which are in less attractive neighbourhoods.
The private rented sector is regarded as a sector where you can quickly
find a place to live, as opposed to the social rented sector with its long waiting lists. The interviewees indicate that it is expensive compared with social
rented housing. Their experience of the private rented sector stems mainly
from the time when they started living independently. The relationship with
the landlord is not always plain sailing. Conflicts with landlords, unpleasant
dwellings and antisocial neighbourhoods are mentioned time and again.
In the private rented sector people move house more often, not just because
the accommodation can be run-down or because people have to leave, but
also because the composition of the household is more subject to change
when people are young and are still studying or looking for work. A home
in the private rented sector is therefore just a stop-gap for the majority of
interviewees. It gives them the freedom and flexibility that they need in their
lives at the time. Some of the women interviewed also found accommodation
quickly in the private rented sector after a divorce.
Table 7.2 contains an overview of the meaning of different types of housing
7.4.2 Housing decisions, work and income
Work and relationships appeared to be the main impacts on the housing decisions of the Dutch interviewees. Before we turn to work and hous-
[ 185 ]
ing, being the focus of our research, we first briefly reflect on relationships
and some other influencing factors. Important factors include the structure
of the household, in particular whether the respondent is in a relationship
or starting a family. The decision to live together can prompt couples to take
the step from renting to buying a home, for some the purchase of a home
belongs in the nest-building, starting-a-family phase. Breaking off a relationship forced some interviewees to find alternative housing; some who already
owned a house jointly could buy a home again afterwards, while others rented. Furthermore, after a baby is born moving house is often motivated by the
need for more space, more rooms or a garden. Conversely, when their child­
ren left the home, some moved to a smaller dwelling. The proximity of family or friends influenced interviewees who want to live near their family or the
place where they grew up. Finally, health impacted on housing decisions of
an interviewee with serious back problems; she moved from a top-floor to a
ground floor flat.
The question whether housing was impacting upon their lives was a difficult one; housing in itself does not have a deep influence on household’s
lives. Again work and income appeared to be relatively important, and will
be discussed extensively below; further, a low rent enabled a young woman
to travel more often; a young man said his rental dwelling provided him the
peace and quiet he needs to develop further in his profession.
Now we will turn to the relationship between work and housing decisions.
In general terms, work and income have a major impact on housing and
housing also has an effect on work or income. For our purposes we will focus
on the choice of a certain type of tenure and the decision to move to another location. With regard to the work situation we will take the stability of the
income and location into account. Income was mentioned from different perspectives: the level of the income, the security of the income, for example a
permanent contract, full or part-time work and finally in connection with
retirement and pensions.
The impact of work on housing
In the Netherlands the impact of income on the type of tenure appeared to
be self-evident. A number of homeowners say that financial setbacks could
prompt them to rent a dwelling. Interviewees mention unemployment or a
fall in their capital as a reason for moving to rented housing. Almost all tenants say that they are living in rented housing because they could not obtain
a mortgage. However, some tenants were able to get a mortgage and yet made
the choice to rent. The social rented sector gives them an affordable and relatively good quality house. People in the higher income group buy property
and have a wider choice. People in the lower income group rent property. In
addition to the level of income, job stability (having a job with a permanent
contract) is an important factor in the decision to rent or buy.
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Not only a stable income, but also the stability of the job location is important when deciding whether to rent or to buy. One female tenant deliberately
moves between jobs and has the freedom to give up her home whenever she
chooses and move elsewhere. She feels that this pattern of work and housing
is more suited to rented accommodation.
Although all the homeowners found job location stability and a certain level of income important when buying a house, some seem to see things differently for new entrants to the housing market. When house prices are increasing, many interviewees think that the sooner you buy the better. This emerges from the advice in response to vignette 1, which describes the situation
of a young man and woman who together want to get a foot on the property
ladder. She has a steady job with the council and his work is less secure; the
question is whether they should buy or rent.
Interestingly, many owner-occupiers do not see job insecurity as a reason
not to buy a house. Many of them have never found themselves in financial
difficulties or else they have managed to cope with money problems without too many ill effects. In general, tenants are more cautious and feel that
more security is needed before embarking on home ownership. They feel that
the young man in the vignette should find a permanent job before buying a
“Speaking for myself and looking at my children, I think that if you don’t have that
much money, it’s better to rent. … I wouldn’t advise them to buy. Why? Because, it’s
such a rigmarole. They’re better off without it. And when you buy you are so settled, you’re tied, financially and to the relationship. It’s great to want to be together,
but it’s all so uncertain these days” (renter, female, 61 years old).
Further, owner-occupiers and tenants agree that work location has an influence on housing decisions. An owner-occupier explains that if his job is in another part of the country, his family will move house. A number of female respondents have followed their (ex‑)husband’s job and some had moved around
a lot. Others mainly moved house for work reasons at the start of their professional career. After their children were born, they tried to find work closer to
The impact of housing on work and income
Many respondents disagree that housing influences the choice of full or parttime work. They rejected the idea that they work more hours to pay for their
house. However, one woman (homeowner, 47) explains that she would like to
work more to reduce the size of her mortgage. After her divorce, she bought
out her husband and is now paying the mortgage herself. She is also partially
disabled and has to live frugally in order to make ends meet. Two other single
women also say that they want to keep their steady jobs.
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“I know that I can’t possibly earn any less. Sometimes I look around for another job.
But suppose my income fell sharply, then it would be difficult to stay here. What
choice do I have? There isn’t anything cheaper. I would have to live in a smaller flat.
That wouldn’t be as nice as living here. Yes, my options are limited. I need a permanent income” (tenant, female, 39 years old).
In contrast to the pressing need to work more or the dependence on a steady
job, for some respondents housing provides opportunities. A renting couple
explains that the security of their rental dwelling was a crucial basis when
they started their own business – if they had been owners, they would have
been scared of losing the house if the business failed. For two men, owning
their own house means that they can stop working. Both have an income
from their very large houses, which were partly inherited. They let apartments on the top floor. The respondents from another household can work
fewer hours as a result of the sale of a previous house.
Housing also seems to have an effect on income considerations for people
who have retired. Many people find it self-evident that older owner-occupiers
have relatively low housing expenses and do not have to worry about their
Some respondents mention that their owner-occupied dwelling has an
influence on their pension. One man has already retired and is living off the
rent he receives for two apartments. He sees his home as his provision for his
old age. One couple sees their home as a supplement to their future pension.
Because they work as freelancers, their pension capital is not as large as they
would have liked and they see the house as a solution:
“Yes, if you don’t have that money put aside for a rainy day, you need to top up
your pension. I know that I need to bridge a two-year gap… yes and I also… and
that could play a role, so that is certainly a factor, yes” (homeowner, couple, 39
and 40 years old).
7.4.3 Home ownership: a source of wealth?
The Dutch say that their homes have turned out to be a good investment. This
perception of the home as an investment appears to stem from the unexpected increase in house prices during the 1990s and the possibility of cashing in the surplus value. The equity in the homes has been used in different
ways. The most obvious way for the interviewees to access the capital in their
homes was to sell them, with the profit being used to buy another house. The
interviewees described this as a property career. The gains were also used to
help their children buy a house, or as an extra source of income.
After the rapid price increases in the 1990s, many people used the surplus value of their homes to take on another mortgage or to renegotiate their
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present one. Interest on mortgage loans used to be tax deductible for consumer purchases, and some interviewees used the money they borrowed to
buy things like a camera, a car or a caravan, while others invested the money
or put it into a pension fund. In some cases, the money was used to buy out a
partner in the wake of a divorce or to start up a business. The law on income
tax changed, however, and from 2001 the interest was only tax deductible if
the money was actually re-invested in the home itself. From then on, interviewees used the surplus value only for home improvements.
“It seemed that the value of the house had risen so much, and at that time we really wanted a new kitchen, a new bathroom, a shed and a fence. We thought that if
we used the savings we already had, and also saved a bit more, it would take too
long, so as we just wanted to get on with it, and the money was available to borrow, that’s what we did” (homeowner, male, 49 years old).
Some interviewees consider it unwise to cash in the surplus value – they
think that people are just saddling themselves with more debt. They do not
wish to take out an extra mortgage on the equity of their house. It is worth
noting that many interviewees see their home and the equity in their home
as a fund for emergencies. Generally, they do not want to use their home for
financing items like health care, leisure activities, starting a business, working less or for buying a second home.
Another possibility the Dutch interviewees mention is renting out part of
the house. For some this is a preferable way of generating income in emergencies. One woman mentions renting as a possibility if her husband were to
die and leave her unable to cope financially. Some interviewees already rent
out their homes and, for them, the rent forms a substantial portion of their
monthly income. They expect to continue doing this in the future.
7.5 Security and insecurity
The Dutch interviewees, both renters and homeowners, said they feel secure
about their housing situation. They find it hard to imagine circumstances that
would force them out of their homes. Some interviewees believe that only disasters, such as war, a general economic crisis or flooding, could have a negative effect on their housing situation. Nevertheless, certainties and uncertainties concerning income, expenses and, for homeowners, equity are mentioned after some prompting. The interview findings clearly show that security and insecurity are closely related to the level of income. The interviewees
were primarily concerned with their ability to pay their monthly expenses.
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7.5.1 Security of home ownership and renting
When asked, some owner-occupiers say that their home provides them with
security and that they regard their position as an owner-occupier as an advantageous one. The dwelling is viewed as a nest egg, as money in reserve. If
the need arises, the owner is able to sell the property and move into rented
“Now I have a safety net if the going gets tough. In that case I could sell this house,
rent something for next to nothing and get by. Of course, the fact that it has now
paid for itself 10 times over is very relevant. I have made a fortune on this house.
It’s now worth half a million guilders” (homeowner, female, 42 years old).
In addition to equity, an owner-occupied dwelling offers interviewees another
way of obtaining money, namely let out part of their houses to increase their
income. Others considered it as an option if their financial situation were to
deteriorate, for example, if a partner died.
Furthermore, owner-occupiers also mention the security of their monthly
expenses. Interviewees often refer to the tenants’ insecurity regarding future
rent increases (see Section 7.3.3). As time passed, the incomes of the interviewees tended to rise and the mortgage expenses remained more or less the
same, since many of the interviewees opted for fixed-interest periods. The
idea that they will have paid off the mortgage by the time they are old also
adds to their feeling of financial security.
The value of all the interviewees’ homes increased. In the end, the houses
were worth more than the loans that the owners took out. All the interviewees refer to the enormous house price increases in the 1990s. However, many
note that, in the short term, the only effect of the rise in value is that they
have to pay more tax. As long as they do not move house, the surplus value means nothing to them. Nevertheless, many mention it as a pleasant surprise. The interviewees do not expect house prices to rise in future as much
as they did in the 1990s. In general, their answers indicate that they expect
prices to stabilise, and in the long term to increase.
Renting also provides financial security. If tenants suffer a drop in income,
they cannot be thrown out onto the street, because there is always the possibility of the housing allowance. A decrease in income is compensated for by
an increase in the housing allowance (see Section 7.3.3).
“Yes, of course you have a certain feeling of security, because, how shall I put it, look,
you have a mortgage on your own home and you can no longer pay your expenses,
so you are kicked out. All right, the same thing can happen in a rented house, too.
Except that if you are unable to pay the rent, you still have the housing allowance to
fall back on. Yes, there’s always a way out” (tenant, male, 64 years old).
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Table 7.3 Security of renting and home ownership mentioned in the interviews in the
Equity – nest egg for emergencies
Letting out part of the house
Stable or falling mortgage expenses
Low or no expenses in old age
Price increases in the late 1990s
Housing allowance
Tenant protection/security of tenure
Rent regulation
No maintenance
Others refer to the option that a social housing association might provide a
cheaper dwelling in the case of financial problems. Security of tenure in the
Netherlands makes tenants feel sure of a roof over their heads (see Section
7.3.3). A young couple have decided to take the plunge and start their own
business, because they rented their home. They say that a home of their own
could have been put at risk if the business ran into difficulties. Both in the
social and private rented sector, rent regulation guarantees affordability and
therefore security in relation to expenses. In addition, tenant protection provides Dutch tenants with the security of a rented roof over their heads for as
long as they want. Moreover, the interviewees state that they will not be faced
with unforeseen expenses, because the housing associations are responsible
for maintenance.
Table 7.3 sums up the securities of renting and home ownership mentioned
in the interviews.
7.5.2 Income insecurity and risks
Interviewees were asked what risks might affect their housing situation. It
was striking that people were initially unsure as to how to answer this question. Their circumstances are generally secure and they are not used to the
idea that events may arise that force them to leave their homes. Only after
some careful thought did the interviewees come up with different scenarios,
but even here they were in many cases able to put them into some sort of perspective by imagining solutions. The cause for worry most often mentioned
by tenants and owners alike is health. Poor health could mean no longer being able to work and therefore meet your monthly financial obligations. This
answer represents to some extent the media attention to policy changes with
regard to people incapable of working at the time of the interviews (see Section 7.2.2).
Unemployment was also mentioned as a factor, but again, it was played
down. It was pointed out that it is often possible to take redundancy with
favourable conditions, and that the unemployment benefit of 70% of your previous salary is often enough to be able to pay the mortgage or rent.
“I don’t look at unemployment as a risk. No, I have a secure job with a solid Collective Labour Agreement and that kind of thing, but I also have the idea that as long
as I stay healthy, I can afford to earn a bit less without affecting my ability to pay
the mortgage” (homeowner, female, 49 years old)
[ 191 ]
Moreover, most interviewees count on being able to find another job in a short
period of time.
Another uncertainty related to the monthly housing expenses touched
upon by home owning interviewees was government policy (see Section
7.3.3). A change in the tax system relating to home ownership and therefore a
restriction on tax relief was mentioned as a serious threat. This is not surprising, as the costs of running a house would increase, while there is a chance
that house prices would fall as a result of a change of this kind.
For tenants too, government policy is mentioned as a source of uncertainty, with the relevant minister giving landlords more scope for rent increases
(see Section 7.3.3). It remains to be seen to what extent social housing associations will use these powers. Opinions are divided on this issue.
Tenants’ uncertainties are limited to their income and expenses, whereas
homeowners also have to deal with a debt. One tenant sees owning a home
with a mortgage in itself as an uncertain situation. If you can’t pay it, you’re
in trouble. She has an aversion to borrowing and explains that if you save,
you earn interest, but if you borrow, you have to pay it. Her conclusion is that
it is better not to borrow money because if you do, you are totally dependent
on the bank, while having to pay back more money than you borrowed in the
first place.
The way in which house prices are increasing also has an influence on some
homeowners’ feelings of insecurity. For example, it was a source of tension for
a married couple who had extended their mortgage in order to rebuild their
house as they wanted it. The mortgage is now the same as the value of the
house. In response to the question of what the rise in house prices means,
the woman said that it was a big relief. Some interviewees reveal that buying
is a stressful business, in particular at the beginning, because they had concerns about being able to pay the mortgage and about how the value of the
house would change in relation to the loan.
Some homeowners who were in an unfavourable financial situation say that
a home of their own, despite rising values, does not necessarily constitute security as far as they are concerned. One of them has lost his job. Half his income
goes towards paying the mortgage. This owner-occupier is proud of the fact
that, in spite of being unemployed, he can afford his own home. He says he can
manage financially, although he is afraid that he will not be able to look after
his house properly and that it may fall into serious disrepair. When he can no
longer cope with the financial demands, he confesses to not opening his bills.
A degree of financial uncertainty can also be detected in another household. Following her divorce, a woman wanted to remain in the house with her
two children. In order to be able to do this, she wanted to use the surplus
value of the house to buy out her ex-husband. At first, no mortgage lender
was willing to lend her the money. In the end this woman arranged an interest-only mortgage. When the children are older, she was planning on working
[ 192 ]
Table 7.4 Insecurity for tenants and homeowners mentioned in the interviews in the
Health problems
Unemployment (downplayed)
Tax policy change
Having a debt
House price developments
Dwelling falling into disrepair
Health problems
Unemployment (downplayed)
Policy change: liberalisation of rents
more in order to pay off the mortgage. However, she now will not be able to
as she is ill and partially disabled. The costs of the mortgage are high in relation to her income – it accounts for almost half of what she earns. Nevertheless, this woman is sure to have considerable excess equity in her home. This
helps her feel that she has a breathing space. If she sells up and starts renting, that will release some capital.
Table 7.4 sums up the insecurities for tenants and homeowners mentioned
in the interviews.
7.5.3 Insecure homeowners?
Some unemployed homeowners, who were selected because they were
thought to be marginal, appeared to feel secure. The relatively high level of
Dutch social and employers’ benefits for unemployment and disability appears to play a role here.
“I am unemployed, which could be a risk. If I, even if I … in the end I get 70% of my
most recent salary, and I am able to pay for anything I want. I can’t spend as much
on my hobby or all sorts of other things […] So even if you are unemployed, you
still have enough income to be able to pay the mortgage” (homeowner, male, 57
years old).
In addition, some uncertainties that have a reasonable chance of occurring
have not entered the interviewees’ minds. From a study of the Home Ownership Guarantee Fund (WEW), it appears that most repossessions related to
negative equity are characterised by high loan-to-value ratios and a relatively large mortgage which is part interest-only (Elsinga & Dol, 2002). Therefore,
it is striking that some people take out high mortgages relative to the value of
the house, sometimes up to 117%, and often a relatively large mortgage that is
part interest-only, which could give rise to a feeling of insecurity. Nonetheless,
some people with a high mortgage are completely unconcerned. They take it
for granted that the purchasing costs are covered by the mortgage, which results in a high loan-to-value ratio. What is more important to them is that
they can afford the monthly mortgage payments. Additionally, it is interesting that none of the interviewees regards relationship breakdown as a threat
to their housing situation.
[ 193 ]
Furthermore, the mortgage guarantee is not mentioned as providing a feeling of security. Some people do not even realise that they have one, but when
they take a look at their mortgage documents after the interview they discover that they do. Finally, not a single owner-occupier mentioned a rise in mortgage interest rates as a risk factor. This can only be explained in part by the
fact that most have fixed interest periods.
In general the Dutch interviewees trust their own ability to earn an income
and trust their employers and social security. Furthermore, they seem to trust
in future house price increases while they have the recent experience of rising
house prices. For some, when the financial situation becomes really threatening, a psychological mechanism seems to come into play. They try to ignore
the situation as a means of surviving. However, this approach was only seen
in a few cases. Most interviewees felt in a secure position with regard to their
income, expenses and housing equity and based this feeling on their experiences in the past.
7.6 Safety net strategies
Savings or insurance policies are intended to cater for general financial risks.
A number of households made their own conscious decision to take out various policies to cover multiple risks. Some have savings to cover emergencies.
Yet the interviews show that no specific measures have been taken to cover risks to the housing situation. Nevertheless, many couples wanting to buy
a house are obliged to take out life insurance by a mortgage provider. The single owner-occupiers were usually advised to take out housing costs insurance,
which pays out in the event of unemployment or inability to work. It is conspicuous that interviewees use their inheritance in full or in part as an extra
fund to cover emergencies. They either put it in a savings account or invest it
on the stock market.
Owner-occupiers are more likely than tenants to have insurance. This can
be explained firstly by the fact that they are encouraged to do so by mortgage
providers. Secondly, a number of tenants say that they do not have as great a
need for insurance, because of the housing allowance facility. If their income
should drop, their housing allowance would increase. This makes it a kind of
insurance. Other tenants have savings and a conspicuously large number of
tenants are confident of receiving help from family and friends should the
need arise. A single woman says she has a fantastic ex-husband and a friend,
both of whom would be sure to help her in an emergency. She adds that everyone needs to have confidence in life. The situation for most owner-occupiers is different. They say that they themselves have primary responsibility
and only in extreme cases would they fall back on their family, which would
then usually be their parents.
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Tenants with insurance usually have clear motives.
”Yes, we have taken out insurance against being made redundant. We did this
because we have heard so many stories about people losing their jobs, so we wanted to cover the risks, and holidays are also very important to us” (tenant, female,
55 years old).
Another couple who rent have insured against accidents and have surviving
dependents’ insurance. In this case the woman’s illness seems to be an important factor in the choice of risks to insure against. Moreover, the man has
his own business and is therefore not eligible for unemployment benefit.
The level of income seems to play a significant role in the decision as to
whether to take out insurance or save money. The level of housing costs as a
proportion of net income also has some bearing in this regard. If the monthly mortgage payments are high, there will be little money left for proper savings or insurance.
For some, insuring against risks is not the highest priority. Others say that
they cannot afford it or that no insurance company will accept them. Some
interviewees also say that they are confident of finding a new job quickly or
resolving the situation in some other way. Others think the matter is unimportant, and their philosophy is one of: ‘if you worry you make things worse’.
Finally, one man says that he puts matters of this kind completely out of his
“It’s something I’m reluctant to think about. So I don’t think about it, and neither do
I worry about it all the time. I think my approach is a good one. And if everything
did go wrong for some reason, then I hope people would lend a hand or offer advice.
But until something happens I’m not going to be a doom-monger, always wondering ‘what if’. No, I think that would be a waste of energy. But I do definitely think
it’s terrible if it happens” (homeowner, male, 53 years old).
It would also appear that self-employed people, both in the owner-occupied
and the rented sectors, do more financial planning, referring, for example, to
a ‘strategic investment portfolio’ and a ‘business reserve’ for emergencies.
The home influences the financial planning of many owner-occupiers. For
instance, one owner-occupier says he is no longer able to save because his
housing costs are so high. Others say in contrast that their home is a nest egg
and that they look upon it as something for a rainy day (see Section 7.4.3).
Social security as a safety net
The interviewees were asked who should be responsible for providing households in financial difficulties with support for their housing costs. All the
owner-occupiers say that the individual should normally be responsible. Some
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add that the government does have a role in extreme cases, but that the money should never end up in the wrong hands.
One remarkable response came from a woman who made a clear distinction between the responsibility of tenants and homeowners.
“Where renting is concerned, the government is responsible: local or national government should provide support. But it is a different matter with an owner-occupied
home,….. because then you could have money available to help yourself” (homeowner, female, 63 years old).
The tenants regularly express the opinion that the government is responsible
and then mention the housing allowance. However, the tenants also have reservations.
“I think the government should be responsible. I think that they are the most appropriate source of help, and I don’t mean just national government, but also local government. Look, if you were to ask me what I think about people who have an expensive house and are unwilling to work, then I would say: look for a job and start
work” (tenant, female, 44 years old).
It is striking that both those who see an obvious role for the government and
those who say that the government should step in only in emergencies emphasise that the financial support should not be too generous and that the
household in question should also make some effort. The interviewees’ opinion implicitly reflects the debate surrounding the welfare state in the Netherlands: people should take more responsibility for themselves, with the government providing a safety net.
7.7 Conclusions
The key question is whether home ownership has an impact on securities
and insecurities in people’s personal lives. In this connection it is important to mention first of all that the Dutch do not worry much. When talking
about their personal situation, they do not mention developments in the labour market and social security as a threat. None of the working interviewees
believe that they are likely to be made unemployed. If this were to happen,
and for some it did, then social benefits are seen as being relatively generous.
Moreover, among many interviewees there seems to be a belief that if people are willing to work, they can find a new job. That is probably also the reason why the Dutch interviewees regarded illness as the most serious threat,
because if you are ill it is very unlikely that you would be able to earn an income. However, the interviewees did not believe that this would inevitably
[ 196 ]
lead to them having to move house. Furthermore, most of them had pensions
that were separate from their house, except those who had let part of their
house. Therefore, in this sense home ownership in the Netherlands does not
seem to make people feel more secure about their income. However, the equity does provide a feeling of security.
Despite the fact that the rented sector is still relatively large and wellstocked and that renting is valued by tenants because of the lack of maintenance and the flexibility involved, the Dutch favour home ownership because
‘when you rent your money just flows away, but when you buy, it comes back
to you and you can build up capital’. This argument shows that the investment factor does play a role in the choice of tenure type.
Although using equity did not appear to be an obvious choice in the case of
a drop in income or for other purposes, the house price rises in the late 1990s
had a major impact on the use of equity and the significance of owner-occupation as an investment. Most homeowners now have a large amount of surplus value, which makes them feel very secure. Some respondents accessed
part of their equity for spending purposes. However, when the tax system
changed and the interest was no longer tax deductible, if the money was used
for consumption, the Dutch changed the way in which they used the equity and re-invested it in their house, as this was still eligible for tax deductions. Their use of equity is influenced by a rapid increase in house prices and
by fiscal regulations. Therefore the home as an investment is a consideration for people who become owner-occupiers; they feel comfortable to have a
nest egg in case of emergencies and to have reduced housing expenses at old
age. However, they do not relate the use of equity to an increasingly insecure
labour market and social security situation.
Remarkably, for many interviewees letting a part of the house seemed a
more acceptable way to obtain money from the owner-occupied dwelling than
using equity. Some of the interviewees were letting part of the upper floors of
their houses. Others referred to it as an option if something happened to their
partners and their financial situation deteriorated as a result. One interviewee also regarded this as a potential source of additional income in old age.
In addition, the interviewees did not seem be worried about high mortgages in relation to the value of their dwellings and about large mortgages that
are part interest-only. It is a normal way of lending money. Only a few people
envisage a possible fall in house prices and they believe that in the end the
prices will always rise. This is probably also why people believe that work is
the main influence on decisions concerning housing and not vice versa.
Notably, one of the few things that both tenants and homeowners worry
about is housing policy. Homeowners refer to a possible change in the favourable fiscal treatment of the owner-occupied dwelling and tenants worry about
changes in rent regulation. Both of these things would result in higher monthly housing expenses.
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The homeowners interviewed mainly bought their properties when they
had a stable income and relationship and most of them did so when they
wanted to start a family. When talking about young people who currently
have to decide whether to buy or to rent, ideas about the need for security of
this kind seem to have changed. Many of them say, ‘the sooner the better’. In
this connection not only the investment, but also the conditions in the rented
sector are an important factor. The social rented sector is regarded as being
difficult to access and the properties in the private rented sector are either
very expensive or of poor quality. The interviews suggest that a change is taking place in the types of households entering the owner-occupied sector. The
home ownership sector used to be a place for secure households. Now it is
also the appropriate choice for people who do not yet have a secure job and
are not yet settled in a relationship.
Diminishing income security could increase the importance of home ownership as a financial resource and could therefore also represent a fault line
between homeowners and tenants. However, in the Netherlands equity is
seen as a reserve or a nest egg and not as a necessity for protecting yourself
against risks. The labour market and the social security system are still perceived as being secure. The interviewees at least believe their own situation
to be secure. There is a clear division caused by differences in the amount of
wealth accumulated by the interviewees; those who bought before the price
explosion made huge profits and are currently in a very secure position. In
the meanwhile house prices have not decreased since the 1980s. These experiences have an impact on choices of the younger generations on the housing
market. These people are additionally confronted with a less accessible social
rented sector. Consequently, they have chosen home ownership and are faced
with heavy financial burdens.
Boelhouwer, P., 2002, Capital Accumulation via Home Ownership: The Case of
the Netherlands, in: European Journal of Housing Policy 2 (2), pp. 167-181.
Boelhouwer, P. & P. Neuteboom, 2003, The Netherlands, in: Doling, J. & J. Ford
(eds.), 2003, Globalisation and Home Ownership: Experiences in Eight Member States of the European Union, Delft (Delft University Press).
Caminada, K. & K.P. Goudswaard, 2003, Verdeelde zekerheid. De verdeling van
baten en lasten van sociale zekerheid en pensioenen (Divided Security: the
distribution of costs and benefits in social security and pensions), The Hague
(Sdu Uitgevers).
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http://www.cbs.nl/nl-NL/menu/cijfers/statline/toegang/default.htm (data
retrieved in 2006).
CPB, 2004, Macro-economische verkenning 2005 (Macroeconomic Forecasts
for 2005), The Hague (Sdu Uitgevers).
CPB, 2004, Vier vergezichten op Nederland. Productie, arbeid en sectorstructuur in vier scenario’s tot 2040 (Four Views of the Netherlands: Production,
labour and industrial structure to 2040 in four scenarios).
CPB, 2005, Press release no. 8, 22 March Centraal Economisch Plan 2005 (Central Economic Plan 2005).
Elsinga, M. 1996, Relative cost of owner-occupation and renting: a study of
six Dutch neighbourhoods, in: Netherlands Journal of Housing and the Built
Environment 11 (2), pp. 131-150.
Elsinga, M. 1998, The meaning of tenure under different conditions: empirical
evidence from the Netherlands, in: Netherlands Journal of Housing and the
Built Environment 13 (2), pp. 137-155.
Elsinga, M.G., J.B.S. Conijn & A.A.A. Mariën, 2001, Woonuitgaven en woonkos­
ten van huishoudens (Housing costs and housing expenses of households),
Delft (Delft University Press).
Elsinga, M. & C. Dol, 2003, De geschiedenis van de nationale hypotheekgarantie (The History of the Dutch Mortgage Guarantee), Zoetermeer (Waarborgfonds Eigen Woningen).
Eurostat, 2005, epp.eurostat.ec.europa.eu/portal/page?_pageid=1090,30070682,
1090_33076576 &_dad=portal&_schema=PORTAL.
Kemeny, J., 1995, From Public Housing to the Social Market, Rental policy
strategies in comparative perspective, London/New York (Routledge).
Kersloot, J.M. 1999, (Des)investerings- en huurprijsbeleid van verhuurders van
woningen (Investment policy of landlords), Delft (Delft University Press).
Ministry of Finance, 2005, Rijksbegroting 2005 (National Budget 2005),
’s-Gravenhage (Ministry of Finance).
MVROM, 2001, Mensen, Wensen, Wonen; wonen in de 21ste eeuw (People,
desires and living; living in the 21st century), ’s-Gravenhage (MVROM).
[ 199 ]
MVROM, 2004, Cijfers over Wonen 2004: feiten over mensen, wensen en
wonen (Figures on housing 2004: facts on people, desires and living), ’sGravenhage (MVROM).
Neuteboom, 2002, Een internationale vergelijking van kosten en risico’s van
hypotheken (An international comparison of the costs and risks of mortgages), ’s-Gravenhage (DGW/Nethur).
Rooij, M. van & A.C.J. Stokman, 2000, Verzilvering overwaarde huis: een statistische analyse van besteding en risico’s (Cashing in the surplus value of a
house: a statistical analysis of investments and risks), Amsterdam (De Nederlandse Centrale Bank).
Schaar, J., van der, 1987, Groei en bloei van het Nederlandse volkshuisvestingsbeleid (The growth and development of Dutch Housing Policy), Delft
(Delft University Press).
SCP, 2004, In het zicht van de toekomst: Sociaal en Cultureel Rapport 2004 (In
the eyes of the future: 2004 Social and Cultural Report), ’s-Gravenhage (Sociaal
Cultureel Planbureau).
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8 Portugal: The sense of home
Pedro Perista & Isabel Baptista
8.1 Introduction
Portugal is now a parliamentary democracy. Since the advent of democracy in
1974, centre-left and centre-right governments have alternated. In 2006 there
was a centre-left government, which was elected in 2005 and which followed
three years of centre-right government.
The population is approximately 10 million, living in an area of 89,000 km2.
55% of the population lives in urban areas, defined as localities with 2,000 or
more inhabitants, and 45% in rural areas. There is a strong concentration of
population in coastal areas and particularly in the two major metropolitan
areas: Porto, with approximately one million people and Lisbon, with about 2
million people.
The Portuguese empirical data was gathered in the town of Caldas da Rainha1. The municipality covers an area of 256 km2 or 25,916 hectares and has a
population of 48,846 inhabitants (2001). Since 1991, the population has grown
by 5,641, which corresponds to an increase of 13.1%. The population of the
town in 2001 was 25,228, of which 46.7% were men and 53.3% women.
This is a relatively young municipality. In 2001, children represented 22.9%
of the population, compared to 16% in the country as a whole. Similarly, the
elderly represented only 12.4%, significantly below the figure of 16.4% for the
country overall.
In 2001, the activity rate in the municipality was 49% (55% for men and
43.3% for women) and the unemployment rate 6.5% (4.5% for men and 8.9%
for women). 6.8% of the population worked in the primary sector, 34.5% in the
secondary sector and 58.8% in the tertiary sector. In the population of Portugal as a whole, 12.8% of people work in the primary sector, 33.8% in the secondary sector and 53.4% in the tertiary sector.
Most companies are small or medium-sized (38 employees per company, on
average). The main industry is faience pottery. In 2002, purchasing power was
slightly higher than the national average (101.34).
In 2001, the two urban freguesias contained 12,969 dwellings in 4,718
buildings. Of these, only 2.5% date back to before 1919. 10.2% were built
between 1919 and 1945, 30.2% between 1946 and 1970, 35.9% between 1971
and 1990 and 21.2% between 1991 and 2001. In the municipality, 79.5% of all
dwellings were owner-occupied. Of these 29% had a mortgage or loan and 71%
1 The town is located in the municipality of Caldas da Rainha, in the ‘Centro’ region of Portugal. It is 10 km from
the coast and 90 km from the capital, Lisbon. The municipality of Caldas da Rainha is made up of 16 freguesias,
fourteen rural areas and two urban areas, which form the town.
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were owned outright. Social housing is highly residual, consisting of only 92
Empirical data was gathered through thirty interviews with homeowners
and renters of dwellings located in the two urban freguesias of the municipality of Caldas da Rainha. The interviews were conducted between the months
of May and July 2005. The distribution of the interviewees was as follows:
twelve non-marginal homeowners, nine marginal homeowners and nine tenants. Approximately two-thirds of the interviewees were aged under 45 and
the remaining third were aged 45 or over.
Two-thirds of the interviews were conducted in households consisting of
couples and one third in single households. Half of the respondents were
female and nearly a third were male. In the remaining situations, both members of the couple were present and involved in the interview.
8.2 The main developments in the labour market and social security
Developments in social security
The revolution of 1974, which brought to an end half a century of Fascist government, is the high point of Portuguese history in recent decades. The situation today is the result of the developments of the last 30 years, but the legacy of the Fascist period can still be seen in various areas.
The Portuguese social security system, in its present form of universal entitlement, dates back to the post-revolution period, although the Basic Social
Security Act was passed only in 1984. The difficult situation of a considerable proportion of the elderly population, for instance, derives from the fact
that pensions are relatively low and often come from the non-contributory
system, because before 1974 social security contributions were the exception,
rather than the rule.
However, despite its youth, the social security system has already been
faced with its own financing crisis. This crisis is related to arguments about
the introduction of ceilings and contributions for complementary systems.
Social assistance has been characterised by different forms of discretionary
behaviour. The allocation of benefits has been heavily dependent on the subjective evaluation of social workers. In this context the issue of the ‘deserving
poor’ and the ‘undeserving poor’ is clearly pertinent. Some population groups
still remain out of range of most benefits as a result of the eligibility criteria
for access to the benefits. The homeless are an obvious example. Given their
situation, their access is severely limited, because of their ‘withdrawal from
the world’ and because of the way others see them.
These factors, among others, raise the issue of how universal the system
actually is. Only in the late 1990s, with the implementation of the guaranteed
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minimum income (RMG), now referred to as the insertion social income (RSI),
the only benefit granted as a right within social assistance, has it been possible to reduce the discretionary character of the system and implement it universally. In 2003, the number of people receiving benefits was 367,690.
But even the RSI does not reach everyone. This benefit is divided in two
components. The first is financial and the second consists of an insertion programme. Fulfilling the terms of the insertion programme, based on a return to
the labour market or on (re)entry into the education system, is a condition for
continuing to receive the financial component of the benefit. For the homeless (but also for other extremely vulnerable sections of the population), this
is very difficult to achieve. Most homeless people (who are sleeping rough) are
not receiving the RSI, either because they have not applied for it or because
they have not fulfilled the obligations at some stage.
Therefore, it is not surprising that poverty in Portugal, although levels have
fallen over recent years, still currently affects about one in every five people.
The at-risk-of-poverty rate after social transfers and inequality of income distribution (7.2% in 2004) is the highest in the EU2 and has shown little improvement since 1995. The older age groups (in particular women), and children are
the most affected by poverty.
The magnitude of the problem relates, on the one hand, to low wage levels,
which shape the existence of a considerable number of the working poor. On
the other hand, it is also affected by the weaknesses of the Portuguese welfare state, namely the low level of benefits it provides, as well as the existence of defects in the social security system. For a long period the system left
entire groups of the population, who for various reasons were not entitled to
any social benefit, totally unprotected.
The failure of the transfer system to prevent poverty can be explained by
the fact that the system uses wage levels as its reference point. Therefore, in
the context of low wages, transfers are also obviously low, even if replacement
rates are good. Transfers under the non-contributory system are even lower.
In 2006, the social pension3, for instance, amounted to € 187.62. Moreover, the
social insertion income4 is based on the social pension and therefore has the
same value.
In 2002, expenditure on social protection represented 25.4% of GDP, while
in the EU25 the same figure was 27.7%. Although between 1998 and 2002 Por-
2 http://epp.eurostat.ec.europa.eu/.
3 The social pension is paid to those aged 65 or over, under the non-contributory social security system for those
who have made few or no social security contributions and whose gross monthly income is no higher than 30% of
the national minimum wage.
4 This is also a benefit paid under the non-contributory social security system to those suffering from ‘severe economic deprivation’, in other words those whose income is lower than the value of the social pension.
[ 204 ]
tuguese expenditure on social protection showed an annual average growth
of 6.1%, in 2003 it amounted only to € 3,192 per head, just over half of the
expenditure in the EU25, which was € 6,012.
Portugal’s population is projected to age more quickly than most other EU
member states in the years to come. The old age dependency ratio is forecast to increase significantly from 25% in 2004 to 58.1% in 2050. Public pension expenditure, which was 11.1% of GDP in 2004 and by then already above
the EU average, is predicted to increase by 9.7 percentage points up to 2050.
Access to health care, although guaranteed by law in the universal public
system, is complicated by huge waiting lists in hospitals for consultations
and surgery and by difficulties in seeing doctors at health centres. Moreover,
despite not having reached maturity, the Portuguese public health system is
already starting to be dismantled. Means-tested payment for services is being
introduced and there is a trend towards the privatisation of health services,
in particular hospitals. In recent years new public hospitals have been transferred to private management.
Total health care expenditure (in 2003, 9.6% of GDP and 1,797 per capita,
in purchasing power parity terms, PPP$) is above the EU average5 in relation
to GDP (increase of 2.6% of GDP since 1992), but below it in per capita terms
(an increase over time: 1,079 in 1995 but negative real growth rates in recent
years). Public expenditure (69.7% of total expenditure, 6.7% of GDP and 1,249
per capita PPP$) is below the EU average, although it has increased in the last
decade (62.6% in 1995).
The participation of both men and women in the labour market presents
renewed challenges regarding the work-life balance. Portugal is in a unique
situation within the context of the European Union in terms of the relationship between activity rates and the level of provision of services and equipment to support families. Policies still reveal a certain degree of reliance on
the ‘welfare society’ and on ‘welfare families’. Female employment rates are
relatively high but coverage rates for child care and in particular for services and equipment for the elderly, despite an increase, remain very low. On the
other hand, little support is given to families who choose to care for family
The conditions for accessing support services are determined by the predominance of private for-profit facilities, both for child care and care for the
elderly. This means that a large proportion of people cannot afford to pay for
these services. However, the importance of the non-profit private sector must
also be stressed. Without these charitable organisations, even fewer services
would be available.
5 EU average of 8.81% of GDP and 2266.21 per capita in 2003.
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Developments in employment, unemployment, flexibility of labour
Over recent years, Portuguese activity and employment rates have been consistently higher than those for the EU as a whole. The overall employment
rate decreased from 68.4% in 2000 to 67.5% in 2005, but the Lisbon targets are
still within reach and all the intermediate Stockholm targets were achieved
in 2005, including those for women (61.7%, as compared to 56.3% in the EU25)
and the older age group (50.5%).
The female employment rate continued to increase even during the economic slowdown, from 60.5% in 2000 to 61.7% in 2005. In contrast, the employment rate of the older age group fell slightly from 50.7% in 2000 to 50.5%
in 2005. There was a significant fall in the youth employment rate, which
decreased from 42.2% in 2000 to 37.1% in 2005 (40.5% for men and 31.4% for
Throughout the 1990s, Portugal was one of the EU15 countries with lower unemployment rates. In recent years, however, there has been a major
increase in unemployment. Until 2000 the rate was falling (4.2%), but from
2000 until now it has increased significantly, reaching 7.6% in 2005. This
increase has been particularly significant in the area of long-term unemployment, which now accounts for approximately half of total unemployment. The
youth unemployment rate almost doubled between 2000 and 2005, from 8.8%
to 16% (13.6% for men and 19.1% for women). The gender gaps in employment
and unemployment still favour men, but have narrowed slightly since 2000.
The gender pay gap in the private sector remained at almost 25% in 2005.
The unemployment rates by educational levels indicate that the highest
rates are still to be found amongst the intermediate levels, mainly for the
holders of the third cycle and secondary education, for all age groups and for
the youngest age group (15-34 years). The low level of development in Portugal, which continues to accept less-skilled workers, explains the fact that
unemployment rates for the population with lower levels of education, in particular those with the first cycle, are below the overall unemployment rate,
both for all age groups and for the youngest age group. However, this situation will not be sustainable in the long run, because the reorganisation currently in progress is being speeded up and the traditional sectors of the economy are being modernised. As a result and despite positive developments
since 2000 (42.6%), the number of early school leavers remains high. The figure was 38.6% in 2005 (46.7% for men and 30.1% for women). The youth education attainment level has also increased from 42.8 in 2000 to 48.4 in 2005
(40.4 for men and 56.6 for women). These two educational indicators are a
long way from the EU averages and the situation is particularly serious for
men, with the gender gap increasing since 2000.
Perhaps more important than unemployment in explaining the situation of
people in Portugal are the characteristics of a large proportion of jobs. Badly
paid jobs lead to a high proportion of low income workers and a strong under-
[ 206 ]
ground economy6 hampers access to social rights.
The structure of employment has also been changing. The 1990s saw an
increase in the proportions of part-time employment and temporary employment, which now represent around 11.5% and 20% of the total workforce,
With regard to the flexibility of labour, Portugal has traditionally been a
country with high levels of rigidity. Between 1989 and 1991 there was a relaxation of the employment protection legislation. Restrictions on dismissing employees were eased as a result of a wider range of admissible grounds
for sacking people and the abolition of prior authorisation of collective dismissals. Previously, the only grounds for dismissal were disciplinary, but the
law was made less restrictive and permitted dismissal for poor performance (failure of the employee to adapt to the job) and economic redundancy.
This seems to be reflected in the Portuguese averages of the indicators of the
restrictiveness of employment protection legislation (EPL).
In fact, from the late 1980s until the late 1990s there was a significant
decrease in all Portuguese averages. Nevertheless, it must be stressed that
despite the relaxation in employment protection, the relative position of
Portugal within the OECD has moved towards the axis of countries with the
strictest legislation, which indicates that the Portuguese legislation to reduce
employment protection was less extensive than in other OECD countries. In
recent years, the situation has not changed significantly.
Employers’ pleas for an easing of employment protection legislation find an
echo in the recommendations of bodies like the OECD, which believes that
restrictions create labour market segmentation, limit mobility and block technological and managerial innovation. The International Monetary Fund7 also
considers that additional steps to increase labour market flexibility are needed. The continued steady growth of labour costs, even in the face of increases in the unemployment rate in recent years, high rates of long-term unemployment and heavy reliance on fixed term-contracts and self-employment
all testify to the presence of significant rigidities in the labour market, as do
standardised international measures of employment protection.
Developments in the economy (GDP)
After a continuous increase in the GDP during the 1990s at average levels of
4% per year, in 2001 there was a considerable slowing down of the economy.
In the period from 2001 to 2006 the average GDP growth rate was below 1%
6 McKinsey Consulting estimates that nearly 30% of Portuguese workers in areas other than agriculture are working in the underground economy.
7 Portugal – 2006 Article IV Consultation, Preliminary Conclusions of the Mission, Lisbon, July 17, 2006 (http://
[ 207 ]
Figure 8.1 Real GDP growth rate in Portugal (% change on previous year)
% change on previous year
per year and in 2003 GDP actually fell (Figure 8.1). Between 1991 and 2004, Portugal had the fifth lowest increase in GDP of the OECD countries. This trend
seems to underline the structural weaknesses of the economy, together with
a development model based on low wages and poor quality jobs where unskilled labour activities often result in low levels of productivity and a high
number of working poor (11.4% in 2003). Economic recovery is slowed down
by a difficult budgetary situation with a general government deficit of 6% of
GDP in 2005, associated with external deficits and high levels of private sector
debt. The forecast for 2006 is that the GDP per inhabitant in purchasing power standards in Portugal will represent 71.8% of the EU25 average (66.3% in the
case of the EU15).
8.3 The main developments in housing
The development of housing tenures
Tenure structure in Portugal has changed significantly in recent decades. Although the proportion of outright owners has remained fairly stable, the proportion of mortgage holders has increased considerably. This increase derives
almost exclusively from the reduction in the private rental market (Table 8.1).
The number of owner-occupied dwellings increased from 1.6 million in
1981 to 2.7 million in 2001, while rented dwellings decreased from 1 million
to 740,000 in the same period. The importance of home ownership is indicated by the increase of 28% in the total number of dwellings between 1981 and
Another relevant factor that has an impact on the housing market is vacant
property. In 2001 11% of all dwellings were vacant, which makes a total of
544,000 dwellings. Of these, 105,000 were for sale and 80,000 to rent. Taking into account that 28,000 were awaiting demolition, this leaves a total of
331,000 empty dwellings. Despite this, enough housing has been built each
year in Portugal to accommodate around 1% of its population.
Source: Eurostat
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Table 8.1 Tenure structure in Portugal in 1981, 1991 and 2001, in %
Outright owners
Mortgage holders
Private rental
Social rental
Owned by parents/grandparents or children/
The private rental market
was affected by its rigid structure and by the rent freezSource: INE, Census es in 1940 and after the end
of dictatorship in 1974. Not
until 1986 did some flexibility come into the market as a result of the possibility of establishing new contracts without rent constraints. However, it must be stressed that the restrictions on rent updates remained and still apply today for all contracts drawn
up before 1990. Another recent change is the option of drawing up renewable
contracts for periods of five years. The tenant can terminate the contract after
giving notice, but the landlord is bound by the entire term of the contract.
In addition to its failure to develop support mechanisms for the private promotion of housing (at least with the necessary scope), the Portuguese state
has not increased the levels of social housing over recent decades. Therefore,
social housing has never been a real alternative, since it has only been available to the most vulnerable people on the fringes of society. In 1981 social
housing represented only 4.5% of the housing stock occupied as the normal
residence. Twenty years later this figure had decreased to 3.2%. Only 1% of all
buildings and 1.7% of dwellings built in 2003 were supported by the state. New
social housing is destined almost exclusively for former shantytown dwellers. The process of rehousing these people forms part of the Special Rehousing Programme (PER). This was started in 1993 and is intended to resolve the
problem of shantytowns and of the illegal occupation of land, and to transfer
responsibility for the majority of social housing from the state to local authorities.
The development of housing policy
From 1976 to 2002 the Portuguese state based its housing policy almost entirely on a means-tested, subsidised mortgage credit system. However, at the
beginning of the 1990s the credit rationing system was terminated by the
Bank of Portugal and commercial banks were authorised to make credit freely
available. Since then the majority of people have had the opportunity to buy
their own homes. In 2001 three in every four dwellings were owner-occupied,
while ten years before the figure was 65%. In 1981 only 57% of all dwellings
were owner-occupied. This sharp increase has its roots in a number of factors.
In addition to the above-mentioned characteristics of the rental market, in recent decades access to housing credit has been made easier and interest rates
have been reduced significantly. These changes took place in 1996, as a consequence of the process of joining the euro. The interest rate fell to around 5%
in 2000 from its previous level of around 20% at the beginning of the 1990s.
The increase in the proportion of homeowners resulted in a growth in debt.
According to the Bank of Portugal, in 1992 on average every Portuguese person
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owed about 18% of their available income. By 2004 that figure had increased
to 117%. In 2001 only one in four Portuguese households felt that they did not
have a financial burden caused by housing costs. For a quarter of the population the burden was a heavy one.
Currently there is only one fiscal policy which promotes home ownership.
This consists of tax deductions of mortgage payments and the respective
interest rates, up to a certain limit. The other previously existing fiscal policy
ended in 2005. This had allowed people tax deductions of 25% of their annual savings in building society accounts In the declaration of 2005 this deduction was abolished. According to the government, this policy was intended to
be temporary and to encourage saving and home ownership only for a limited
period of time. However, once again it was probably not a coincidence that it
was implemented in the context of a high level of public deficit.
8.4 Housing decisions and the meaning of tenure
For most Portuguese respondents, the dwelling is seen as a home or a refuge rather than an asset, which reveals the strong emotional ties that people have with their residences. This is true both for homeowners and renters. Among renters, those with rental contracts that date back over long periods tend to express these feelings more strongly, but even those with recent
contracts do not usually regard their home as a temporary residence and still
have an emotional attachment to it.
Only in a few cases do the respondents regard their homes simply as a roof
over their heads or as an investment. For one of the respondents, the idea of
the home as an investment goes hand in hand with the idea of it as a burden,
creating mixed feelings which cannot easily be separated. Another interviewee, who has owned his home only for two years, considered it to be mainly an additional motivation to keep on going, which gave further meaning to
a ‘life of work’. Buying comes as a natural step in the respondents’ lives and
they are encouraged to buy by the small or non-existent difference between
the values of rents and mortgages. Job security, for instance, although understandably important is not a decisive factor when entering into home ownership.
As for tenure, the strong promotion of home ownership over the last few
decades and the small or non-existent difference between the value of rents
and mortgages are certainly the reasons why all the homeowners and most of
the renters state a preference for home ownership. Only those who are afraid
of getting into debt express a preference for renting.
The avoidance of debt is one of the few perceived benefits of renting and
this is closely associated with the fact that it is the only choice for those peo-
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Housing at
some of the
interview locations in Caldas
da Rainha,
ple who are unable to buy because of a low income, because they are elderly
or both. Another important advantage of renting relates closely to the recent
history of the Portuguese housing market, in other words to frozen rents,
which have resulted in long-term tenants paying very low rents.
The main advantage of buying, referred to by almost all the interviewees,
concerns equity. For the respondents it makes sense to spend money on their
own property rather than on something they will never own.
“Since I had to pay, I wanted to pay for something that was mine. Nowadays renting costs much the same as paying a mortgage. So obviously I wouldn’t ever rent
somewhere. And buying a property is a capital investment. I would never pay for
something that would never be mine” (non-marginal owner, female, 29 years
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“One day, it (the home) will be mine. Just imagine getting to the age of 50 or 55 and
still paying rent… If things go well, I’ll buy another property. If they don’t, I’ll get to
that age and my mortgage will be paid off and I’ll have a pension to live on. That’s
my idea. If I went on renting…the later I left it to buy a house, the longer I would
have to keep on paying for it and I was always afraid of that” (non-marginal
owner, male, 28 years old).
Sometimes, even the idea of renting produces a negative reaction.
“I was in a rented house for so many years. Would I rent another one? No! At some
point, it was just not worth paying the rent. For the same amount or little more I
could have my own home. And this way I don’t have a landlady coming after me to
collect the rent or anything else. At least I’m in charge of my own destiny and what
happens to my home” (marginal owner, female, 33 years old).
Therefore for some people, owning also seems to represent independence.
Ownership seems to be the only way of ensuring that no one is interfering in
your life. The respondents are aware that until the mortgage is paid off in full,
the bank has something to say in the matter, but they also know that as long
as the mortgage payments are made regularly, they will not be hearing from
the bank. This cannot be taken for granted in the case of landlords.
Changing tenure is a valid option for almost all renters, although it would
be heavily dependent on improved financial circumstances, as these are the
main reason for the majority of people choosing to rent. In contrast, as mentioned earlier, the initial reaction of the owners is to reject almost immediately the idea of renting. They would only consider it if they had serious difficulties, in other words health problems. But even if this was the case, the owners
would prefer to move into a cheaper property, rather than renting.
This is most probably associated with the idea of the rental market being
the last resort. Buying is so deeply rooted in most people’s minds, for the reasons mentioned previously, that renting is seen as a strange choice, which is
only appropriate for those people who have no possibility of obtaining a loan
or who have tax or legal problems.
The main influence on people’s initial housing decisions is unquestionably relationships. Marriage or living with your partner is the main reason for
people to leave the parental home. Among the younger respondents there are
few single-person households and this is largely due to financial reasons. The
high prices in the private housing market and the lack of alternative, affordable (social) housing do not make life easy for single-person households.
Most of the people interviewed who were living alone had chosen this option
because of relationship breakdown.
Housing decisions are also determined, although to a lesser extent, by the
labour market. Some of the interviewees had already moved house at least
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once because of their jobs and others had even moved abroad, but this is not
a common occurrence. The fact that the town only exerts a low level of attraction means that people can remain living in their existing homes while working in the town. It is only in major cities that larger numbers of people move
house because of their jobs, but even in these situations people tend to move
only once and then stay in the new area.
Using housing equity to access finance seems to happen only rarely in Portugal. Even in the case of relationship breakdown, on only one occasion was
the property sold in order to allow the ex-partner to have access to his share
of the money.
Equity seems to be regarded from two different perspectives. Although, as
mentioned above, equity is identified as a major advantage of buying, it is not
the primary reason for doing so, given the emotional ties which people seem
to have with their homes. In addition, even if people are aware that their
dwelling has increased in value since they bought it, they are also aware that
moving will not allow them to access the money. Because prices everywhere
have gone up and not just in a certain area, moving to another house will not
in itself provide them with any extra money.
For tenants, the choice of renting is, in some cases, related to an awareness
of the difficulties or even the impossibility of buying, which is consistent with
the advantages of renting identified by the buyers.
“Next year I will turn 40. My salary is reasonable but the salary that I am declaring for tax purposes is fairly low. I think the state doesn’t give much help to single people. Before I started renting this place, I went to the bank and they told they
would not give me a loan…and at that time I was ten years younger” (tenant, female, 39 years old).
From this perspective, people do not regard their dwellings as an investment,
even though most people definitely believe that the process of buying and
selling property is still one of the most profitable transactions they will make,
although to a lesser extent than before. However, people clearly distinguish
this concept from home ownership and do not really consider this to be an
investment. Even the idea of housing as a financial resource only seems to
come to mind after direct questioning. It does not appear to occupy a central role in people’s thoughts. As such, it is not surprising that people have
not used their homes as a financial resource in the past. A few households
used the difference between the estimated value of the dwelling and the loan
they applied for to obtain some additional money at the time of taking out the
loan. This allowed those households to acquire capital – between € 5,000 and
€ 10,000 – at a lower interest rate. The money was then spent on cars, furniture or refurbishing the house. Only one of the households took out a second
mortgage to buy a car. As for the remaining households, the money resulting
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from the sale of the previous home was always used for the next one.
When first asked, most respondents say that they would not consider using
housing equity in the future. The main focus is on housing as a home and on
paying off the mortgage.
“My objective is to pay it off as soon as possible because you never know…two incomes are one thing, but one income is a different matter altogether. So, my objective is to pay it off as soon as possible so that I no longer have the expense and feel
more relaxed” (marginal owner, female, 53 years old).
Once the house has been paid for, it acquires a new and important meaning,
that of an asset to leave to the children. Almost all the interviewees believe
that it is important to leave their house to their children. Interviewees also
tend to value the possibility of giving their children a roof over their heads.
They want to offer them help, which they themselves did not have, to get
started on the ‘ladder’ and protect them from possible ‘snakes’.
Only after direct questioning did the respondents consider using the equity
themselves and, in almost all cases, only for health reasons. Nonetheless, the
respondents clearly emphasise that it would have to be a pressing need and a
situation in which they had no other choice.
However, it seems worth mentioning one specific situation, where the
respondent uses unusual reasoning. One homeowner would consider using
his home for almost all of the purposes mentioned. But what is most interesting is that the education of his children is definitely not one of them.
“We made long term plans. We opted to repay the loan over 18 years, to coincide
with the time when our child, whose birth was already planned, went to university.
When she is 17, our home will be paid for and we can do whatever we like” (nonmarginal owner, male, 37 years old).
Conversely, when they reflect on the theoretical situation of other people,
some of the respondents believe that using housing equity may be a good
idea. This is because the hypothetical situation concerns elderly people. In
Portugal, the elderly are extremely vulnerable to poverty. Some respondents
mention the generally low levels of pensions and the weaknesses of the social
security system in order to justify their support for the use of housing equity.
8.5 Safety net strategies
The respondents’ safety nets do not seem to have a very tight mesh. Almost
all the homeowners have compulsory life insurance (a few have older contracts that did not require this insurance), but this is their only safety net,
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apart from the compulsory insurance against accidents at work that most
people have. Only a few interviewees took out non-compulsory insurance policies, to cover unemployment, for instance, despite the fact that this represents a major concern. According to a significant number of respondents, it is
not that they do not recognise the importance of these safety nets, but rather
the feeling that their incomes are too low.
“If our monthly income isn’t enough for us to pay our debts and survive, then it will
certainly not be enough to open a savings account. It’s like when everybody says
that there will be no money to pay for our retirement. My impulse is to open an account and put my tax money in it. But that’s not possible and it isn’t possible to pay
the taxes and save money. So, we will sort that problem out when we get that far”
(marginal owner, female, 33 years old).
This quote raises the issue of disillusionment about welfare provision. People
are aware of the weaknesses of the Portuguese welfare system, which in addition has no specific provision for housing. These perceptions may have been
reinforced by the recent government trend of withdrawing from a number of
areas. The failure of the system to provide adequate protection stems from
the fact that it is based on wage levels. As a result, if wages are low, then
transfers are obviously also low, even if the replacement rates are good.
Apart from this, however, the major problem with public welfare policies concerns the delay between submitting the application and receiving the benefit.
There is a delay of several months that obviously has serious consequences at
all levels. There is very little data available in this area, but there is empirical
evidence from people who resort to local social security services for financial
support because of the impact of these delays on the families’ ability to survive. It is not surprising that some respondents describe how they took things
into their own hands in order to find an immediate solution to their problems.
“We are trying to save some money and we’re succeeding. This money will allows
us to survive for two or three months if I become unemployed, but two or three
months without a job…that’s why I say…if I have to carry buckets of cement, I will
do” (non-marginal owner, male, 30 years old).
The family is often the major buffer in cases of hardship. Almost all the interviewees are confident that someone in their close family would help them
if they had problems. However, for many of the respondents asking for help
would be exceedingly difficult, as most people believe that everyone should
be responsible for their own finances. In addition their strong feelings of pride
would prevent them from asking for help. In contrast, in some cases the help
given by other people is the only thing which is stopping the situation from
becoming even worse.
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“After paying the rent, I only have e 35 left. If I didn’t get help from my children, I
don’t know what I would do” (tenant, female, 73 years old).
In terms of equity, only homeowners with mortgages which are about to come
to an end feel that their property represents a reasonable sum of money. For
the others, the equity is very limited and few of them are aware of the possibility of making use of it.
When considering other people’s options if they get into difficulties, the
alternative which most of the respondents mention is downsizing, in other
words selling their current home and buying a smaller and cheaper one. This
approach seems to indicate a considerable difference between the way in
which people perceive their homes and the way they would use it if they had
problems. The home as a haven seems to give way to the home as an asset.
However, it is important to interpret these results with caution, as they represent opinions about a third party8. If the respondents were asked directly about their own specific situation, the results could be different. Moreover, when people refer in their answers to their own personal case, there is a
discrepancy between what they would do themselves and what they suggest
that others should do.
Two important factors which need to be taken into account in this context are whether the respondents have children and whether they have emotional ties with their home, both of which will have a significant influence
on whether they are prepared to sell. As we have already mentioned, a house
is often more than just a place to live and is regarded as something which
the children will inherit. If the homeowners have children, selling the home is
often regarded as throwing away their inheritance.
Consequently, the respondents tend to think that if the home has no sentimental value for the owner, especially if he or she is older, then the best
option is to sell and buy a smaller one. This seems to be particularly relevant
in the case of people whose household has become smaller as the children
have left the parental home.
The strong attachment to the home is perhaps more clearly reflected in the
answer of one respondent who says that…
“... if they sell the house when they are only three years away from paying off the
mortgage and then rent another house…little by little they would be killing themselves. They would never see things in the same way again. They would always re-
8 Respondents were asked to give advice to a couple in their mid-fifties. The couple still has three years remaining on their mortgage and their house has increased in value by 300% since they bought it. The wife works parttime and the husband has just learned that he will be made redundant in three months time. The wife’s salary is
not enough to cover all of their outgoings but they do not have any outstanding debts apart from their mortgage.
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gret what they did. Losing everything for the sake of only three years…having really bad luck…that starts to affect you. It would definitely have a serious impact on
them” (non-marginal owner, male, 28 years old).
The second most frequently mentioned option is to look for work. One possibility is for the man who is being made redundant to find a new job. Despite
growing levels of unemployment, there is a feeling that there is always work
that you can do, even if you need to make a sacrifice of some kind. The respondents feel that having a job and an income is essential.
“As I see it, there’s only one thing they can do and that’s to sell. (…) if, at the age
of 50, I have to carry buckets of cement…it’s not great but it’s unavoidable, at least
for two or three months (non-marginal owner, male, 30 years old).
Another option is for the part-time worker to get a full-time job. The standard
working pattern in Portugal is full-time work, both for men and women. The
proportion of part-time workers is lower in Portugal than in the rest of the European Union. Therefore increasing the working hours of the part-time worker seems to be the natural solution.
Another option suggested involves negotiating with the bank to extend the
deadline for repaying the mortgage and also investigating the possibility of
taking out a second mortgage to cover the initial impact of the man’s unemployment. Sometimes, the respondents also associate this second option with
the search for a job, which is essential for the medium and long-term viability of the option. There is the feeling that banks are likely to be interested in
negotiating credit extensions, particularly if the mortgage is reaching its end.
The suggestion of a second mortgage seems to be, in most cases, the result
of a learning process, as this was largely unfamiliar to most of the interviewees at the beginning of the interview. In addition it is not clear whether every
respondent who suggested this solution fully understood the medium-term
implications of a second mortgage, in other words having a larger amount to
repay each month.
Conversely, other respondents only seem to have considered the mediumterm implications. In these cases, they believe that taking out another loan
is out of the question, because if the people have no way of paying one loan,
they will not be able to pay a second one.
Relatively few people mentioned the option of resorting to unemployment
benefit or redundancy compensation, which, in the former case, indicates
once again the weaknesses of the system. The respondents do not question
the entitlement to the benefit, but they are not confident about relying on the
system. They refer to the above-mentioned delay between becoming unemployed and receiving the benefit. Some respondents even use their personal
experience to illustrate the difficulties of this delay.
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It is interesting to see how the respondents’ personal experience of housing influences their views on this subject. One respondent who had lived in
a series of rented rooms promptly suggested renting out a room as a new
source of income. This was one way of generating revenue from their own
home. Similarly, a respondent who always contributed to the family budget
while she was working and living at her parents’ home suggested the possibility that the couple could ask their children, if they had any, for help.
“We also need to see whether they have children, whether the children live with
them or not and whether the children can help. They can discuss the problem with
their children and suggest that, if the children help them for the remaining three
years, afterwards they will have a house which is worth much more than they have
spent. If not, they (the parents) will sell the house, spend the money and the child­
ren will lose their inheritance” (marginal owners, 29 and 30 years old).
It is revealing that nearly half of the marginal homeowners, but only one of
the non-marginal owners, suggest that the couple should make personal sacrifices in order to reduce their expenses which would allow them to keep the
house. This seems indicative of these two groups’ different perspectives. Making sacrifices, which means in most cases cutting back on spending wherever possible, is necessary to order to achieve the more important objective of
keeping their home, which is a refuge and an essential part of their lives.
Another respondent, however, takes the idea of making sacrifices even further, and emphasises how important it is for him to avoid hardship.
“Some people spend money in a good restaurant instead of cooking a bowl of soup
at home” (marginal owner, male, 48 years old).
The different perspectives among the homeowners are reinforced by the fact
that nearly all the marginal owners say that they feel powerless in the face of
unemployment. They believe that it is not easy to predict and in most cases
they do not have enough disposable income to save or take out insurance policies. Different factors which affect their lives are also mentioned.
“It’s always possible but it’s difficult to judge. Different things happen in life and
we have to keep investing in our children or in our health. The political changes in
society also do not allow… And there are those little extravagances, like holidays,
because we really need to recharge our batteries. We can always hope that next
year will be better” (tenants, 59 and 58 years old).
One in three of the non-marginal owners also expresses a feeling of powerlessness, but, unlike the marginal owners, they often mention options such as
savings, making additional loan repayments or starting a pension plan.
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There is also a clear differentiation between the respondents when we
analyse their opinions regarding the responsibility for providing support to
households which have problems with their housing costs. Marginal owners
and tenants tend to believe that the state is responsible for providing support. However, it is important to mention that the respondents’ answers indicate that a service of this kind should be set up, as the Portuguese state currently offers no specific housing assistance to homeowners. For some of the
respondents there is clearly no other option but the state, because this type
of service is considered to be outside the scope of private companies.
The weaknesses of the social security system are implicit in the opinions of
other respondents.
“I think that that’s what social security is there for. We tend to think of social assistance as something for down-and-outs. As a result, there isn’t anything left for
people with real needs and difficulties and nowhere to go for help” (tenants, 59
and 58 years old).
Relatively few respondents refer to the banks or do not mention any organisation which they think should provide support. There are also respondents,
mostly older people, who believe that no help should be offered at all. These
interviewees sometimes refer to the situation during the dictatorship period
when state intervention in areas such as this was non-existent. They also say
that nowadays people are always expecting something from the state.
The respondents give a number of different reasons for this. On the one
hand there are those people who relate housing cost problems to a lack of
determination or self-discipline9. These respondents make a plea for individual responsibility.
“Honestly, no. A few moments ago, I heard on the radio that there are more mobile
phone numbers in Portugal than there are people...when you can’t, you just can’t!
I’m not saying that no one needs help, but I am saying that: ‘I have a car, I smoke, I
have a mobile phone and a dog and…oh dear, this month I can’t pay the mortgage’
isn’t acceptable. Perhaps I’m missing the point because, thank God, I’ve never had
any problems. But my father worked hard to get where he is. I also work hard and
if I can’t go on working in sales, I’ll work in a coffee shop or anywhere, because I
have no problems with that. But I imagine that many people would have problems
with doing that sort of work” (non-marginal owner, female, 27 years old).
9 This seems largely consistent with the fact that, according to the European Values Study (1999), 41.9% of the
Portuguese population considered laziness or lack of willpower to be the most important reason for living in
need. The overall figure in all the countries surveyed was 24.1%.
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Individual responsibility is felt to be the essential factor, as the respondents
recognise that the country’s situation is far from perfect. There is a belief that
while there are still considerable weaknesses in areas which are regarded as
basic requirements, such as the health care system, then this kind of housing
support should be postponed. In some cases, and given such circumstances,
some respondents even thought that providing this type of housing-related
support would be just be a waste of state funds and the taxpayers’ money.
Other respondents use their own personal experience to illustrate their reasoning, even if this obviously has serious implications.
“Everyone must be prepared to make sacrifices. People must not rely on help and
support. They must do what I did. I worked in France and I was working day and
night until I became completely disorientated. This afternoon I will be working for
four more hours and after that I will work until after midnight. Tomorrow it will be
the same. This is my life. It involves a lot of sacrifice. On Saturday I started working
at 7.30 and I got home after midnight. I only went home to eat a banana. That was
all I ate during the day. Even I don’t know how I can take it” (marginal owner, female, 54 years old).
Conversely, only a few of the non-marginal owners refer to the state. Most of
these owners believe that the banks should be responsible for helping households with housing cost problems. They think that, together with the clients
themselves, the banks should take some responsibility for protecting homeowners, by providing advice that can help prevent their clients from getting
into difficulties and jeopardising the bank’s investment.
On the other hand, only the non-marginal owners suggest that the responsibility should lie with the Portuguese Association of Consumers’ Rights,
which is probably a good indication of their experience of the service provided by this association since 2000 to people with debt problems.
Some of these respondents mention the state but nearly half of them refer
to its regulatory role rather than its direct intervention in this area. The state
is seen as being responsible for the creation of a legal framework which obliges all companies that offer credit to provide a service explaining to people all
the consequences of borrowing. It is assumed that if the state imposes laws
on the private sector, the companies will have no option but to comply with
Regardless of the answers the respondents give, one issue which constantly comes up concerns the deserving character of those with housing cost
problems. The respondents state very clearly that any help from any type of
organisation must be carefully monitored. This would ensure that people who
are trustworthy and who are intending to pay would get help, whilst ensuring
that those who are not paying because they do not want to do not receive any
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Most respondents, if they were to receive sudden windfall, would use it in
one of two ways. On the one hand, there are those people who put a strong
emphasis on repaying the debt, using all the money or at least a significant
part of it, to pay off the mortgage. This would reduce the burden on their
monthly finances, but perhaps most importantly would give an intrinsic feeling of relief which the tenants in particular valued.
On the other hand, there are those who would use part to repay the debt
and use the rest of the money as a cushion. Options such as investing all the
money or putting it all in a bank account are clearly residual.
8.6 Security and insecurity
The feelings of insecurity and the risks perceived by households vary considerably. For marginal homeowners, the perceived risks are immense, because
almost everything, from unemployment or health problems, to accidents or
even neighbourhood deterioration would have a major impact on their housing situation.
“In that case…everything would go down the drain. An increase in my monthly repayments is out of the question because I can’t pay more than this. If I’m ever ill,
the bank will have to repossess the house because there’s nothing I can do. If I had
any savings I would use them until I got better, but as I don’t have any put money
aside…” (marginal owner, female, 53 years old).
Tenants also express similar feelings, although to a lesser extent. Some of
these respondents, with old rental contracts, had some concerns about possible changes resulting from the proposed new law on housing rents, which
aims to bring the old, low rents up to market levels. Unemployment is referred to by all the groups but especially by the non-marginal homeowners.
For these people, their job guarantees that they will remain relatively well-off,
hence their natural concern about this subject.
The importance which these interviewees place on neighbourhood deterioration is also very interesting, in contrast to the answers of the two other
groups. This indicates that they have greater housing mobility, but also provides information about the location of the homes of each group.
“If the neighbourhood was horrible, I would move. That’s really important. It’s also
important not to have neighbours who make everything dirty and leave rubbish lying around…” (non-marginal owner, female, 32 years old).
However, the risks already experienced by the different groups are also different. Among the non-marginal homeowners, only one household experienced
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a risk, in this case unemployment, whereas among marginal homeowners
nearly half of the households had had experiences of this kind, which made a
major contribution to their poor financial situation.
“I had an accident at work and I’m not earning any money” (marginal owner, male,
48 years old). “A few months ago my husband became unemployed. This has had a
big impact on us. That was why I…the nerves…that was the reason. I got anxious
because I knew I wasn’t going to have enough money to pay for everything and our
child wasn’t working at the time. It was complicated. And now I am getting sickness benefit. And that’s complicated” (marginal owner, female, 38 years old).
For most homeowners, at least when they first discuss the issue, income security and housing security seem to be two separate things. It seems that any
problem or risk could affect every area of life, in addition to housing.
As mentioned previously, people seem to think that even if something happens which has direct and serious implications for their income security, it
will be easier to maintain a house they own than a rented one. Home ownership also seems to provide security in the sense that banks are perceived as
easier to deal with than landlords. Also, in addition to the option of making
use of equity, home ownership security seems to derive from the perception
that housing costs will eventually come to an end.
In conclusion, the home as a haven seems to be systematically protected by
the feelings of commitment and sacrifice which have been mentioned previously, even if this implies having a very basic standard of living. On the other
hand, housing security seems to be strongly connected to the security of life
in general and hard work. The home as a refuge is also a place of shelter from
the aggressive outside world.
8.7 Conclusions
The nature of the Portuguese housing market is heavily determined by the
events of 1974 which brought the dictatorial regime to an end. This includes
the process of rent freezing, which made the rental market highly unattractive for landlords. On the other hand, social housing has never really played
a major role and it is and has been aimed almost exclusively at the resettlement of shantytown dwellers. Therefore home ownership is almost the ‘natural’ choice of tenure, further supported until recently by state promotion in
the form of subsidised credit and tax reductions.
Taking into account the fact that these policies are now longer in place,
that the housing market is severely saturated and that short-term changes
are being implemented in the rental market, it seems plausible that the Portuguese housing market is on the threshold of a new phase.
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Insecurity seems to be a growing problem in Portuguese society. Debt has
been growing significantly and has even exceeded the amount of available
household income. Housing debt is only a small part of this phenomenon, but
the number of repossessions has been rising.
Coverage rates of public policies are relatively high, but there are considerable delays between submitting an application and receiving the benefits.
Moreover, insecurity clearly becomes an issue when about 30% of the labour
force is working in the underground economy, employment security is under
threat and unemployment is rising.
In addition, no special provision has been made by the state with regard
to housing insecurity. Therefore, ultimately it is the responsibility of ‘welfare
families’ to deal with housing insecurity. The last resort is discretionary social
assistance which has only a minor impact on the problem.
Given the weaknesses and insecurities in the system, home ownership
seems to represent an oasis of safety and stability. The feeling of possession
seems to comfort both outright owners and mortgage holders, even those
who do not have significant financial resources.
Home ownership in Portugal represents, most of all, a haven of independence and intimacy. Owners develop emotional ties with their homes. The
strength of these links often helps the owners to develop their identities. In
these cases, housing seems to mould social identities, paving the way for
social recognition and inclusion.
Among the tenants, only those with frozen rents have a feeling of security, which comes from their low monthly housing payments. Housing affordability is an issue for Portuguese tenants with newer contracts and high rents,
as well as for marginal homeowners. It is not unusual for households to
spend very significant amounts of their monthly income on housing, a situation which is aggravated by the low salaries that are typical of the Portuguese
labour market. As a result a significant proportion of households feels highly
insecure and lives often on a knife edge.
Therefore people seem to derive a feeling of security from home ownership,
regardless of their objective living conditions and resources. Home ownership
seems to encompass concepts of permanence and stability, in contrast to the
unstable and temporary character of the rental market.
It is common for people to stay in the same home for several years.
Although tenants seem to move more often in search of better conditions and
the opportunity to own their own home, the emotional investment made by
homeowners seems to discourage them from moving.
Renting seems to be regarded as a last resort rather than a choice. In fact, it
has been shown that in the Portuguese context the rental market is not a real
alternative, given its biased structure.
Relationships play a central role in housing issues. In a context where economic conditions restrict the access to housing, relationships still represent
[ 223 ]
the main reason for moving out of the parental home. Furthermore, relationships are also the primary reason for respondents to access the money stored
in their homes, since equity does not seem to be an important part of people’s
views of housing. On the other hand, economic conditions also restrict other
areas of the respondents’ lives. The majority of them have cut their spending
in other areas because of housing.
However, housing is widely seen as a good investment and equity is said
to be an important asset, often a decisive factor in the choice to buy a house.
Nevertheless, the emotional significance attached to housing seems to prevent the respondents from considering their own home purely as an investment and as a source of equity. The possibility of using the equity in the
future is not welcomed with much enthusiasm. Likewise, only a few respondents had used housing as a financial resource in the past.
Health reasons seem to be the only motivation for respondents to use the
equity stored in their homes. Once again, for some interviewees, there is a
considerable difference between their own situation and hypothetical situations, where respondents support the use of housing equity.
Their reluctance does not even seem to be based on the awareness of the
existence of an effective support network. The respondents’ safety nets rarely have a tight mesh. In most cases, their financial resources only represent
small cushions and their insurance policies are generally limited to compulsory mortgage-related insurance. However, the respondents do believe other types of insurance to be important, because they are aware of the weaknesses of the welfare system. Despite this, the majority of the respondents do
not take out additional insurance policies, mostly because of financial constraints.
In this context ‘welfare families’ continue to play a major role, by preventing hardship in some cases and by acting as an important safeguard, even if
used only as a last resort. Although equity may act as a potential buffer in the
future, solutions based on individual effort emerge as the main driving forces
for overcoming difficulties. Personal sacrifice, with all its implications, is still
the preferred solution for a significant proportion of the respondents and, for
others, hard work seems to be the best method of ensuring success.
Baptista, Isabel, 2003, Portugal National Report 2003, European Observatory
on Homelessness/FEANTSA (unpublished).
Bruto da Costa, Alfredo, Isabel Baptista, 2001, Access to housing: working
together to prevent homelessness among disadvantaged and vulnerable
groups, European Observatory on Homelessness/FEANTSA (unpublished).
[ 224 ]
Carvalho, Pedro Guedes, 1998, Public intervention on housing: the Portuguese
case, paper presented at the ENHR International Housing Conference, Madrid,
2-4 December 1998 (unpublished).
Doling, J. & J. Ford (eds.), 2003, Globalisation and Home Ownership: Experiences in Eight Member States of the European Union, Delft (Delft University
Laboratório Nacional de Engenharia Civil (National laboratory of civil engineering), 1999, Gestão integrada de parques habitacionais de arrendamento
público: proposta final de um guião recomendativo (Integrated management
of public rental dwellings: final draft of recommendations), Lisbon (LNEC).
Ministério das Obras Públicas, Transportes e Habitação (Ministry of Public
Works, Transportation and Housing), 2004, O sector da habitação no ano 2003
(The housing sector in 2003), Lisbon (MOPTH) (unpublished).
Observatório do endividamento dos consumidores (Observatory for the indebtedness of consumers), 2002, Endividamento e sobreendividamento das
famílias: conceitos e estatísticas para a sua avaliação (Indebtedness and
over-indebtedness of families: concepts and statistics for an evaluation,
CES-FEUC, Observatório do endividamento dos consumidores (unpublished).
Observatório do endividamento dos consumidores (Observatory for the
indebtedness of consumers), 2002, Relatório de actividades de 2002 (Activity report 2002), Observatório do endividamento dos consumidores (unpublished).
Observatório do endividamento dos consumidores (Observatory for the indebtedness of consumers), 2002, Mortgage finance in Portugal: an overview,
Observatório do endividamento dos consumidores (unpublished).
Programme of the XVII Constitutional Government.
Rodrigues, Duarte, 2002, A evolução do parque habitacional português:
reflexões para o futuro (The evolution of Portuguese housing: reflections for
the future), Lisbon (unpublished).
[ 225 ]
9 Sweden: To own or to rent?
Eva Andersson
9.1 Introduction
The key question for this chapter is the impact of housing tenure, particularly home ownership, on securities and insecurities in people’s personal lives
in Sweden. In order to describe the impact of home ownership on (in)security,
it is necessary to investigate the institutional framework: the labour market,
the social security system and the housing (financial) market. In addition and
very importantly, the results from an interview study in 2005 will be used to
illustrate and explain perceptions of security and insecurity among homeowners and tenants (for comparative reasons).1
This chapter has the following outline. In Section 9.2 the Swedish labour
market and the social security system, which form the basis for the insecurity
and security of homeowners, are described. Section 9.3 outlines the developments in the housing market. Comparisons between housing tenures (regulations, prices etc.) and housing affordability are particularly important in this
respect. After this rather general overview, the results of the Swedish OSIS
interview study are presented. Section 9.4 covers housing decisions, choices
and the meaning of tenure among the 30 households interviewed. The question of (in)security among both renters and homeowners is described in Section 9.5. Section 9.6 deals with the respondents’ safety net strategies. That
section ends with a further discussion on security and insecurity before and
after 1993 on the basis of the results.
This chapter outlines the situation in Sweden which, at the time of the
interviews, had a population of about 9 million and a social democratic government, (the social democratic government had been in power since 1994,
but one year after the interviews in 2006 a centre-right alliance government
was elected). Historically, Swedish welfare policy in general and housing policy in particular has focused on a general welfare policy approach. It is based
on proportional taxes and transfers for every income group in relation to
social, educational and other welfare policies.
However, there is a fundamental difference between, for example, the housing sector and the school system, from a welfare perspective. The housing
policy acts through the market. The state does not allocate housing, instead it
regulates the housing market. The traditional concepts of general and selective welfare are not directly applicable, because they have to be adapted to a
policy that works using voluntary contracts in a market. In the housing policy sector there is no direct public control involved in the presumed distinc-
1 This chapter is based on Andersson & Turner (2005) and Andersson (2005).
[ 226 ]
tion between general and selective welfare. Swedish housing policy should be
regarded as having selective goals and being managed using indirect measures (Bengtsson & Rothstein, 1997, p. 269).
In addition, the policy system works in a volatile environment, with rapidly increasing house prices in some regions and stagnant and very low prices
in other regions at the time of the interviews. The pattern very much reflects
the urban and rural divide in Sweden. Urbanisation has been increasing in
Sweden for at least a decade. This urbanisation process is driving the increasing price gap between regions and between municipalities. The consequences
of this price development are easy access to owner-occupied housing in lowprice regions, and a large affordability gap in high-price regions. This constitutes another challenge for the housing policy of today (Turner, 2005).
Other challenges are the growing population of pensioners who are putting
new demands on both the general economy and the housing market. There is
awareness that later generations are not entering or taking part in the housing market on quite the same advantageous terms. Another challenge is the
fact that the municipal housing sector and, in particular, its rent regulating
role are called into question from time to time.
Despite being confronted by these challenges, the Swedish social security system remained intact in 2005. It is possible to assume that homeowners (and tenants) in Sweden felt very secure because of the extensive protection mechanisms. On the other hand there were missing links in this protection and it was clear that many Swedes had little scope for accommodating
cost increases or falling incomes. If the interest rate increases rapidly or some
components of the welfare system are abandoned, people could face serious
housing risks. A related question is whether the risks are relevant for all types
of households and, if not, which kinds of household are more at risk than others with regard to housing? This question was explored in the interview study
conducted in Sweden in 2005.
9.2 The main developments in the labour market and social security
This section covers the main developments in people’s income security in relation to the labour market and social security.
9.2.1 Developments in (un)employment, flexibility of labour
In March 2006 the unemployment rate in Sweden was about 5.5% (www.scb.
se, 2006). However, the structure of the labour market is changing and the
proportion of temporary employment is increasing. This is a move towards
[ 227 ]
a more flexible labour market, driven by commercial interests and partly accepted by the former government, but more so by the current one. It has a
major impact, predominantly on young households. It restricts access to
home ownership and creates a feeling of insecurity for those who are already
homeowners. The banks are reacting to this development by placing less importance on the variable part of the household income. This improves the
situation for young households and for households with irregular, but adequate incomes (by allowing them to have larger mortgages). However, these
responses are not sufficient to fully alleviate the situation.
In contrast those people with a stable job have a reasonably secure position and are protected by regulations, such as a requirement to give three or
more months notice when making employees redundant. For unemployed
people who are members of a trade union, the unemployment benefit society (A-kassa) will pay 80% of their income for 300 days, at the time of the interviews. Those who do not belong to unions will have lower benefits. The current demographic situation in Sweden with a growing number of people of
retirement age has put the focus on pensions. When the pension system in
Sweden was revised, there were concerns about pension amounts and whether they were sufficient to cover housing costs, for example. There is also the
option of taking early retirement, before the age of 65, and a growing number
of people are doing this. As the majority of the future pensioners have assets
in the form of housing, they will probably manage, but they will certainly see
their incomes decrease.
9.2.2 Developments in the economy
One aspect that was emphasised and often referred to by the interviewees was
the economic recession (housing crash) in 1990-91 in Sweden. (A similar recession affected the rest of Europe). (Andersson & Turner, 2005). The housing market crash was not a single event and did coincide with several economic and
political changes in Sweden (Turner & Whitehead, 2002). Unemployment was
at a high level and still increasing. Interest rates were also rising, housing subsidies had been reduced and prices were falling. For the homeowning respondents the most important factor was probably the falling prices (see Figure 9.1).
For households that had bought property in the late 1980s, falling prices had
an impact in the early 1990s (see also Figure 9.1). It either locked households
in or left those who moved with significant outstanding loans. For households
living in Co-operative Housing Associations (CHAs) the charges were significantly increased as a result of reduced interest subsidies. Together with high
interest rates on mortgages at the beginning of the 1990s, the charges laid the
foundations for high housing costs. In cases where households had used housing equity when house prices were high, some had to leave their homes, which
at the time could not be sold. Renters were also affected by the housing mar-
[ 228 ]
Figure 9.1 Real price index for owner-occupied, single-family houses in Sweden,
1976-2000 (1981 = 100)
Price index
1974 ’76
’98 2000
Source: Turner and Whitehead, 2002, p. 210
ket crash, since the interest subsidies for landlords were significantly reduced.
The consequence was rent rises, as wich later will be shown in Figure 9.4.
For some respondents in the interview study the housing crash and its
aftermath have had a significant influence on their future housing circumstances, including their security and insecurity. It has influenced their position on the housing market and their opinions about housing.
9.2.3 Developments in social security: the main features
of the system and current discussion
The foundation of the Swedish social security system can be divided into three areas of economic security. The first is economic security for families and children, the second is economic security in the case of sickness or
disability, and the third is economic security in old age. The social security
system is an extensive concept and therefore only the main features are described below, in other words, no concrete benefit levels are given. However,
those outside the system or those for whom benefits are too low or cover too
short a period to allow them to manage their current housing, they are important in this study.
In the field of economic security for families and children, parental insurance, housing allowance for families and child allowances are the most
important benefits. While parental insurance for 480 days (80% of income for
390 days, lower benefit level for 90 days) and child allowance are general benefits, housing allowance is not (see Section 9.2.4).
The second field of economic security in the case of sickness or disability is also the second largest in expenditure terms (after economic security
for pensioners). Among the important benefits relating to the (in)security of
housing are sickness insurance, (80% of salary), and for those with longer or
undefined absences from the labour market sickness, activity compensation
[ 229 ]
and work injury benefit. These benefits have been the subject of criticism and
have been restricted because of a rapid rise in expenditure in the late 1990s
and early 2000s. In addition there has been a decline in expenditure in the
last two to three years (for unemployment benefits, see Section 9.2.1).
The third and the most costly and largest field of social insurance includes,
for example, old age pensions, survivor’s pensions and housing supplements
for pensioners. As the pension system has undergone several changes, many
people approaching the age of 65 have difficulties in estimating their exact
pensions and are worried about the future.
As an indication of the limitations of the social security system, the coverage of some benefits has been decreasing over time and as a result of rising
incomes and costs etc. In the case of parental insurance and sickness benefit, 80% of 7.5 so-called base amounts have been covered (in 2005 when the
interviews were conducted). The downside of this policy was that 1.4 million employees earned more than this and therefore were only covered by the
general insurance to a lesser degree. However, most employees had additional agreements with their employer to cover a salary above 7.5 base amounts.
From July 1, 2006, 10 base amounts were covered by the general insurance,
which gave a larger proportion of the employed population 80% of their
income. This change reduces the risk of having a significant cut in income in
the case of sickness or parenthood, which in turn also affects homeowners
with limited financial resources (Government press release, 2006).
The selective social security system includes the social allowance, which is
a last resort and is administered by the municipalities. The social allowance
is meant to be temporary and therefore not a solution to long-term income
difficulties which cause housing affordability problems. In the recent Swedish debate, examples have been given of people ‘falling between’ sickness and
employment benefits and therefore being forced to apply for social allowance.
Since this is a recent phenomenon, the concern is that this is a result of the
government’s efforts to reduce sickness benefit, which has been significantly
increased in the past.
As a result of the comprehensive nature of the social security system, the
general picture of a poor person in Sweden, according to the National Board
of Health and Welfare (2006), is someone who is outside the labour market
and the social security system. Those people who are able to establish themselves on the labour market qualify for the social security system. According to the Board, a full-time, minimum salary is enough to keep a person out
of poverty. The same is true for those who have been employed and receive
benefits from the social security system. An apparent risk of persistent poverty remains for people without a specific income from work and without an
income from the pension system, unemployment benefit or sickness insurance. The risk is higher for groups of young and foreign-born people among
whom there are high unemployment levels. Illegal immigrants are the most
[ 230 ]
Figure 9.2 Distribution of the housing allowance across ten different income classes in
Share of total housing allowance
Income classes
Source: Andersson & Magnusson, 2003; ECHP data
marginalised group in Sweden because they have no safety nets, except for
emergency care (The National Board of Health and Welfare, 2006). Poor people
outside the labour market and the social security system are over-represented in the category of homeless people and supposedly also within the undefined group of people with severe housing problems.
9.2.4 Housing-related social services and benefits
Households with children are eligible for housing allowance. Housing allowance is given firstly to families with children under the age of 18, secondly to
families with children over the age of 18 who are receiving study allowances and loans or extra child subsidies and thirdly young adults aged 18 to 29
without children. The size of the allowance depends on the structure of the
household, the housing costs, the income and finally the size of the dwelling.
Figure 9.2 shows the distribution of the housing allowance across ten different income classes (deciles) (Andersson & Magnusson, 2003).
In 1999, about 30% of families with children (in total 1.1 million families
with children under the age of 18) received housing allowance at some time
during the year (SOU, 2001, p. 129). The benefit was principally paid to single parents in the rental sector. The housing allowance was also important for
families with adults on low incomes and several children.
The distribution in Figure 9.2 shows that the largest shares of housing subsidy are paid to households in the middle classes and somewhat smaller
shares to low-income households. The reason for this could be that households in the lower income classes, for example single students, have such a
low cost of living2 that they will end up below the limit for housing subsidy.
Housing supplement for pensioners is a benefit related to income (in other
2 For example, low rents or no children to support.
[ 231 ]
words old age pension, survivor’s pension or sickness insurance or compensation) for people over the age of 65.
9.3 The main developments in the housing market
What are the main developments concerning housing and how does home
ownership compare to other forms of tenure? This section deals in particular with tenure forms, how housing affordability differs between owners and
renters and the background of rising rents, security of tenants and financial
housing issues.
9.3.1 Developments in housing tenures
The public housing sector in Sweden underwent a boom during the 1960s and
1970s. Between 1951 and 1970, 42% of new construction in the housing sector
consisted of public housing. During a later period, 1981 to 1999, the proportion
of new construction was 17.6%. While the proportion of new public housing
has increased, privately-owned rented housing has decreased. From 1945 until
2005 owner-occupied housing increased from 38 to 43% of the housing market
(see Table 9.1). However, during the period from 1970 until 1980 there was rapid growth in owner-occupied housing in Sweden. The simultaneous building
of rented multi-family houses and owner-occupied housing is described as a
paradox in Swedish housing history (Almqvist, 2004). The paradox consisted
of the government strongly promoting and building (through municipalities)
rental housing and Swedes themselves wanting and building owner-occupied
houses (Almqvist, 2004). The co-operative housing association sector (here the
equivalent of ownership) has increased from 4 to 17% of the market (see also
Table 9.1). CHAs were initially seen as a special form of rented flats. Later on,
they were moved, from an ideological and political point of view, into the privately occupied sector.
So-called direct and indirect ownership demonstrate the difference between
private home ownership and ownership in CHAs. Indirect ownership of housing means that “…the right to the dwelling is linked to participation in an
association which owns the building and the site (or which leases the site)”
(Nordic Council of Ministers, 1998, p. 73). CHAs in Sweden and housing jointstock companies in Finland are regarded as providing indirect ownership
(Nordic Council of Ministers, 1998, p. 18). The position of direct and indirect
owners is almost the same, for example in that owners can take advantage
of increases in house prices, but are also exposed to the risk of losses when
house prices fall. Households that are indirect owners have a slightly higher
level of security, in that the association is responsible for a part of the loan for
[ 232 ]
Table 9.1 Tenure forms in Sweden 1945 to 2005, in %
Public housing Private housing
40 (public and private)
the housing. The households
are not responsible for this
shared debt. All of the direct
owners’ capital is at risk if
Source: Turner, 2003 (for 2005, estimates by Tommy Berger at IBF, there is an economic decline.
from SCB statistics, i.e. FOB90 and production and demolition statistics)
The rental market is divided into the public and private
sector. The problems solved
by social housing in other countries are covered in Sweden by local authority-owned housing companies, so called public housing. Swedish municipalities have the responsibility to provide housing for their residents. Dwellings
owned by the municipalities come from a long tradition of the welfare state.
The Swedish public housing sector is comprehensive, whereas an organisation offering social housing is residual, that is only for poor and vulnerable
The normal tenancy agreement in Sweden, regardless of whether the homes
are private or public rented dwellings, is for an unlimited period. (Where students are living in rooms or apartments exclusively intended for students,
there are limited agreements related to the student’s activities, in other words
the length of the course.) Agreements expire after a formal notice of termination submitted by the tenants, for instance if they want to move. The landlord
can also terminate a tenant’s agreement, but this is difficult because the tenants are protected by the so-called ‘right to take possession of the dwelling’
(besittningsrätt). Grounds for a landlord to evict a tenant include non-payment
of rent (together with other necessary conditions), the improper use of the
dwelling (noise, damage) and subletting without permission.
If the dwelling is sublet, a limited tenancy agreement is possible. The right
to take possession of the dwelling applies for subletting tenants after two
years in the dwelling, according to the law (http://www.hyresratt.nu/index­
sida.htm). Around 0.6% of all Swedish households were living in sublet dwellings in 1999 (SCB, 2002b, p. 10).
From the 1990s through to the present day the criticism of the general welfare policy has focused in particular on the housing sector. The system for setting rents (bruksvärdessystemet), which has been in place since 1968, is unique
to Sweden and is an example of a general policy imposed by the state. The
private landlords have to follow the rents set by the municipal housing companies (after negotiations with the tenant associations), on the basis of the
criteria of quality, location etc., when they revise their rents. The system provides protection against large rent increases and against the development of
a highly differentiated market for similar rented housing. This regulation or
system for rent setting has recently been subject to severe criticism, but still
remains in place.
From a life cycle perspective, 57% of children aged between 0 and 17 live in
[ 233 ]
owner-occupied detached houses (SCB, 2002). About 50% of Swedes aged 18 to
29 live in rented multi-family houses. The majority of people over the age of
29, who frequently have a family, live in owner-occupied housing. Around 16%
of pensioners, who generally have smaller households, live in co-operative
multi-family houses and 33% live in rented multi-family houses. Few immigrant families own their own houses. The reasons for this include discrimination, higher unemployment and attitudes towards ownership (Abramsson,
Home ownership therefore remains an important sector of the housing
market in Sweden and especially so for families with children. Compared to
other countries, however, public housing has a strong position because it is
not only available to people with limited financial resources. The importance
of home ownership and rented housing differs from region to region, because
the norms and available forms of tenure vary throughout Sweden. According
to a study by Lind and Bergenstråhle (2004), people in the three metropolitan
regions (Stockholm, Gothenburg and Malmö) place less importance on living
in owner-occupied detached housing than people in medium-sized towns (the
answer to a question on the preferred form of tenure). The variation reflects
the pattern of availability and price. While detached owner-occupied housing
is in short supply in the metropolitan regions, there is a surplus in other parts
of Sweden.
As a reflection of the values attached to the tenure forms described above,
79% of people in the northern, sparsely populated regions of Sweden live in
owner-occupied housing. In the northern, densely populated areas 67% of
people live in owner-occupied housing. In the central southern parts of Sweden the figure is 60%, in Gothenburg and Malmö 51%, and finally in Stockholm 41% (Almqvist, 2004, p. 17).
9.3.2 Developments in rents, housing costs, house prices
and housing finance
The general developments in the economy affect the development of rents,
housing costs, housing prices and finance. As mentioned, the housing crash
of 1990-1991 is a clear indication of this. Since then, or in particular from 1994
onwards, there has been a remarkably long period of house price increases
and falling interest rates (see Figure 9.1 and Figure 9.5). This long period alone
makes the situation risky for new entrants to the home ownership market because they expect or fear a drop in prices.
The security and insecurity of home ownership is very much dependent
on household characteristics, such as the affordability of mortgages, family relationships, employment etc. The proportion of disposable income spent
on housing costs is a crucial issue for security and insecurity. In an interview
survey conducted by a Swedish insurance company as many as 39% of people
[ 234 ]
Figure 9.3 Proportions of rich, poor and other households living in single family housing in EU countries
(all housing tenures)
Poorest 20%
Richest 20%
Other 60%
% 0
Source: Andersson & Magnusson, 2002
Source: E
Figure 9.3
in single-family
to their
incomedistype in EU count
they of
to move
if their costs
posable income decreased by € 180. The survey gives an example of the vulnerability of many households should there be increases in interest rates or
changes in the social protection offered by society (Länsförsäkringar, 2005).3
As part of a comparison of the characteristics of homeowners across EU
countries, Figure 9.3 gives an approximate picture of households in single
family housing (note that the figure does not show homeowners only). Relatively few poor people4 in Sweden live in single family housing. This sector is
dominated by the richest 20% whereas, for example, in Portugal people living
in single family housing are predominantly poor. There are many reasons for
this, but one explanation might be the proportions of different housing types
in the Swedish housing system, where the owner-occupied sector is relatively small and the alternative for poorer households has traditionally been the
rented sector, which is comparatively large.
In Sweden, homeowners are wealthier than renters, taking into account the
value of the housing and the possibility of using equity. In Sweden, where the
homeowning sector is smaller than in southern Europe, the residents come
from wealthier parts of the population. A comparison of the quintiles shows
that only 9% (out of 20% on average) of the poorest quintile are homeown-
3 Despite small margins for increases in costs, very few homeowners are in real difficulties, for example, at risk of
having their property repossessed. The same applies to evictions in Sweden.
4 The basic definition of poverty is income-related. Poor households have a disposable income of a maximum of
60% of the median household income. Income is not, however, always a valid measurement of poverty. People
with low incomes may not show signs of poverty whereas people with incomes above the poverty line may do so.
[ 235 ]
Figure 9.4 Development of rents per square metre, 1986-2000 in Sweden, for a dwelling
with three rooms plus kitchen, belonging to a municipal housing company (in 1999 prices)
Rent per square metre, in Swedish krones
1986 ’87
’90 ’91
’94 ’95 ’96 ’97 ’98 ’99 2000
Source: Turner and Whitehead 2002, p. 207
ers, while the figure for the richest quintile is 29% (Kreft, Turner & Yang, 2005,
p. 41). In addition, the cost of housing as a proportion of disposable income
is 20% for homeowners in owner-occupied housing and 21% for residents in
CHAs. The figure is highest for renters, who spend 26% of their disposable
income on rent (SCB, 2002, p. 8).
As the share of income spent on housing is a vital factor in the insecurity
and security of households, we will look more closely at how housing cuts the
disposable income of households. Housing costs reduce the disposable household income of the poor sometimes to a greater extent than other income
groups. Historically, there was a significant rise in this proportion between
1990 and 1992 due to a change in the Swedish tax system. In 1963 Swedish
households used 19% of their disposable income for housing consumption; in
1995 the same figure was 28% (Wigren, 1997).
Magnusson (2000) describes a 40% increase in rents in the period from 1990
to 1997 (see also Figure 9.4). When compared with the total private consumption figure, there is also a rise in the proportion spent on housing. A study
by Wigren points to the division of households into smaller units, in other
words the continual shrinking of households, as one of the most important
reasons for the development of housing costs. Other results of interest from
Wigren’s study relate firstly to higher proportions spent on housing by renters
than by owners5. Secondly the results show higher proportions spent by the
poorest 10% than by the richest 10% and thirdly higher proportions spent by
the youngest people (under 20 and between 20 and 23). These groups spending a large proportion of their income on housing costs also saw the larg-
5 Owners in this case refers to both owner-occupied detached housing and co-operative housing associations
[ 236 ]
est increase in the proportion during the period 1963 to 1995 (Wigren, 1997).
Insecurity for those spending a large proportion of their income is a result of
the fact that these groups are often single, in other words more vulnerable
to unemployment, young, (which means that they have a lower or insecure
income) and finally poorer.
There is also an affordability problem in high price regions, such as Stockholm, Gothenburg and Malmö. However, it is important not to exaggerate this,
as most of the price development can be explained by a fall in the nominal
interest rate. Housing expenditure remains constant at a given loan-to-value
ratio. The problem is that the real value of debts is increasing rapidly, because
of increasing prices in combination with the constant loan-to-value ratio. This
makes it more difficult for young entrants to the market to buy properties,
as they generally have low levels of non-housing wealth with which to compensate for falling house prices. They also tend to have larger mortgages than
older, more established homeowners.
A lock-in effect can be seen in the metropolitan regions where households
living in rented apartments (or small owner-occupied apartments) do not
have the opportunity to save in order to buy a property in the future. In addition, households living in lower priced regions do not have the possibility of
moving to the metropolitan region, because they would make too large a loss
when selling their property and because the cost of moving into the metropolitan housing market is too high. From this perspective, moving house is not
easy or affordable, but in legal terms there are no specific barriers between
different tenure forms.
Over the years, the banks (in the widest sense of the term) have introduced
more generous lending conditions. This is an effect of the house price boom
over the last decade, which has led to housing being seen as a safe investment. This may also be stimulated by a relatively less successful stock market
and limited house construction. The supply of funds has led to fierce competition among banks to lend money to homeowners. The result has been a
lower interest rate6, a higher loan-to-value ratio (up to 90% in some transactions) and long repayment periods of 30 years or more. The falling interest rate is shown in Figure 9.5 by year and quarter. A possible problem in the
future could be an increase in interest rates, which will be difficult to manage
for households with small margins. As most households have a fixed interest period of on average 14 months (since 2000) or a flexible interest rate, the
effect of an increase will be immediately apparent (Turner, 2005).
From the perspective of the state, the only form of risk mitigation is private
mortgage insurance policies. There are also, as in all countries, bank legislation and lending practices that govern the risk exposure allowed in the bank-
6 Banks offer different interest rates.
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Figure 9.5 Interest rate by year and by quarter 1974-2004 in Sweden
Interest rate
ing sector. The current view
is that future and present
incomes are relatively more
important than the property
collateral, at least compared
to the situation a decade ago,
when loans even used to follow the houses (i.e. were kept
by the new owners). A specif0
ic state authority monitors
1968 ’72 ’76
’80 ’84 ’88 ’92 ’96 2000 ’04
bank performance and banks
Source: Turner, 2005
are obliged to report abnormal debts etc. Around 80% of
private homeowners and 30% of those in CHAs have a mortgage (BHU, 2002).
Since 1996 the prices of CHAs have increased by 300% and of owner-occupied housing by 170%. These figures cover the whole of Sweden (Turner, 2005).
Some regions have had a much more modest increase, whereas others, such
as the three metropolitan areas, have seen a more rapid increase. Despite
this, the idea that the equity in the house can be accessed for consumption
purposes in old age or as a safeguard against loss of income is not yet widespread in Sweden. There is, however, reason to believe that this perception is
gradually changing as a result of a sustainable price increase and weakening
pension systems. Withdrawal of housing equity can also be a way of managing property tax (Kreft, Turner & Yang, 2005).
Both owner-occupied housing and CHAs are subject to property tax, which
is administered by the national government.7 Initially no property tax is paid
on newly built dwellings. Thereafter it is paid at a decreased rate. Property
tax is a certain percentage (1% in 2005) of the assessed tax value and this percentage is under constant discussion. Every property is supposed to have a
tax assessment value equivalent to around 75% of the market value. Since the
tax reform in 1991, long-term homeowners with houses in attractive locations
have seen their property tax increase. This increase in the property tax has
caused insecurity among some homeowners. In 2005 a regulation was introduced to raise the tax in stages for households with increased property tax. In
addition, the property tax should not exceed 5% of a household’s income and
there are procedures for deductions (Skatteverket, 2005).
Only limited protection is available for homeowners in the event of unemployment and loss of income. However, this could change if the long-term
house price boom were to turn into a bust. This would have such a profound
7 Co-operative housing associations (CHAs) pay property tax for the dwellings in the co-operative. The individual
households are not always made aware of the actual amount. Landlords of rented housing also pay property tax.
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impact on security that both the government and the banking sector would
probably introduce more flexible measures and safeguards to protect the
economy and to minimise credit losses, such as mandatory life insurance. For
individuals and households, however, there is still the ordinary social security system with sickness benefit, early retirement, housing allowance, social
allowance and unemployment benefits etc.
9.3.3 Developments in housing policy
In contrast to many other European countries, home ownership has not been
promoted in Sweden. Instead there was a national housing policy aimed at
building apartment blocks for ordinary families, the so-called Million Programme which lasted from 1964 to 1975. A starting point for Swedish housing policy has been to foster equality and social justice in and through housing and town planning. In part the goal has been to create better housing for
poor people. However, the norm and the dream for households and especially families with children is owner-occupied housing (Almqvist, 2004). During
the 1970s there was a wave of new construction of owner-occupied housing,
which was also reflected internationally. Once again, in the 1990s there was
a move to owner-occupied houses and on this occasion to the countryside
around Swedish towns (Almqvist, 2004, p. 19). However, there was an earlier
programme to support poor families who wanted to build their own homes.
This early policy (1905-1948) was meant to prevent the depopulation of the
Swedish countryside and to make Sweden more self-supporting in food production in the event of war.
9.4 Housing decisions and the meaning of tenure
The following sections of this chapter present the results from an interview
study conducted in Gävle, Sweden in 2005 with 30 households. The interviews were conducted with a similar interview guide and identical vignettes
to those used by all the countries participating in the OSIS project (Belgium,
Finland, Hungary, Germany, Portugal, the Netherlands and the UK).
The meaning of housing includes the feeling of security and the opportunity to be yourself in your own space. This does not seem to differ between
the different forms of tenure. Neither does the feeling of permanence differ
between tenures. These were the results of the interviews which are described
in detail in this section. After some thought a few of the owners interviewed
expressed the opinion that renting was more secure. In their opinion, renting
will not result in any expensive surprises because it is just a question of picking up the phone and asking the housing company to do the maintenance.
[ 239 ]
Housing at
some of the
interview locations in the
Brynäs and
Sätra neighbourhoods in
Gävle, Sweden.
How do people perceive owning and (social and private) renting?
Since the meaning of housing differed very little between the tenures, the
main concern, which was frequently mentioned (using almost the same
words), was that it feels good to pay money to yourself, a reference to mortgage payments for homeowners.
M8: “You do pay money to yourself and it’s a form of saving. There is saved capital
invested in your property” (homeowner, male, 62 years old).
In addition renting was perceived as an increasingly expensive alternative
when interest rates are low. The conclusion is that the meaning of housing
in general does not differ between tenures but respondents do recognise differences in costs. For some, however, a specific physical property may have
significance if it is owned because of the long-term commitment and perhaps the simple fact of ownership. Despite this the meaning that any housing
8 In the quotes, M stands for male, F for female and I for interviewer.
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should have is expressed in the same way, whether or not the respondents’
current housing matches the criteria.
Regardless of their current form of tenure, the respondents also presented a
unanimous view of their preferences for housing and tenure at different stages of their lives. This was particularly clear when they were asked about their
ideal housing and housing location. An average-sized house by the sea or a
lake in the countryside, but not too far away from the city was the preferred
choice. The imaginary location was around Gävle (where the interviews were
conducted) or in Sweden, for all but one respondent. Consequently, tenants
and owners expressed both the general meaning of housing and their preferences for housing and tenure in similar terms.
The first and most important reason for owning is that it seems to be a
financially advantageous alternative, but according to the respondents there
are exceptions at both ends of the life cycle. In other words, renting is seen
as an acceptable alternative for young people as well as for the elderly. The
respondents’ own preferences changed as they grew older, which was also
clear from their housing history. The exceptions were a couple (renter, female,
42 years old) who had always rented because they said they were not able to
do the maintenance on a property and a man (homeowner, male, 55 years old)
who believed that renting was unthinkable even in old age, because he had
visited rented housing through his work and did not like the neighbourhoods.
When respondents were asked about a fictional young couple and their
housing decision (in a vignette), the responses they gave were similar. The
young couple were advised to rent. It is easy to move if they change jobs
and they would probably not have enough money to buy, the respondents
believed. Some added that banks would not lend the couple money because
they (probably) have low incomes and one had an insecure job. The respondents also believed that this was the easiest solution, as this is a trial period
for the couple. It is the first time they have lived together and if they separate
there will be no difficulties with mortgages.
There were also signs that disadvantaged renters preferred the municipal
housing companies (MHCs) to private landlords. One respondent (renter, male,
33 years old) lived in an MHC apartment, but said that he preferred it to living
in private rented housing because that had a private feel to it and you were
subject to the landlord’s arbitrary decisions. He strongly advised his brother (who had recently arrived in Sweden) to do the same. Another respondent (renter, male, 45 years old) said the same thing and was angry that he had
to stay in property belonging to a private landlord, at the bottom of the scale,
as he said. He was, however, refused an apartment by the MHC, because of
large debts that were being handled by the head of the enforcement district
(Kronofogde­myndigheten). Like the majority of renters, he would like to live in
the MHCs, possibly for the same reason mentioned above, that is in order to
have more privacy and a wider choice of apartments.
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When respondents were asked about the role of home ownership in Sweden in general, and people’s preferences, owning a property was the most
common answer. However, many respondents added that some people definitely prefer renting because of the service they get. Likewise young people
were seen as preferring to rent. One woman (homeowner, female, 59 years
old) said that home ownership was less important in Stockholm and therefore its importance depended on the availability and choice in the town. One
respondent elaborated on the issue of the value of owning per se and wondered whether it was the greater variety and different forms of housing that
are available to homeowners that make ownership attractive. She did think
that a wider supply of different types of rented property would change people’s preferences in favour of renting.
F: “You know I don’t think it’s ownership itself, but the choice available. That you
want…No, but I do think it’s the choice of where you think you want to live and
what suits you the best and sometimes this means buying your own property. But
I think that if there were a bigger and a more varied supply of rented housing, then
more people would rent” (homeowner, female, 46 years old).
I was expecting respondents to explain that they felt proud and had a sense
of achievement when discussing their preference for ownership, but they did
not. One reason for this might simply be that people do not perceive the differences between owning and renting in that way, but another reason might
be an unwillingness to sing their own praises. A feeling of pride in your own
achievements in housing is closely related to making comparisons with other
people. It might not be politically correct to spell out the fact that you are better off than others. I do not know if this attitude is particularly pronounced
in Sweden, but it might be the case. However, a few respondents (for example, renter, male, 42 years old, homeowner, male, 55 years old and homeowner, male, 64 years old) reminded me of the fact that they wanted to purchase
because they always end up in ‘better’ neighbourhoods and that neighbourhoods with renters are less well looked after and not as nice. This description
of residential segregation (in both class and ethnic terms) is almost taboo, but
a few respondents, including one immigrant (renter, male 33 years old), emphasise apparent differences between residential areas. Nevertheless, the reason why only a few seemed to feel proud of their achievements might be as
simple as the fact that respondents did not think about housing in that way.
It is important to remember that Gävle is a medium-sized town where class,
neighbourhood and tenure differences may not be as pronounced as in larger towns, such as Stockholm, where the differences between neighbourhoods
are clearly obvious.
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How do housing decisions relate to the labour market, to social security
and to personal well being?
A wide range of life events had influenced the respondents’ housing decisions. Factors such as relationship breakdown or moving in with a partner
and other considerations, including larger or smaller houses for a growing
or shrinking family, were frequently mentioned. The importance of these life
course events is apparent in the responses. A couple described their housing
history from living separately in rented apartments as students, moving in together in a rented apartment, living together in a CHA terraced house where
their first child was born through to the big house they have today now that
they have two children (homeowners, female, 35 years old, male, 36 years old).
The woman emphasises the role of the children in her housing decisions.
F: “I’m always thinking about the children and if you have children, a family, and
all that, then maybe you’re more likely to feel that you want to own.”
F: “I can imagine that it’s more important during that time of your life, anyhow.”
I: “Yes.”
M: “Yes, that might be it” (homeowners, female, 35 years old, male, 36 years old).
Some respondents, but not many, had moved because of a change of job. The
reason might be that the majority of the respondents had lived in or around
Gävle since they were young and did not want to move. Others had moved
to Gävle to study in the first place but had then started work and stayed on.
Even if they changed job, there was no reason to move, because they could
commute. In addition, employment can be an influence because it allows
you to accumulate more financial resources. This in turn has given some respondents the possibility of moving to better housing. Two women said that
they had just followed their husbands’ jobs (renter, female, 64 years old) and
(homeowner, female, 53 years old).
There was a clear relationship between the nature and type of employment
and housing decisions among the interviewees. Households with average to
high incomes had a stable housing situation and lived in good quality housing, often privately owned.
For most of the respondents, housing decisions did not seem to be subject
to restrictions, but their housing history often included one or more forced
moves when they were young. As a result of education or relationship breakdown, the rent or the payments became too high. One exception was the
respondent (renter, male, 45 years old) whose debts are a case for the head
of the enforcement district (Kronofogdemyndigheten). Because of his debts he
could not rent an apartment from the MHC (municipal housing company). In
addition some private landlords were not prepared to rent property to him
and the banks would not lend him money to enable him to become a homeowner. His current landlord (private) had his parents stand surety for him. His
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housing decisions were limited to a very small selection of apartments.
M: “It didn’t happen of its own accord, it was more a situation I have been in for
several years really, I am not allowed to rent without my parents as guarantors because I have debts of several hundred thousands. It’s alimony and I still have mortgages since the divorce.”
I: “Yes.”
M: “Even if I have been earning, sometimes very large amounts, I haven’t had any
security, you know. We had been looking at several apartments before this one,
which I really wanted, one in the middle of town with five rooms for 4600 with a
tiled stove and stuff like that. But I wasn’t allowed to take that one, the housing
company said, they had a tougher policy. And I had been at Gavlegårdarna [MHC]
and had accumulated a lot of points over a number of years, but, for a municipal
company and the biggest in Gävle, they have possibly the most unfair rules. (…)
You can only have a maximum debt of 20,000 and I have very much more” (renter,
male, 45 years old).
According to the respondents, housing really does not have an influence on
households (reverse causality) other than restricting their holidays. This was
the case for the marginal households9. Those respondents who said that they
had problems affording holidays also said that they had never been abroad
on holiday and some had had complaints from their children. Their children
made comparisons with friends’ families that could afford to travel.
When prompted, some respondents ‘discovered’ an impact of housing that
they had not identified in the first instance, but they said the impact was
minor. In a housing market like the one in Stockholm, where housing is hard
to find, one respondent said that she could only take jobs that were within commuting distance. She would not give up her much sought-after rented apartment for a job. She added that this was the time when finding a job
was easy (homeowner, female, 54 years old). A couple with children had calculated that they could stay in their house while studying (with study and
housing allowance) and admitted that they might have cancelled their education plans if they had had to move. The impact of housing may be minor,
but another interpretation is that the respondents justified the restrictions, in
particular those caused by high housing costs. They justified the costs unconsciously because of their desire to stay living in the same house. Housing was
9 Eight households are characterised as marginal. They have a combination of the following factors: high loan-tovalue ratios, low incomes, experience of problems with paying mortgage or rent, living in lower segments of the
housing market, one or more members of the household unemployed or unable to work and a lack of (private)
safety nets. Two households have significant debts. One of these has such serious debts that this has consequences for the choice of housing available to him.
[ 244 ]
not seen as the cause of financial problems. Instead the problems were attributed to, for example, a low income or the cost of having a large family.
In my position as an interviewer I sometimes felt that their situation was
sufficiently difficult to justify moving, but they themselves had found ways
to cope with it. This was especially true for marginal households. They did
not find the problems too serious and therefore did not move. However, the
respondents often said that they would prefer to move and improve their
financial situation, rather than having affordability problems and letting their
housing have an impact on other areas of their lives.
Do people intend to use their housing resources? Under what circumstances and how?
The respondents were asked about housing equity from three perspectives: a
case in a vignette, their own possible future use and their past or current use
of housing equity. Despite being mentioned during the interview and advertised recently in Sweden, the concept was new to the majority of respondents
and had to be explained.
In the vignette where respondents were asked about the use of housing
equity for a couple’s pension, many regarded the idea positively. However, the
result that the children and grandchildren would not inherit the total value of
the property troubled some respondents. On the other hand, if people could
not afford to live and had a large asset, there was no doubt that they should
use it, the respondents believed. Others did not like the idea of using housing
equity at all and said that the banks would trick them, that loans are not a
good solution or that it was not worth it. The best option was to sell the house
and downsize or even rent. When asked if it was a good idea to use housing
equity for pensions, one respondent (renter, male, 33 years old) said that he
simply does not like debts and loans.
Concerning their own future use of housing resources, many said that they
would have to be in a position where there was no other solution, but then
more than half of the interviewees took a positive approach. The most popular use was home improvements, followed by care needs (acute), the purchase of a holiday home and pensions. Some respondents would also consider using the equity in the future so that they could stop working or work
part-time. None of the respondents were in favour of using the equity to buy
another property to rent, start a business or take holidays.
Some respondents had already used equity (compare this with the possible future use and the case in the vignette) for improvements to housing, to
buy a car and furniture and one household used it for a caravan. It was a delicate ethical question for some of the older households, because they have
been taught that loans have to be paid off. The younger households often had
a more open attitude towards using equity.
Improvements to the house are considered to be an investment and large
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amounts of money are sometimes needed, which makes this a reasonable
purpose for using housing equity. In general, people would prefer to make use
of other savings or to pay for things out of their monthly incomes, even if
they have used housing equity before. A couple of households chose to take
out a higher mortgage when they first moved in so that they could pay for
renovations that they planned to carry out. A similar reason for a few households to take out a higher mortgage was to buy furniture. These were young
people starting a new home.
The next most common use of equity was buying a car, which had been done
previously by three households and considered by a number of others. However, this says something about the attitude to the use of equity among the
households interviewed. Despite increased advertising, its use is still limited.
The thought of using housing equity in order to work part-time was a new
one and none of the respondents had ever done this. The majority would not
do this in the future either. They preferred to ‘cut their coat according to their
cloth’. Accordingly, many had had housing and job careers which ran in parallel. When they started to earn more, they moved to higher quality and larger houses. For many this meant a difficult period when buying, but their situation improved with time.
None of the respondents had used housing equity to start a business or to
finance a pension or early retirement. The elderly respondents in particular began talking about ethics when the suggestion was made to use housing equity for these purposes. They felt it to be very wrong to spend what you
had saved throughout your life and, in addition, they did not believe that you
should put your home at risk.
Furthermore, none of the respondents said that they had moved in order to
access finance from housing (even though some moves had had this result).
Some marginal households did move because they could not manage the rent,
the CHA charges or the mortgage payments, but this did not result in access
to finance (the value of the house or apartment had fallen). Some older homeowners mentioned that they might move to access finance when they retire.
A common strategy mentioned was to sell the house or apartment and buy a
smaller property or rent in order to enjoy their retirement.
My interpretation is that it is difficult to judge if the respondents really
would use housing equity for the purposes that they said they could use it for
in the future, because for most of them this was the first time they had even
considered the possibility.
9.5 Security and insecurity
Financial security and insecurity is an everyday question for many households. The interaction of housing systems, the household structure, finance
[ 246 ]
and social security is sensitive to small changes in any area. Many Swedes
have small or non-existent buffers against increasing costs, social insurance
or relationship breakdowns or other events in their lives.
What are the securities of home ownership?
Most respondents feel financially secure about their housing and say that, as
long as they prioritise their housing costs, nothing will happen to them. They
will manage to pay and there will be no reason for them to be evicted or for
their house to be repossessed. This applies to both renters and owners.
Those with well-paid jobs, savings and large amounts of housing equity feel
more secure than the others. In the group of interviewees these were, in particular, people who owned their own homes and who had been born in the
1940s and 1950s. The ‘secure group’ also included some ‘lucky’ young couples
who had just started to realise that their homes were also a major asset in
terms of equity. One respondent (homeowner, male, 38 years old) was very
proud about his choices, which had made him and his family wealthy (wealth
in the form of equity since house prices had increased, but which was still
less than that of the older owners). It is important to note that he is now 38
years old and bought his first home in 1997. His only experience of home
ownership is that of a period of rising house prices and falling interest rates.
This fact might be an explanation of his feelings. One woman (homeowner,
female, 29 years old) reflected on the issue of housing as an investment over
different periods.
I: “You nevertheless generally assume that it is a good investment, to invest in a
F: “Yes, we (…) did enter the housing market at that point, so up until now, that’s
how it has been. There are other people who have bought property at a totally different time, I don’t know when but maybe 20 years ago or something like that,
when interest rates were very high and prices were rising slowly” (homeowner female, 29 years old).
How should we consider the financial security of homeowners which results
from house price increases in relation to the non-existent financial security
of renters? There are also the different opportunities of the different generations to take into consideration. Have they created their own security? Many
respondents simply remained living in the same place, made a fortune and
became financially secure. The quotes below reflect a feeling of compassion
for younger people on the housing market today. The housing market is seen
as more risky and unfair today, also in relation to tenants.
M: “It’s awfully unfair really, our society, in that you (…) if you have been lucky
like us in having a house like this, which is cheap housing and then you hear about
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people who are paying 6-7000 a month in rent and they get nothing in return and
barely make both ends meet, you know, and they don’t have a penny to put aside”
(homeowner, male, 55 years old).
M: “In fact, you could say that those of us who were born during the 1940s have
got our houses for free, but it’s bad really because inflation has paid for them. Or
the savers have paid for our houses. It’s not very nice really, but that’s what has
I: “Yes, and now the situation is quite different.”
M: “No, and if you bought a house in the past, you could see better times coming, but I doubt if things will get better later on. It’s inflation that does it and you
don’t know whether that’s going to happen. People who are buying expensive houses today might have to put up with very high housing costs throughout their whole
lives, you know” (homeowner, male, 64 years old).
Apart from equity, the other factor that made homeowners feel secure was
their comparatively low housing costs. This meant that the risks that were
mentioned did not seem relevant to them. In addition, younger, well-informed
households enjoyed the flexibility of mortgages, compared to tenants’ rents.
They did not have fixed loans. Whenever their income changed, they could also change the payments on the loan. This was the case for the couple with
children who had stayed in their own house while they were studying (homeowners, female, 35 years old, male, 36 years old). They did not make any payments for three years. Another well-informed woman (homeowner, female, 46
years old) said that if you have a house, you have to follow and investigate developments in the economy. In her opinion you have to plan your finances actively instead of just paying off the mortgage like many older people do.
Not all the respondents feel secure. One marginal respondent (homeowner, female, 59 years old) was not sure whether she could stay on in her current home at the time of the interview and another respondent (homeowner, male, 56 years old) was about to move because of relationship breakdown.
A third respondent, who rented a property, (renter, female, 64 years old) was
not sure whether she and her husband could stay in their current home when
she too retires next summer.
Even though most respondents felt financially secure, another important
exception was those people who were buying, selling and paying co-operative charges in the early 1990s, at the time of the housing market crash. Some
respondents are still suffering from the after-effects of the crash. One household (homeowner, female, 53 years old) had to leave their apartment in a CHA
because the charge had increased and the mortgage interest rate had risen.
They got nothing in return for their housing. All over the country, the CHA
charges increased, but the worst cases were in newly built housing with large
shared loans. The government reduced the housing subsidies, which only
made the difficult situation worse.
[ 248 ]
What are the securities of (social and private) renting?
One important aspect of security for tenants is that they will not have any unexpected costs as a result of housing maintenance. This factor was very much
appreciated by the respondents. On the other hand the costs for tenants will
not fall when they retire, as is the case for homeowners who have paid off
their mortgages over time.
The tenants interviewed were aware of the fact that the normal tenancy
agreement, whether private or public, is for an unlimited period. Some also
trusted the local Tenants’ Association (Hyresgästföreningen) to do a good job in
restricting rent increases (renter, female, 64 years old). As these opinions were
recorded before the new centre-right alliance government began discussing
free rent setting, it would be interesting to compare them with people’s current thoughts and concerns.
What do people perceive as serious risks? What is the role of housing in
their perception of risk?
When discussing serious risks and housing, the starting point for most respondents, apart from the marginal households (8) in the survey, is that it is
not something that they worry about. They believe the risks to be small in
general terms, even after discussing particular issues.
However, when asked specific questions, households did discuss the risks
and this is described in the text below. Many respondents answered that a
reduction in income in the form of unemployment or sickness benefit would
not force them to move. They would have less money to spend on other things, but they would still be able to afford their housing costs. However,
some have started to think about the fact that they will have a lower income
when they retire. One renter said that she and her husband would try to stay
in their apartment when she retires, but that they are considering the option
of downsizing to make their housing costs more manageable (renter, female,
64 years old).
Costly repairs were not a concern for non-marginal households either. They
said that they had savings which would cover repairs and, if necessary, they
could use housing equity. Some older homeowners saw the risk that, as they
got older, maintenance would be difficult for them to carry out. Hiring people to do the work would be relatively expensive in their opinion. For renters
maintenance is not an issue, since it is included in the rent.
When asked a question about rent or interest rate increases, non-marginal households said that they could manage. Some households did even mention possible help from the government, if the circumstances became too bad.
The explanation was that if they were in trouble, the majority of homeowners
in Sweden would also be in difficulty, and then the government would have to
step in.
Neither marginal nor non-marginal households felt insecure about the land-
[ 249 ]
lord selling the house or, for that matter, neighbourhood deterioration. They
just did not see it as a risk in their neighbourhood and with their landlord.
For all the households consisting of couples, the risk of separation was
the most important factor. Some households with low housing costs did not
believe that they would be forced to move in the event of a relationship breakdown, but for most it was obvious that they would have to reduce their housing costs by downsizing.
Understandably, the situation for marginal households differs with regard
to the above-mentioned issues. They already live at or just under the limit of
what they can afford. Rent increases or increases in mortgage interest rates
are risks for them. Because of this, most marginal homeowners have fixed
rates as a precautionary measure. Fixed rates are a safety measure, but at the
same time they result in higher costs when interest rates fall. Costly repairs
are another source of insecurity for marginal homeowners, most of whom did
not have housing equity which they could use.
Tenure is not the main reason behind the households’ perceptions of risks
to housing. The most important factors are the affordability of housing,
together with household size, age and employment. However, there are very
different preconditions for the two groups of owners. Owners in CHAs formed
in the 1980s or 1990s, that is before or during the housing market crash in
Sweden, have worse conditions than the other owners. One example is the
single, unemployed respondent (homeowner, female, 59 years old), who was
aware of a number of risks and could only afford her apartment because her
daughter (unemployed, 36 years old) was living with her. The main reason for
her difficulties was that the CHA where she lived had suffered in the crisis
at the beginning of the 1990s. Because of this she still paid a high monthly charge, plus electricity and broadband. The same respondent has had past
experiences of affordability problems.
I: “Are you experiencing or have you experienced in the past difficulties with paying
loans or charges?”
F: “Yes. It was when I became unemployed and couldn’t make ends meet, you know,
but I managed. But then I had nothing left for myself. All my money went on the
loan and the housing costs and I survived on around 2000 a month. And I don’t
have much more than that to live on today either, but I could say that I’ve organised my life on the basis of that.”
I: “And it’s been like that for a while, with your income being relatively low?”
F: “Yes, yes” (homeowner, female, 59 years old).
For this woman the affordability of housing together with her household size,
age and employment were all relevant factors for her insecure situation.
In order to explain the importance of the factor of household size and age
for the perception of risk, we can include all the respondents. This is because
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the majority of them talked about periods of affordability problems when
they lived alone, when their children were young, when they had large, new
mortgages and when one of the parents was either working part-time or staying at home. Respondents who were in this phase of their life when the housing market crash occurred often suffered badly. One respondent (homeowner,
female, 42) was affected in this way and her experience shows in her response
to a vignette.
F: “Yes, I think the prices for the co-operative apartments have become so high, that
I would be afraid to buy second-hand now. You hear about prices of 500 to 600,000,
so I would probably advise them to get a rented apartment.”
I: “To start with a rented property?”
F: “Yes, because prices could suddenly fall and they’d be left there with all those
mortgage payments. Right now it is like that (…) so if it was my son I would advise
him to start with a rented apartment (…)”
F: “I don’t think many apartments are overpriced at the moment.”
I: “Because they have increased [in price] that much?”
F: “Because I’ve seen what can happen [with prices]. I was there when prices
fell. So right now… but otherwise I would think it’s a good idea to buy housing”
(homeowner, female, 42 years old).
My interpretation is that the level of risk faced by the households interviewed
is not a question of eviction or repossession. This does not even apply to the
marginalised households. Their housing situation is not so serious that they
will be threatened with homelessness. It is more a question of where to set
the limit of the value of staying in their present housing as against the costs.
How much is the household willing to pay before downsizing? There is clearly
a risk of not being able to afford basic everyday requirements. For the marginal households, for example, it is not possible to go abroad on holiday. This is
mentioned by many of the marginal households and had been the reality for
many of the respondents in the past.
Some respondents who expressed feelings of insecurity could change their
housing situation and would be better off if they either sold their co-operative housing or bought a home, if they were renting (homeowner, female, 59
years old, renter, male, 45 years old and renter, female, 34 years old). However,
the present low interest rates are exceptional and moving house in these circumstances might be a cause of uncertainty. Home ownership as the low-cost
alternative to renting has changed the ‘normal’ pattern for people when considering housing and affordability in Sweden.
[ 251 ]
9.6 Safety net strategies
What is the role of home ownership in people’s financial planning; do they
take precautions, or simply rely on the social security system?
Do people take precautions against possible risks? What are the elements
of the safety net strategies?
According to the respondents, the first method of counteracting perceived
housing risks is to use savings. However, the amount of savings varied greatly.
Non-marginal homeowners were best prepared in this respect, while the marginal households had little or no savings at all. About half of the respondents
also gave examples of things (cars, etc.) which they could sell if they were
short of money.
With regard to precautions against risks, generally the respondents did not
have private mortgage insurance, but had some savings, which they had not
put aside solely for the purpose of housing. Three households (homeowner,
female, 56 years old, homeowners female, 29 years old and male, 31 years old
and homeowner, female, 46 years old) had mortgage insurance, which included protection if the other household member died. These were households
where either partner could remain in the home and pay the costs themselves
in any case.
The majority of those under the age of 45 said that their parents would help
as a last resort. This was the case especially if the problems were small and
could be solved within a reasonably short time. Many respondents over the
age of 45 said they had no family that could help. If the problems were more
permanent, then the households would turn to the municipality and apply for
housing allowance and, in the worst case, social allowance. However, many
knew they were not eligible for social allowance. On the other hand many had
already been receiving housing allowance for some time. Even the non-marginal households had received housing allowance.
Many of the respondents had private pension savings and almost all of
them had a private insurance for accidents and sickness, which were intended to cover other eventualities, but which would help out indirectly in the
case of housing problems. Joining an unemployment benefit fund also seemed
to be a natural choice. In a vignette the income of a hypothetical unemployed
man in Sweden would be reduced to 80% of his original earnings, but the
household could stop paying the mortgage, which was the suggestion made
by many respondents.
M: “I see no reason for that [having to move], it depends on their financial situation
in general. It’s not as if he won’t be paid anything when he’s made unemployed (…)
just going on these facts I would say they will probably survive anyway” (homeowner, male, 28 years old).
[ 252 ]
Interestingly, the respondents in a marginal or difficult situation felt the situation of the household in the vignette to be more insecure than the others did. They themselves had experienced problems, such as unemployment
benefits arriving late, which had caused them problems because they had no
margin for error. All but one of the eight marginal households advised the
couple in the vignette to sell the house.
M: “It seems to me that they wouldn’t be able to afford to stay there. From a purely financial point of view, it might be a good idea to move to something cheaper”
(renter, male, 42 years old).
It may seem that the financial planning strategies described above differed by
tenure, because the homeowners could afford to save more and take out more
insurance policies. However, those respondents with savings and insurance
said that they had had the same arrangements throughout their housing history, that is both when renting and owning. As a result it seems that having a
higher than average income is the most important way of counteracting perceived risks to housing.
To what extent do people rely on social security?
Of all the forms of support available, housing allowance was the first to be
mentioned by the interviewees, if there were housing problems. No one believed this benefit to be wrong in principle. However, some were against its
use and believed that it had been overused in the past. One renter said that
clearly the responsibility lies with the individual and the state or municipality should not interfere until the situation is really acute. He then referred to
his partner’s more liberal ideas. The couple had different opinions and both of
them were aware of this.
M: “There you just want benefits straight away!”
F: “Yes, it depends on the individual too. Not everyone can handle money, that’s just
the way it is” (renter, male, 29 years old, female, 22 years old).
Among the households interviewed (like the one quoted above), it seemed that
the men were inclined to believe that people should handle their own problems. The women respondents were largely satisfied with the current system.
One respondent (renter, female, 34 years) thought that the MHC has a
responsibility and should make greater efforts to build less expensive properties. The rents for housing that had recently been built by the MHC were far
too high, she said.
In general the households interviewed did rely on the social security system
as a last resort. They counted on unemployment benefit and sickness insurance, for example, and in the worst possible situation on social allowance.
[ 253 ]
The question of whether the perception of risk relates to more objective
measures of insecurity is in itself an interpretation of the respondents’ situation. As stated above, some of the respondents could downsize in order to
reduce their housing costs. This is the responsibility of the respondent. Measures to be taken by society include the provision of a variety of benefits, such
as unemployment benefit, sickness benefit, housing and social allowance and
pensions. As a researcher and an outsider, it is very difficult to say whether
these measures live up to the respondents’ expectations, but they certainly
diminish the households’ risk.
9.7 Further discussion
The ambitious objective of the OSIS project was to identify the origins of security and insecurity in the interaction of housing systems with jobs, household structures, finance and social security. One hypothesis of the OSIS project
is that a restructuring process is taking place throughout Europe. This restructuring relates to citizenship and social rights, in which housing is an important factor. This is a difficult hypothesis to test and it has only been possible to
make suggestions about its accuracy. However, in one respect this restructuring process is one of the things which I have identified as a result of this survey.
The signs of restructuring that I have found are not abstract and can be
described as modified conditions on the housing market. Lower interest rates
on mortgages, increased house prices and relatively high rents for tenants
have changed the landscape of housing for Swedes. This long period of price
growth is exceptional and, together with the low interest rate, it forms the
framework for the current situation. According to the respondents, the previous equality between the different forms of tenure has changed in favour of a
clear advantage for homeowners, and private homeowners in particular (see
Figure 9.6).
This might be the beginning of a restructuring of the housing market and
the question is whether people have identified these changes and, if so, how
they regard them. One example which indicates that some people have not
fully realised what has happened is when homeowners mention risks such
as maintenance costs, while at the same time having large housing equity,
plus householders’ comprehensive insurance and savings. There is a tradition
of seeing homeowners as being less secure and tenants as more secure, but
today the reverse is true. Tenants have to pay high rents and do not know
whether rents will increase in future. They have no housing equity to supplement their pensions and are often not able to save much. Interestingly, a
description of the situation both before and after the housing market crash
can be found in the interviewees’ answers (see also Figure 9.6).
[ 254 ]
Figure 9.6 Position of owning and renting on the security and insecurity scale before
and after 1993 in Sweden (preliminary summary of the respondents’ views)
Before 1993 (crash in 1991)
Development after 1993
interest rent Renting
for owners
- Low interest rates
for owners
- Rising house prices/
- Housing equity
- Rising MHC rents
Figure 9.6 indicates a change in the relationship between renting and owning. However, there is particular interest in homeowners in the OSIS project.
Interestingly, a distinction between private and CHA homeowners can be
identified, where private homeowners are the real ‘winners’ and co-operative
homeowners believe that their position combines security and insecurity. The
timing of both buying and selling housing has been crucial for future housing costs, as well as for the financial situation of Co-operative Housing Associations (CHAs). Because of the differences in their financial situations, the
charges for co-operative housing vary greatly.
The picture presented by the media is of the greatest importance for the
two situations before and after 1993 which are illustrated in Figure 9.6. Are
housing issues sensitive to trends? I have not carried out any systematic
research on the view presented by the media of mortgages, future house prices, interest rates or publicity for using housing equity. Despite this, my feeling is that people seem to be referring to an ongoing discussion and share the
opinions on these issues that can be found in media. Consequently, the media
may also help to shape security and insecurity.
Apart from the possible view of housing and house prices given by the
media, the most important finding concerns a widening gap resulting from
the reconstruction of the housing market. The interviews make it clear that
there is a gap between, on the one hand, couples born in the 1940s, who own
a house and, on the other hand, young couples and single people (both old
and young) who do not own property or who entered the housing market during a less favourable period. Young entrants to the housing market are vulnerable to (more or less strongly perceived) risks of higher interest rates. Older,
marginalised households (for example single people) may never have recovered from the housing market crash in the early 1990s and feel a sense of
[ 255 ]
insecurity about their pensions and about whether they can afford to stay in
their current home. The wealthiest households in my survey have the lowest housing costs. This division according to age and tenure became clear as a
result of the respondents’ experiences.
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10 United Kingdom:
Safe as houses?
Deborah Quilgars & Anwen Jones
10.1 Introduction
The United Kingdom consists of four nations: England, Scotland, Wales and
Northern Ireland. England is home to nearly 84% of the UK’s 60.2 million population (Table 10.1). The UK population continues to grow at an annual rate of
about 0.5%, although growth is uneven across the UK, with parts of Southern
England and Northern Ireland seeing an increase of around 10% in the last
ten years whilst Scotland and Northern England have experienced a slight decline in population.
The UK has an ageing population, with an
average age of 38.8 years, compared to 34.1 Table 10.1 UK population by nation
years in 1971. The changing population profile
Per cent of total
can be explained by declines in both fertili- Nation
ty and mortality rates as well as internationEngland
al migration into the UK. In 2005, net inflow
migration stood at 185,000 (including a net
migration of 60,000 people from the A8 counNorthern
tries). In 2001, the UK had a minority ethnic
Source: National Statistics, mid-2005 estimate,
population of 4.6 million (7.9% of the total
The majority (nearly 80%) of the UK population live in urban areas, though these areas
represent only 9% of the total land area. Over a quarter (26%) of the UK population live in London and the South East. Population density over the UK is
high compared to many other areas of Europe, with an average of 244 people
per square kilometre.
In the late 1990s, Scotland, Wales and Northern Ireland all held successful referendums on devolution, leading to the establishing of separate Parliaments or Assemblies in the four nations (the Northern Ireland Assembly
was subsequently suspended). Devolved powers are greater in certain areas,
for example health and education. The UK Parliament retains overall authority and control of a range of reserved powers including social security policy
(covering both income benefits and state support with housing costs). Within
England, increasing responsibilities are also being placed at a regional level,
with the establishing of nine Regional Assemblies. Lastly, but importantly, 365
local authorities (285 in England; 32 in Scotland; 22 in Wales; 26 in Northern
Ireland (soon to be reduced to 6)) across the UK are charged with implementing policy at the local level across a wide range of areas, including housing.
[ 260 ]
The research study
The UK OSIS interview study was conducted in York, a local authority and city
in the Yorkshire and Humber Region of England with a population of approximately 182,000. York’s economy provides a strong base of skilled and professional jobs and the city’s skills profile is untypical of the North of England:
the high level of manual and management skills in the York labour supply is
similar to the South West and South East regions of England.
York has a buoyant housing market, with high demand for social housing and, as in most areas of the UK, high demand for affordable owner-occupied accommodation. Also in common with other parts of the UK, York has
experienced significant rises in house prices in the last decade, with the average house price just slightly lower than the national average. There are four
higher education institutions in York and an estimated student population
of more than 30,000, which contributes to high demand in the private sector
housing market.
The recruitment of the interview sample was primarily undertaken in
one area of York (Holgate/Acomb) that is typical of the city, with the exception of having a smaller student population. A random sample of households
was mailed on three occasions with householders asked to reply if they were
interested in taking part in the research. A small number of respondents were
also recruited through snowballing via personal contacts at the university.
Thirty interviews were conducted during the early summer and autumn
of 2005 with a mix of single people and couples (with and without children),
of whom two-thirds were owner-occupiers (20), and the remainder social
tenants and private renters (5 of each). Eight of the households had one or
more adults unemployed or unable to work (six owner-occupiers and two
tenant households (one social renter and one private renter)). Respondents
were mixed in terms of socioeconomic and demographic characteristics, a
small number were wealthy, most were fairly comfortably off and a number
of respondents (both owners and tenants) were living on low incomes, sometimes supplemented by welfare benefits, or were totally dependent on benefits. Eight of the homeowner respondents were considered marginal because
of their low incomes or the precariousness of their financial position, particularly a high income to mortgage ratio.
10.2 Main developments in labour market and
social security
Development of (un)employment, flexibility of labour
In line with globalisation pressures, a period of labour market restructuring
has occurred in the UK that has seen a reduction in the proportion of fulltime jobs (72% of employees in 1981 to 63% in 1996, and predicted 59% by 2006
[ 261 ]
Table 10.2 UK employment participation rates, 2004
Northern Ireland
United Kingdom
in 1,000s
in 1,000s
Average earnings
Source: Labour Force Survey, cited in Siebritis, 2005
(Lindley & Wilson, 1998)); an increase in part-time employment; and a slight
increase in self-employment. ‘New’ jobs are much more likely to be part-time
or temporary positions. Other forms of flexibility in the labour market, including temporary contracts and agency work, have also increased during this period, although this still represented a minority of employment situations in
2004. Pay flexibility has also seen some growth (e.g. zero hours contracts,
where employees are only paid for the hours they are required). Mortgagors
are more likely to be in permanent, full-time positions than tenants, however it is estimated that about one fifth of mortgagor heads of households are in
precarious labour market positions (Ford et al., 2000).
In addition, UK employment legislation was significantly relaxed in the
1980s, which resulted in less protection for employees against redundancy, as
well as less safety net protection should they become unemployed (see Section 10.3). Trade union powers were significantly restricted in the 1980s and
wage councils were dismantled.
However, alongside this restructuring, labour market participation rates
have risen in all four UK nations over the last decade. Unemployment fell by
about half from over 9% to less than 5% in 1994-2004 (Table 10.2). Although the
unemployment rate increased slightly to 5.5% in 2006, labour markets remain
presently favourable to sustaining home ownership, with the UK having the
fourth highest employment rate of the EU25 at 71.7%, just above the Lisbon
70% target for 2010 (DWP, 2006). Attitudinal research suggests that there is a
consensus that people no longer have a ‘job for life’ in the UK. For the most
part, people are aware of labour market changes, the influences of global markets and the presumption that they will have to change jobs at some point.
However, qualitative work reveals that people retain a belief in their ability to
secure employment, feeling secure in the labour market if not secure in their
present job (Quilgars & Abbott, 2000).
Development of economy (GDP)
The UK economy has enjoyed a period of considerable stability for over a decade, with low levels of unemployment combined with low levels of inflation
and low interest rates. The Gross Domestic Product (GDP) has expanded for 55
consecutive quarters, the longest unbroken post-war expansion, and has been
above growth in the eurozone for ten consecutive years (DWP, 2006). The forecasted GDP growth at constant prices (2000) for 2006 in the UK is 2.4%, which
would represent a rise on 1.9% in 2005 but slightly less than 3.3% in 2004. In-
[ 262 ]
terest rates increased by a quarter-point in mid-2006 to 4.75%, marking the
first rise in two years. Inflation growth was also running slightly higher than
target following oil price rises in the first half of 2006. However, overall, the
economic context remains favourable and contrasts quite considerably with
the conditions of the late 1980s and early 1990s, when interest rates were as
high as 15% and unemployment was about double its present rate.
The relationship between housing and the economy should be noted for the
UK. Britain has always been a country where buoyant housing markets and
high street spending go hand in hand (Hamnett, 1999), with the UK showing
the highest correlation between private consumption growth and real house
price change of any OECD country between 1970 and 2002. With house price
rises (see below), mortgage equity withdrawal (MEW) totalled nearly £57 billion in 2003, making up nearly 20% of gross lending. In recent years a wide
range of new options have been introduced, allowing borrowers unprecedented access to housing assets in a context where spend against secured loans
does not have to be accounted for (but, obviously, has to be paid for) (Smith,
2005). MEW clearly has implications for the wider economy because of its
impact on consumer spending and on household finances and indebtedness;
on housing investment and the future quality and condition of the housing
Development in social security
Income benefits
Statutory income benefits are relatively modest in the UK. Non means-tested national unemployment benefits were reduced in 1996 when the contributory unemployment benefit, previously lasting 12 months, was cut to 6
months. Their rate is paid at the same subsistence level as means-tested income benefits (currently either Jobseeker’s Allowance (JSA) for economically active claimants or Income Support (IS) for other claimants). Redundancy
payments are statutorily provided after someone has been employed for two
years. However, such payments are modest, representing one week’s pay for
every year worked.
Recent survey data indicated that nearly three quarters of households taking out a mortgage since 1993 have access to some form of employee benefits, should they become ill or suffer an accident (Ford et al., 2004). However, not all adults in a household are entitled to these benefits, and whilst for
some employee benefits might take the form of a period of full pay for six
months and a further six months on half pay, for others the protection could
be much more limited. The provision of sick pay by an employer is not a statutory requirement over and above statutory sick pay arrangements which
provide a subsistence amount. For those unable to work due to illness or disability, slightly enhanced income benefits are available in the form of Incapacity Benefit and a range of disability premiums and benefits.
[ 263 ]
Housing-related benefits
Means-tested Housing Benefit is provided to both social and private renters in
and out of work and usually covers the majority if not all of rental costs. However, recent changes have seen some reductions in the scope of the benefit,
particularly through the introduction of local reference rents which create a
ceiling for benefit payments. A new form of housing benefit, the Local Housing Allowance (LHA), is currently being rolled out nationally for private tenants. The LHA will fix eligible rent for a particular household type in an area,
providing a shopping incentive to search for cheaper housing but also leaving renters with a shortfall if they cannot find suitable accommodation within this limit.
Social protection for owner-occupiers who are unable to work has also been
reduced over the last decade. In the UK, Income Support Mortgage Interest
(ISMI), first introduced in 1948, provides limited means-tested assistance with
interest (not capital) payments for people receiving income benefits during
periods of unemployment or inability to work. However, since 1987 this provision has been progressively restricted, most notably from October 1995 when
new borrowers faced a longer qualifying period of 39 weeks before receipt of
ISMI. Pre-October 1995 borrowers now qualify for ISMI after eight weeks but
receive only half of the eligible interest for the next four months, and full eligible interest thereafter.
There is no specific housing assistance for homeowners who are in work
but on a low income, although the introduction of tax credits, first for working families in 1999 and then later extended to single working households in
2003 (Working Tax Credit (WTC)) provides some additional support that may
indirectly assist low-income homeowners in meeting their mortgage commitments. However, in 2000/2001, take-up of WFTC was only 50% of eligible
homeowners compared to 75% of eligible tenants.
Reductions in ISMI for homeowners were accompanied by a policy shift in
safety-net provision whereby the government expected mortgagors to provide
cover against unemployment, sickness and accident via the private insurance market (Department of Social Security, 1997; ODPM, 2002). Whilst government policy encourages reliance on private insurance, there is no statutory requirement to take out insurance: homeowners are expected to act as
responsible and rational citizens (reflecting wider ideological shifts away
from welfare to individualised provision). Borrowers have particularly been
encouraged to take out one particular form of insurance, Mortgage Payment
Protection Insurance (MPPI), which typically covers mortgage payments for 12
months. However, take-up of MPPI stood at only 21% of all borrowers in 2005,
hardly changed since 2000 (CML, 2006a). Other insurance can also play a role
in helping to meet housing costs, with a recent survey indicating that 40% of
recent (since 1993) mortgagors have Critical Illness insurance and 20% possess Income Protection (Ford et al., 2004). Different insurance products, how-
[ 264 ]
ever, cover for different eventualities and borrowers have to ‘stitch together’
a patchwork of provision with other safety nets such as savings and employee benefits, with estimates that only 12% of households have short-, mediumand long-term safety nets (Ford et al., 2004). Whilst only 0.9% of mortgagors
were estimated to have arrears of three months or more in 2005 (CML, 2006b),
the number experiencing difficulties in paying or having short-term arrears
is larger (Quilgars & Stephens, 2007). Evidence also suggests that those who
most need cover are not always those who have it (Ford et al., 2004).
Pension policy
There are a number of key elements of pension provision in the UK. Firstly,
Pension Credit is an income-related benefit that provides, or contributes to,
a guaranteed level of income. Secondly, the State Pension is paid to everyone
who has enough qualifying years through having paid or been treated as having paid or been credited with National Insurance (NI) contributions. In addition there is an additional State Pension, an earnings-related part of the
State Pension built up in the State Second Pension or the State Earnings Related Pension Scheme (SERPS). Thirdly, and increasingly encouraged, are private pensions, which include occupational pensions (also known as work or
company pensions) and personal pensions (including stakeholder pensions).
A personal pension is purchased from a pension provider such as a bank, life
assurance company or building society and contributions are possible across
(and between) jobs. Occupational and personal pensions will provide a regular income in retirement (via an annuity policy) and there is usually also an
element or option to provide a lump sum on retirement.
Pension policy is undergoing significant changes in the UK. The Pensions Bill
2006 contains a number of reforms, including the following: making the basic
State Pension more generous by restoring the link with earnings; increasing
the number of people entitled to a full basic State Pension by reducing the
number of years it takes to build up a full basic State Pension (from 39 years
for women and 44 years for men to 30 years); raising the retirement age from
65 to 68 between 2024 and 2046; and streamlining regulation of private pensions, making it easier for people to plan and save.
10.3 Main developments in housing
Development of housing tenures
In 1900, only 10% of the UK population owned their own properties, with the
vast majority renting in the private sector. Since then, home ownership has
grown steadily, although not evenly, to a position where it is now the majority tenure, with 70% of households in England now being owner-occupiers (see
Table 10.3). Northern Ireland has the highest levels of owner-occupation at
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Table 10.3 Households by tenure, England
Private renting
Housing association
Local authority
1981 Number of households
in 1,000s
1991 Number of households
in 1,000s
2001 Number of households
in 1.000s
Source: ODPM, 2004
75% of total stock, followed by Wales at 73%, with Scotland having the lowest levels at 64%. Post-war governments have consistently encouraged home
ownership through various schemes and tax relief provisions, including Mortgage Interest Tax Relief (MITR) until 2000. In particular, the Right to Buy policy
has allowed pre-1988 social security tenants to buy their homes at a substantial discount off the open market price.
In the post-war years the development of state or municipal housing was
important, and this tenure increased from 12% in 1945 to 32% in the 1970s.
However, since 1979, public housing has been manoeuvred into an increasingly residual role by restrictions in investment and selling of (usually the highest quality) stock. For example, more than 1.8 million former tenants purchased their council home through the Right to Buy policy in the 1980s/1990s.
By 2001, only 14% of English households lived in local authority housing
(Table 10.3). Since 1997 Labour governments have continued to pursue policies to privatise and diversify housing away from direct state provision.
Other sectors have remained small although not insignificant. Since the
1970s, the housing association sector (more recently known as Registered
Social Landlords (RSLs)1) has been preferred to local authority housing as the
alternative for people unable or unwilling to enter home ownership or private renting. However, growth has been from a very low base, with only 5%
living in this tenure in England by 2001 (Table 10.3). Nonetheless, since the
late 1980s, local authorities have been able to transfer their stock to housing
associations, with 150 having done so2 by 2005 - a surge in the last five years
in particular means the proportion now living in RSL properties is likely to
have increased. Right to Buy (and a similar Right to Acquire policy for housing
association homes built or acquired with public subsidy after 1997) has also
applied to the housing association sector.
For the last 25 years, a number of ‘shared ownership’ schemes have also
existed to assist people to become part-homeowners when they are unable
to afford to become full homeowners. To date, these schemes have been very
small in scale, complicated and inequitable, each scheme only applying to
certain people in particular circumstances (Low Cost Home Ownership Task
1 Registered Social Landlord (RSL) is the technical name for social landlords registered with the Housing Corporation (funder and regulator of housing associations). The vast majority of RSLs are housing associations.
2 This includes some partial stock transfers.
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Force, 2003). However, in recognition of increasing affordability concerns, the
government has simplified the system, introducing a ‘home-buy’ system that
applies to all tenures (ODPM, 2005a): Social HomeBuy enables local authority
and housing association tenants to buy a share in their home at a discount;
New Build HomeBuy enables people to buy a share of a newly built home
(usually built by a housing association); and Open Market HomeBuy enables
people to buy a home on the open market (with a housing association holding the remaining share). The Right to Buy and Right to Acquire schemes continue to be available to local authority tenants and certain housing association tenants.
The dwindling private rented sector has also been supported and encouraged, primarily through deregulation (and some short-lived tax break
schemes) over the last twenty years. The private rented sector has seen a
recent boost through the growth of Buy to Let landlords in the early 2000s.
Whilst the proportion of households living in this tenure has not changed significantly since 1981, with 10% of English households living in private rented stock in 2001 (Table 10.3), the nature of the sector continues to change over
time. The private rented sector tends to offer Assured Shorthold Tenancies
to tenants, which commonly provide six months’ security. In contrast, the
majority of tenancy agreements in the social rented sector are Assured Tenancies which do not specify a time limit, obviously providing a greater degree
of security.
Affordability issues
The UK housing market has been characterised by a number of periods of
rapid house price inflation since 1970. Rapid house price inflation occurred
in the 1980s, leading to a market characterised by increasing housing equity.
However, a downturn in the late 1980s and early 1990s left some newer owners in negative equity. The price of the average UK house has risen by 187% to
£179,000 since February 1996, with prices increasing by 240% in Greater London (Table 10.4). One of the consequences of house prices increasing at a faster rate than earnings is that affordability for first time buyers is now a particular problem. The average age of the first time buyer increased from 31 years
in the mid-1980s to 34 years in 2004. A recent study (Wilcox, 2005) calculated that more than 1.25 million younger households in England, Scotland and
Wales had incomes too high to qualify for Housing Benefit for social housing
but too low to afford a mortgage on the cheapest two- or three-bedroom properties in their area.
With the earlier expansion of the sector, home ownership has become an
increasingly diverse sector, with half of the lowest income quintile households now being homeowners (Burrows & Wilcox, 2000). Whilst arrears levels have been relatively low for the last decade (approximately 100,000 per
annum), there are signs of rising rates (Cunningham, 2006), and poorer home-
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Table 10.4 Regional house price performance in the UK, since 1996
Yorkshire & the Humber
North West
East Midlands
West Midlands
East Anglia
South West
South East
Greater London
Northern Ireland
Average price Q1 Average price Q3
1996 (£)
2006 (£)
10 year change
10 year change
Source: Halifax House Price Index (1996):
owners, along with those purchasing recently with high Loan-to-Value mortgages, are likely to be at greater risk of finding it difficult to meet mortgage
payments. In the rental sector, deregulation of rents over the last three decades has led
to rises in housing costs in both the social and private sectors. For the most
part, Housing Benefit has met these costs for those not in the labour force or
on low incomes. However, for others, similar levels of rents and mortgages in
some areas (less so now with rising house prices) have provided an incentive
to move into owner-occupation where this is affordable.
Development of housing policy
With home ownership expanding into new areas and new groups, today I see
Britain as one of the world’s greatest wealth owning democracies where the
widely held chance for not just some but all to own assets marks out a new
dimension in citizenship and makes Britain a beacon for the world. Chancellor (Finance Minister) Gordon Brown (ODPM, 2005b). An independent evaluation of English housing policy over the period 1975–2000 (Stephens et al., 2005)
identified three main ‘policy clusters’ that dominated housing policy development. Deregulation and liberalisation was the first cluster of reforms, including both mortgage market deregulation in the 1980s that expanded access to
finance, and privatisation, mainly through the Right to Buy policy. Throughout the period, home ownership was seen as the ‘natural’ and ‘normal’ tenure by successive governments. Whilst no tax incentives now exist to enter
home ownership, the government continues to attempt to expand the sector, most recently through a raft of measures to promote shared ownership
(via the new HomeBuy scheme (ODPM, 2005a)). The second policy cluster that
dominated housing policy in 1975-2000 was restructuring of housing subsidies from 1975, when more than 80% of subsidies were supply-side subsidies
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for the provision of affordable homes, to 2000, when more than 85% of subsidies were on the demand side, reducing housing costs mainly through Housing Benefit. The third policy cluster relates to asset restructuring, including
the transfer of much local authority housing to the housing association sector
as well as increases in the availability of private finance. A fourth theme could
be added in the early 2000s: the promotion of asset-based welfare which,
while in its infancy, is increasingly identifying the potential of housing wealth
to meet a range of needs such as care in older age and supplementing of pensions (Smith, 2005). The further expansion of home ownership is part of the
wider policy to increase the holdings of savings and assets (whether immediately accessible or not) of households on the assumption that people will provide their own safety net, thereby minimising the need for state welfare.
10.4 Housing decisions and meaning of tenures
Views on owning and renting
Almost all respondents, irrespective of tenure, described their housing firstly
as somewhere to live or a roof over their heads, and a home. In general they
saw their home as providing a safe haven from the outside world, and security and privacy. In addition, respondents said their home was a place to enjoy
family life, to relax, to entertain friends and somewhere for all their personal possessions.
However, both tenants and owner-occupiers tended to favour home ownership over renting. Tenants and owners felt that home ownership meant freedom to do what one liked with a property, for example, to build an extension,
study or a new kitchen and to decorate it how they pleased. Homeowners also
said that buying their home had given them independence but some stressed
that home ownership also brought responsibility, for example having to meet
mortgage payments and other housing costs (for example, maintenance).
Some homeowners and tenants (some of whom had owned in the past) felt
that buying a house was an achievement and something to feel proud about;
a small number felt that there was a certain status to being a homeowner,
but an equal number felt that it carried no special status and that some people were just fortunate to be able to buy. Although homeowners did not tend
to describe their homes as an investment, almost without exception owners
said that their homes provided financial security, particularly over the longer term. A number of respondents felt that they had invested a great deal in
their homes, both emotionally and financially (especially in the early years of
home ownership).
Most tenants expressed similar attitudes towards their homes as homeowners and they too often talked about security, safety and having privacy and
their own space. Most (although not all) social rented sector tenants felt that
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their tenancies were secure and this helped them feel as though the property was their own (see Section 10.5). This was not the case for private renting,
with most people feeling this was the most insecure tenure of all, although
one tenant did feel that she had achieved a better quality of housing by renting privately rather than via council housing.
The main reason given by owners (and renters) for preferring home ownership themselves was that one day the property would be theirs. Renting
was widely regarded as wasted money and almost every respondent (including most tenants) described rent as ‘dead money’. However, there were exceptions. Three tenants did not agree and stressed that renting is the only option
for some people. Two of these tenants had experience of home ownership but
both had had their homes repossessed and had been homeless. A number of
owner-occupiers felt that they had been lucky to enter the property market
at the time they had. The reason that tenants chose to rent was because they
could not afford to buy a property (or one that they liked) at the present time.
A few expected this to change (for example, one person was planning to buy a
house after her divorce settlement) but others felt that they would never be in
a position to buy unless they won the lottery. Although nearly all respondents said that owner-occupation was or would
be their preferred tenure, only a very small number could see no benefit at
all in renting. Both owners and renters felt that tenants had more freedom
to move (this was more the case for private rented sector tenants) and that
they did not have to worry about costly repairs and maintenance. Most of the
respondents who had rented accommodation earlier in their lives felt that
Housing at
some of the
interview locations in the
Holgate area in
York, UK.
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this had suited them at the time; they either could not afford to buy at that
time or they were moving around for employment, study or relationship reasons.
Tenants also felt that renting allowed them to live in a better standard of
accommodation than they could afford to buy on their income. Social tenants
in particular thought that their homes were decent and relatively cheap and
probably much bigger than anything they could possibly afford to buy. One of
the tenants whose home had been repossessed in the past and who then lost
her home because of a relationship breakdown commented:
“It was nice being a homeowner because I did feel more secure and also because it
does give you that bit of status I suppose, you sort of feel ‘I own this’ ... it was nice
to plant things in the garden and these are going to be here for me to see for a long
time ... but it is better to rent securely than buy precariously” (private renter, female, 30s).
Housing decisions and labour markets, social security and personal wellbeing
Respondents described various influences on their housing decisions. Sometimes these reasons were relatively clear, especially when respondents explained why they first left the home they grew up in (e.g. to work, study, travel or set up home with a partner). However, the influences on housing decisions thereafter were usually more complex and interrelated with decisions
about employment, relationships, family formation, relationship breakdown,
affordability, experience of other forms of tenure and a range of other considerations (e.g. location, schools and the type of property).
Employment factors
The main factor in the decision to buy a property for most respondents was
having sufficient and secure income from employment, usually but not always from two incomes, and the main reason that almost all tenants chose
to rent was that they did not have enough money to buy. Many respondents
(owners and renters) simply said they had to work to pay their housing costs
and it was clear that many could not manage without two wages. Employment was also an important factor in shaping people’s housing histories (location and their choice of tenure) for reasons other than mobility. Many respondents had moved to York because of their jobs or their partner’s and
work also influenced where they chose to live in the city, with a few people
saying that they needed to be close to the railway station or to have easy access to the motorway.
Most of the respondents who had moved around the country for employment reasons stayed in the private rented sector; this was especially the case
for people when they were single or worked in insecure employment (short-
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term contracts), who found the private rented sector gave them the freedom
to move around more easily. They then moved into owner-occupation later, and this was achieved quite easily for those moving up the career ladder,
although rising house prices did mean affordability was heavily influenced
by timing. Few households had spent periods of time in the social sector and
then moved into owner-occupation; mobility was possible within social housing but not as commonly sought or as easily achieved as in the private rented
sector. In particular, the ‘freedom to move’ was associated with private rental housing.
Other households were already on the property ladder and sold up and
bought another property when they moved to new jobs in other parts of the
country, because once on the property ladder they wanted to stay on it. People
with families were more reluctant to move for work reasons and a couple of
households chose to commute rather than to move because they had young
families, although one couple said that they would move if they had to for
employment. A couple of people said that they might have changed their jobs
or career if they had not had to pay a mortgage and a few respondents said
that owning a property would make it more difficult to move to another part
of the country because the whole process of finding another property to buy
(including learning about the new area, schools, location, etc.), the expense of
the transaction and moving costs was time-consuming and expensive. However, no-one said that owning their home had stopped (or would stop) them
from moving if there were good reasons to do so.
Few people thought that they would retire early or take part-time employment because they owned their home, although one couple used some of the
proceeds from the sale of a house to allow one partner to take a career break
to care for the family and to pay for her to take a Masters course.
Social security
The relatively low level of social security entitlement for those unemployed
or unable to work meant that people could not choose to move from renting
to buying a home whilst not working. However, a number of those respondents who were already homeowners and unemployed or unable to work explained that they were able to remain in their homes because they were receiving some help in the form of benefits (ISMI, see earlier) or had some savings. This was not, however, a very secure position for homeowners who had
no savings. One unemployed homeowner (aged 56) explained that she desperately wanted to return to work so that she could start paying off the mortgage,
build some equity and pay for much needed work on the house. A couple of
respondents had experience of being repossessed in the past (for example,
one respondent became homeless when her husband’s business failed) and
now saw renting as more secure because of this experience. Unemployed tenants who were in receipt of Housing Benefit and income benefits for unem-
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ployment or ill health felt less pressure to have to return to the labour market
for housing reasons although they still wanted to work for personal reasons.
Related to (but not solely explained by) employment or social security factors, one of the major influences on housing decisions was the cost of home
ownership. Having the money for a deposit (in some cases through interestfree loans or gifts from family) and a steady and sufficient income was usually (although not always) necessary to secure a mortgage. A few respondents who had bought their homes said that they had not really been in a position to buy, either because they did not earn enough or did not have enough
money to pay for the survey on the property, legal fees, and all the associated
transaction costs. However, they were so keen to buy that they found ways to
overcome these problems. One respondent explained that her employer had
helped her by telling the mortgage lender that she earned a couple of thousand pounds a year more than she actually did.
Some respondents said that it had been cheaper to buy a house with a
mortgage than to rent when they first entered the property market and it
therefore made economic sense to buy a property. Most tenants (see housing
preferences) would have bought a property if they could have afforded to do
so. In some cases people had taken the opportunity to buy their social rented
house at a discount under Right to Buy but even this was beyond the means
of some social rented sector tenants.
Personal factors
Relationships and family formation were a key influence on housing decisions. Older respondents had often left the parental home to marry. Some began married life in rented housing and went on to buy their own homes once
they could afford to do so. Younger homeowners often lived with their partners for a time in private rented accommodation and only bought a property
once they were settled in employment or wished to start a family. Respondents often had fairly complicated relationship histories and this was reflected in their housing moves. In a few cases relationships had broken down and
this often meant a move into the rented sector by necessity as people could
not afford to buy alone (in particular, the social rented sector is accessible
for women with children although one or two moved into private renting to
give them a wider choice of housing, as well as avoiding the ‘stigma’ of social housing). In most cases, these respondents went on to set up home with
a new partner and a few re-entered (or were planning to re-enter) home ownership. In a few cases, the breakdown of a relationship and domestic violence
had resulted in respondents becoming homeless for a time before being rehoused in the social rented sector. Another important influence on housing decisions was change in the com-
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position of the household, usually having children. A few homeowners said
that one of the main reasons they bought a house was because they wanted to start a family, and others said that once they had children they felt that
home ownership would provide more security and stability. Having children
sometimes resulted in a move to a larger property and respondents also mentioned moving to a nicer area or a property with a garden. None of the older homeowners had moved to a smaller property because their children had
moved away; one respondent (a social tenant) explained that although her
children had moved away they still liked to visit and considered her house
as their home so she felt reluctant to move. Some former and current social
rented tenants explained how they applied for more appropriate family
accommodation when they started a family. Other influences on housing decisions included generally wanting a better quality of life. Respondents talked about wanting a larger garden, living
in a nicer area, and being closer to relatives, good schools or leisure facilities. Some tenants felt that they were able to enjoy a better quality of life
because they rented, they felt they had decent sized properties and could
afford to take a holiday and do things that they would not be able to afford
to do if they had a mortgage. A couple of tenants said that they could afford
to buy a property if they took on extra work but they felt that this would not
be a good thing for their families. Older homeowners described how they had
struggled when they first bought a property and their families were younger. One respondent said he had not taken a holiday for seven years and that
he spent all his spare time working on his property and even went without
proper food. However, for the most part, homeowners seemed happy to accept
that buying a home would mean some financial difficulties or their having to
go without extras because of the long-term benefits and security they associated with owning their home. Some respondents said their housing and its location had a beneficial
impact on their lives; living in a nice house and in a nice area was seen to
be important for their well being and especially for children. Owners and tenants talked about the importance of location and not living in a ‘rough area’,
although tenants clearly had less choice about where they lived (it is possible
to move within the social rented sector but respondents suggested that this
was not very easy to do). A couple of respondents (owner and renter) felt that
where one lived and the tenure affected employment opportunities as employers discriminated against people from ‘rough’ areas and social housing.
Use of housing resources
Whilst housing was first and foremost viewed as a consumption good, most
respondents recognised that home ownership was now an ‘investment’, irrespective of whether they had consciously thought this when they had purchased their home and that they had accrued housing ‘resources’. This was
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particularly associated with the rise in house prices over time (see earlier): all
homeowners (with one exception of a very recent buyer) had seen substantial increases in equity (with properties tending to at least double in value),
and were very aware of the current market and able to estimate the value of
the sale of their property on the open market. Most respondents, however, did
consider that increases in house prices were largely meaningless unless they
were planning on downsizing or exiting the property market.
M: “It’s money that we have made but it’s not money in our hands, it’s what we call
paper money.”
F: “Only when we downsize will we feel the benefit” (homeowners, male 54, female 55).
Many respondents already had experience of moving, usually to a larger property (moving up the ‘property ladder’), and whilst people tended to transfer
most of the equity from one property to another, it was not unusual for people to keep back a small amount for other uses, particularly home improvements. Three marginal homeowners had also used the sale of their previous
house to pay off non mortgage-related debts. It should be noted that in all
cases the reason for moving was to improve their housing situation, not to
access equity. However, most people appeared to consider that equity withdrawal at this point was an obvious thing to do and no-one struggled with
the concept or process. In addition, a smaller number of respondents had remortgaged in order to undertake home improvements, including upgrades of
existing rooms as well as extensions, loft conversions or conservatories, explaining that this was “adding value to the house”.
For most, therefore, the use of housing to date was being reinvested in other housing uses. However, three households had utilised their equity on a
number of occasions and for different uses, including funding career breaks
to start a family, undertaking training, holidays, keeping money aside for a
‘rainy day’ and for home improvements. In addition, one respondent had
established himself as a private landlord through using equity from his own
home directly to purchase two further properties (with a third in the pipeline). These people described a ‘learning curve’ with respect to accessing equity, and whilst people tended to take out relatively modest amounts (remortgaging less than half of the value of their equity), respondents explained how
easy it was to access this financial resource and with an implication that they
were actually encouraged to do so by financial institutions.
Most UK respondents understood the concept of using money stored in
their house for future activities, but few had thought this through in any
detail, with people more likely to have a general awareness that this could
be a resource for the future. A couple of people explained that they could not
understand why someone would consider this, but most people would consid-
[ 275 ]
er using their housing resources in the future in some way. Renters appeared
to be just as aware as owners of the potential of housing equity, and were able
to comment on others’ experiences or plans, if not their own.
It was clear that some possible future uses of housing resources were seen
as more likely or more acceptable than other potential uses:
1. Housing as ‘pension’
The potential use of housing as a financial resource in retirement was the
most likely area that respondents had considered as a concrete plan. Although a couple of households stated that they had good pensions, for many
housing was seen as the way that they would effectively negotiate later life.
A few saw their housing as their pension and had more heavily invested in
housing specifically for this reason (for example, one single male homeowner had put all his resources into buying and redeveloping a house). Some were
seriously considering downsizing or selling their house to fund their retirement, but generally most people had not thought about the details of how
they would use this ‘pension’, rather more simply just seeing it as a possible
‘saviour’ for future needs. “…we are of the age that we are a little concerned about pensions, and it may
be our trump card. Neither of us has been in jobs for long enough to accrue huge
pensions … so it may well be our trump card on the pensions, finances front…”
(homeowner, female, 45).
However, Vignette 2 revealed that many people, whilst not necessarily against
using some (if not all) of their housing resources to supplement a pension income, were quite wary about the mechanisms available to do this: there was
a scepticism about whether schemes like these were good value and could be
2. Meeting care needs and responding to a reduced welfare state
In contrast, a common response was that people felt they might have to
spend housing resources on care needs in the future because of reduced welfare and government policy on selling houses for care – this for some would
be a ‘forced’ use of their housing equity. Renters were aware that they would
not have this resource to draw on in the future – they actually felt that this
was a good reason to continue renting as they saw people struggling to buy
their own home only to have to sell it later to pay for care.
3. Housing-related activity
Home improvement was seen as the most appropriate use of housing resources simply because it was a housing-related activity and also added value
to the property at the same time. A couple of people anticipated helping their
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children purchase their first property. A number of people also expressed a
desire to invest in a second property in the future, although some thought
this was likely to be more realistic than others.
Whilst the reasons above were justified by most as a good use of housing
resources, there were some circumstances where people were more reluctant to use these resources. Most people worried about spending their housing resources on activities that might place their home at risk. In particular,
whilst a few people had thought about setting up businesses, or buying additional properties, most respondents were clear that they would never think
about doing something that would put their first home at risk.
In addition, very few respondents felt they could justify spending housing
resources to fund leisure and holiday items, unless this was deferred to retirement. In effect, households were implicitly working to a hierarchy of ‘worthy’
activities in considering the use of housing equity. For example, some people wanted to spend money on children’s education as this was seen as highly important.
Finally, although views were quite mixed on the importance of inter-generational transfers per se, the most common view tended to be a preference
for leaving something to children. However, this was coupled with the recognition that they were likely to have to use some of the resources to support
themselves in retirement as well. Inter-generational transfers, therefore, were
not an insurmountable issue for the use of resources, rather people hoped to
balance both of these needs as appropriate. 10.5 Security and insecurity
Homeowning and security
All homeowners tended to feel quite financially secure. This was rather surprising because some households had far more resources and safety nets to
fall back on than others, and some respondents had higher incomes or much
lower mortgage costs. The main reason for feeling secure was that almost
every respondent had built up some equity (only one first time buyer who had
only lived in her home for a few months had no equity) and they felt that this
was sufficient to provide them with some financial security in the short, medium and long term.
“We have more security because house prices have gone up so much, if everything
went wrong you could sell up and still have some capital, it does make you feel secure” (homeowner, female, 34).
The feeling of security among homeowners was based on the belief among
almost all respondents that property prices would continue to rise (if more
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slowly) and that interest rates would not rise too much. Some had ‘fixed rate
mortgages’ where the interest rate they paid was set at a certain level, usually between 1-5 years, and they felt that this would protect them from interest
rate rises which they only expected to be short-term. Very few respondents
mentioned that property prices could go down but they did not appear to believe that this would really happen. Overall, homeowners were very optimistic about the future growth in house prices. This is perhaps surprising given
that the UK has suffered economic recessions and house price crashes in the
recent past which resulted in many thousands of people having their homes
repossessed and many thousands of homeowners left in negative equity. Similarly, homeowners were also very optimistic about their labour market prospects and tended not to mention unemployment as a risk (see Sections 10.6
and 10.7), and this added to their sense of financial security. Homeowners talked about security in terms of having something ‘behind
them’ and about housing providing security for their children, for example, if they were to die then their children would not be left without a home.
One respondent said he felt secure because the house was his - although he
acknowledged that technically the property belonged to the bank. Another marginal homeowner pointed out that even if he had to sell the property
there would still be enough equity left to provide a degree of security. Whilst
some marginal homeowners did not find it easy to pay their mortgage and
other housing costs and had to do without extras such as holidays (in one
case a respondent said he went without food) they did not see this as a particular hardship nor did it make them feel financially insecure. Paying a mortgage was regarded as saving, as the property would one day be theirs and
(they almost all believed) would certainly be worth a lot more than they had
paid for it and would therefore provide them with financial security. None of the homeowners said that they felt financially insecure, although
a few indicated that they had concerns either about meeting their payments
every month or not having enough money to save for ‘rainy days’ or other necessities (one respondent, for example, had not renewed her buildings
insurance). One man described his financial situation as ‘stretched’ (meaning he found it difficult to meet his financial commitments and have enough
money to live on) but he had chosen to try to pay his mortgage off quickly
and therefore his monthly repayments were high (nearly 60% of his income).
One first time buyer was considering taking another lodger (she bought the
house with the intention of letting a room but the first lodger left) to increase
her income so that she could save some money each month towards holidays
or towards work on the house. One owner said that nothing makes one feel
secure these days although he was currently financially secure. One respondent who was unemployed said that while she was only fairly secure at the
moment as she had a very small income (social security payments covered
most of the interest on the mortgage) she was awaiting a divorce settlement
[ 278 ]
and was confident of the outcome and of her future financial security.
Renting and security
Tenants were less likely to feel financially secure than homeowners. Many
were living on low incomes and were unable to save much (if any) money or
to buy financial products such as pensions and insurance to secure their financial futures. Most (though not all) tenants did not have well-paid or particularly secure jobs and there seemed little opportunity for them to improve
their labour market position or to increase their wealth; obviously, unlike
homeowners, they would not see any return on the money they had paid for
housing. Three of the tenants seemed unconcerned about their financial security – it seemed that they were resigned to the fact that they had no resources
and that they could rely on social security benefits which, while not generous,
would provide a relatively secure source of income and pay for housing costs.
However, some low-income tenants who were in receipt of Child Tax Credit (a
means-tested allowance for parents or carers of children who are still in fulltime education) were worried about the reduction in income when their children completed their education.
However, a few tenants said that they felt more financially secure than
homeowners because they did not have to worry about costly repairs, whilst
some said that they did not have to worry about mortgage repayments (but
these tended to be households in receipt of benefits who did not have to worry about paying their rent either).
“The other thing with renting I think is that you don’t have to worry about paying a
mortgage off, or missing a payment and having your house taken off you, when you
are renting you are a lot safer ... we don’t pay rent and we don’t pay poll tax (community charge or local tax) and our repairs are done for nothing” (social renter, female, 38).
Those tenants who were planning to buy felt that owner-occupation would
secure their financial future; a couple of these tenants had (or were expecting) substantial amounts of money which they would use as deposits. Whilst not necessarily feeling financially secure, tenants did feel secure
about their housing in terms of as long as they paid their rent and did not
breach their tenancy agreement; they could stay in the property as long as
they wished. One reason that tenants appeared to feel secure was that they
were either in receipt of Housing Benefit (which is not available to owner-occupiers) or could depend on this in the event of a reduction in income.
However, all respondents generally described the private rented sector as the
most insecure form of tenure. A number of respondents (current owners as
well as tenants) had had to leave private rented accommodation, often more
than once, in the past because landlords had decided to sell whilst others had
[ 279 ]
faced rent increases or Housing Benefit reductions which made the property unaffordable. One private rented sector tenant said she felt fairly secure as
the landlord had bought the property under the Buy to Let scheme (Buy to Let
mortgages are specifically for properties that are to be rented out) and so was
unlikely to want to sell it in the near future. Risks to housing
Overall, most respondents recognised few risks to their housing when first
asked the question in interviews, but tended to acknowledge a greater range
of potential risks when prompted to reflect by the researchers. Nonetheless,
as the above section suggested, householders tended to feel relatively secure
overall and most risks were seen as negotiable.
Homeowners tended to recognise a greater range of risks to their housing
security than renters, although not all of these were felt to be very likely to
occur in reality. Unemployment tended to be the first risk that people mentioned, but this was usually followed up with a reference to either their job
being quite secure (usually due to the nature of the employment, for example, teaching) or one of the two jobs in the household being secure even if
the second was less so – highlighting the importance of two potential income
streams. However, despite this, relationship breakdown was not often perceived as a risk, usually not mentioned at all or not as a real concern:
“I suppose he could leave me – although I don’t think he would but I don’t suppose
anyone does, do they” (homeowner, female, 34).
Most people recognised some health risks when prompted, but most people
stated that this was not something they worried about, particularly younger
Overall, homeowners did not perceive many housing-related risks. People
did mention the possible increases in mortgage rates if interest rates rose,
low payments resulting from poorly-performing endowment policies and
negative equity but felt these risks were quite low in the current economic
climate. Substantial repairs to the house were mentioned as a possible risk
by a few people but most did not think neighbourhood deterioration was an
issue. However, the person who had set himself up as a private landlord and
purchased a number of properties did worry about the economic and broader
political risks:
I: “Do you see any risks that might have an impact on your housing situation?”
M: “Yes, many risks, anything could happen. One big terrorist attack in London and
the whole thing could collapse … the property market could collapse … It’s not (going to collapse) unless something really bad happens to the country, it’s not, but you
never know” (homeowner, male, 33).
[ 280 ]
The first set of risks that renters identified were closely connected to their
position in the housing market. Problems with the payment of Housing Benefit was mentioned by a few people, some of whom had direct experience of
Housing Benefit problems in the past, where late payments had meant their
tenancy had been put at risk (and in one case, eviction followed). In the case
of private renters, a couple of people were paying ‘top-ups’ to Housing Benefit
(see earlier) of approximately £100 a month, however this was not specifically mentioned as a risk although rent rises in general were. Private renters perceived a greater risk from landlords selling their properties and therefore asking them to vacate the property.
Income security was also an issue mentioned by a few renters. Two single
parents were very worried about the implications of changes to their receipt
of tax credits and family allowances as teenage children grew up and were no
longer considered ‘dependents’. A number of people were working part-time
or were self-employed and their income levels were subject to some fluctuation, which was mentioned as a possible concern. Unemployment, however,
was less frequently mentioned as a risk than for owners, apart from in connection with health concerns (see below). The fact that most renters were single meant that they were more dependent on one income than homeowners.
Most had already experienced relationship breakdown so this was not identified as a risk.
Finally, many renters were quite worried about the risk of deteriorating
health. Poor or increasingly poor health was both a fear for renters who were
currently working (as they may not be able to work and did not think benefits
would be adequate) and those who were already unable to work but feared
their health may get worse in the long term. However, two social renters did
point out that the council would probably be able to respond to their increasingly poor health by moving them to more appropriate accommodation.
10.6 Safety net strategies
Influences on strategies
Overall, respondents felt quite confident in their abilities to manage the risks
they perceived. However, as with the nature of risks themselves, often people
had not thought through their potential strategies in great detail. Some strategies involved planning ahead (such as saving or taking out insurance), but
others relied much more heavily on people’s ability to cope (such as getting
another job or relying on family). Most mentioned a number of strategies that
together would hopefully enable them to ‘cope’ with income loss, although
some only identified one main safety net that they could rely on.
Better-off homeowners were generally in a better position to take precautions than marginal homeowners and renters. The most important influence
[ 281 ]
on whether and how people planned for eventualities was the resources available to them via employment, as well as more widely via resources inherited
or built up through property, inheritance or savings. Renters generally (though
not exclusively) had lower disposable incomes and had very limited opportunity to save. This was also the case for some of the marginal homeowners
whose greatest resource was stored in their home.
A second key factor influencing planning strategies appeared to be people’s
overall personality and belief system with respect to planning ahead or living life for today. Many people explained that they simply did not worry and
did not feel a need to plan extensively or, conversely, were very risk-averse
and therefore had to plan. This was difficult for people to explain but parental
influences were thought to have been important, as well as past experiences (such as illness), as well as wider societal influences encouraging people
to spend and accept debt. Some young people, though not all, appeared to be
more willing to accept higher levels of debt than older households.
F: “Loans aren’t things that we really like, I mean having a mortgage is bad
enough, because you are owing money to people in effect.”
M: “Usually, if we can’t afford it, we don’t get it…”
F: “We have a credit card and every time a bill comes in, we pay it straight away.”
M: “I couldn’t live like what kids do these days, they don’t seem to have any financial, they just pay, pay, pay…”
F: “I think I’d die if I got a red demand … I think if I die tomorrow, at least I won’t
owe much” (homeowners, male 54, female 55).
Other life experiences, particularly having children, were felt by some to have
made a difference to their likelihood of planning. A few people also felt that
they had become more thoughtful with respect to future planning on becoming a homeowner, although this was not a prevailing view (and could also
mean there were now no extra resources available to save).
Types of safety net
One of the first strategies households mentioned to address the perceived
risk of unemployment was to find another or more than one job (or for one’s
partner to increase their working hours). In the main, people felt that there
was little that could be done to prepare for redundancies, although a minority did raise the possibility of taking out insurance cover. However, insurance
was most likely to be thought of as a potential safety net to address health
problems, and a number of households had some form of insurance (usually Critical Illness Insurance – see earlier). Others looked to employee benefits
to cover a period of sickness, with the best jobs providing six months’ full pay
and six months’ half pay. People rarely had both employee benefits and insurance.
[ 282 ]
Respondents had varying levels of savings, but for most, savings were minimal and only represented a short-term resource. Some mentioned that being
sensible and not ‘overstretching’ themselves financially was a form of preventative safety net. One or two, however, said they might turn to debt companies or their lenders for assistance with managing over-commitments. A
key difference between homeowners and renters was the former seeing the
potential for their property to provide them with a safety net. Although this
was seen as a last resort, people often felt comforted by the knowledge that
they could access this equity through selling the house or downsizing.
Very divergent views were expressed with regard to potential family support. Most could rely on some support financially or in kind, but often this
would be short-term, or people felt that again this would be a last resort.
“Only my parents … They would help me out financially for a while but it would be
the case that I’d have to get a job – they’d help for a couple of months … I wouldn’t
want to sell the house ... If the worst came to the worst then I could always move
back to my parents’ again and let this house out while I looked for another job”
(homeowner, female, 35).
State support was seen as an important safety net by some renters but not for
Overall, respondents were quite positive about their ability to draw on their
own resources to respond to crises - it appeared that some felt more comfortable ‘responding’ to difficulties than planning ahead to counteract them.
“My first and foremost safety net has always been my own resources, I know that
no matter what happens in life, I can deal with it, there is nothing that is going
to be that bad … I mean I am strong and I am healthy and I am intelligent, and if
I lose my job I will go and get another job, and even if it’s not as good I could get
two or three jobs … And if it was something out of my hands, like ill health, then I
know that I have good relationships around me that I have also invested in…”
(private renter, female, 33).
Views on social security as a safety net
Overall, few respondents identified social security as the main or a major
safety net. This was particularly the case for homeowners who were sceptical
about the likelihood of receiving any support from the government (although
in actuality, homeowners do qualify for limited support with paying mortgage
interest payments after a nine-month waiting period – see earlier).
F: “They [the state] don’t help anybody now do they?”
M: “I wouldn’t know, I wouldn’t know what you could claim” (homeowners, female 37, male 38).
[ 283 ]
Many (though not all) homeowners also felt that the individual was responsible for supporting themselves with housing costs during periods of income
or job loss. Others felt just as strongly that the state did have a responsibility to householders, especially given the level of taxes and national insurance
contributions. Renters were more likely to justify the state’s involvement in
supporting those at risk, although again not exclusively so. Most renters did
identify the state as a potential resource to rely on at times of crisis, especially with respect to paying housing costs via Housing Benefit. However, at least
one renter was quite confused about their entitlement to benefits if they became unemployed.
10.7 Conclusions
Owner-occupation continues to be the tenure of choice in the UK and one that
continues to be promoted and encouraged by the present government. Although tax incentives are no longer used to support home ownership, the UK
government continues to attempt to expand the sector though shared ownership initiatives, an increasing emphasis on asset-based welfare policies and
general political rhetoric.
In this study, householders felt that home ownership offered many benefits, the most important of which was the security of knowing that the house
would be fully owned or ‘theirs’ one day. Home ownership was preferred to
renting mainly because respondents (tenants and owners) believed that rent
was ‘dead money’, but other factors included the freedom to do what one
liked with the property, independence, security (not having a landlord who
might ask them to leave) and the long-term security respondents felt home
ownership offered. Nevertheless, most respondents could see some benefits
to renting, in particular mobility and not having to worry about costly repairs
and maintenance.
The main factor in the decision to buy was having sufficient and secure
income from employment, and the main reason that almost all tenants chose
to rent was that they did not have enough money to buy. Although some
younger or marginal homeowners said that they had less disposable income
to spend on leisure and holidays and a couple of people did without necessities, it appeared that such sacrifices were accepted by owners as part of buying a home. Respondents also felt that having a nice home in a good location
had a beneficial impact on the well being of the family and was particularly
important for children. Homeowners felt more financially secure than tenants; although a few indicated that they had concerns about meeting housing costs or saving money
for a ‘rainy day’ this did not appear to concern them. Most tenants felt less
financially secure, they tended to be living on low incomes from benefits or
[ 284 ]
employment and were unable to save much (if any) money to secure their
financial futures. Homeowners also felt financially secure because they were
confident that the housing market would continue to prosper over the long
term and that their fixed rate mortgages would protect them against future
interest rate rises. They were also optimistic about their future prospects in
the labour market. The main reason, however, for the sense of financial security among homeowners was that they had all (except one first time buyer)
built some equity, in some cases a fairly substantial amount. Although respondents tended to describe their houses primarily in terms of
a home, homeowners and tenants also regarded home ownership as an investment and an asset. This was the most important aspect of home ownership
that most tenants felt they had missed out on. This view was based on the
steady growth of house prices over the years, particularly the dramatic rises
in recent years. Most respondents were aware that they could use the equity
and talked about doing so in the future, but few had thought about this in any
detail. Most respondents felt that housing equity should be used only for certain ‘worthy’ purposes and should not be wasted on leisure activities. However,
a learning curve did seem evident for those homeowners who had used their
equity other than to move house, with people explaining how easy it was to
repeat the process and to use resources for an increasing range of other pursuits. In some respects, the findings of the study matched well with the concept of an asset-based welfare state, with people aware of the potential to use
housing resources for retirement and care issues, however understanding of
these processes tended to be in their infancy, and a learning curve for spending could potentially work against this policy if householders in the future
spend a substantial proportion of their housing resources before retirement.
Homeowners did not feel greatly at risk of losing their home, even though
some appeared to be far more secure than others in terms of the employment
status of the household, income levels, cost of mortgage and other resources. Respondents generally felt able to cope with any risks but it was evident
that they had not always thought through any strategies in great detail and
some were only able to identify one main safety net. Among the safety nets or
strategies respondents felt they could rely on were: finding another job; insurance (for ill health); employee benefits; state benefits; savings; and moving to
a cheaper property and using the remaining equity to live on. A few, mainly younger, respondents said their families could help, but this was seen to
be a short-term solution and one that most people would rather not rely on.
Ultimately, people’s planning strategies depended mainly on their resources,
although other factors like general outlook on life, past experiences, age and
having children also had an impact. Renters were more likely than homeowners to consider relying on the state for assistance with housing costs, with
many (though not all) homeowners feeling that it was their responsibility to
pay for their housing costs if they were unable to work.
[ 285 ]
Overall, home ownership and security appeared to be closely related in
respondents’ minds in the UK. People tended to be (over-?)optimistic about
future house prices and the economy, as well as their own resources if they
were to meet any unforeseen eventualities. Whilst it was clear that most
respondents did have considerable equity and might be prepared to use this
in the future, these strategies were poorly thought out at present. Whilst
homeowning was preferred over renting, UK respondents did still identify an
important role for renting and felt it did offer a different form of security –
not in a financial sense, but rather in providing reliable and affordable housing – and also, along with homeowning, ontological security by providing a
home and a base for family life.
Barker, K., 2004, Review of Housing Supply, Delivering Stability: Securing our
Future Housing Needs, London (HM Treasury).
Burrows, R. & S. Wilcox, 2000, Half the Poor, York (York Publishing Service).
Council of Mortgage Lenders, 2006a, MPPI policies in force, 2/5/2006, www.
Council of Mortgage Lenders, 2006b, Arrears Tables, www.cml.org.uk.
Cunningham, 2006, CML Repossession Risk Review, in: Housing Finance, February.
Department of Social Security, 1997, A New Contract for Welfare, London (Stationery Office).
Ford, J., R. Burrows & S. Nettleton, 2000, Home ownership in a risk society,
Bristol (The Policy Press, Bristol). [Authors’ own analysis of British Household
Panel Survey].
Department for Work and Pensions (DWP), 2006, UK National Report on Strategies for Social Protection and Social Inclusion 2006-2008, London (DWP).
Ford, J., D. Quilgars, R. Burrows & D. Rhodes, 2004, Homeowners Risk and Safety-Nets, London (Office of the Deputy Prime Minister).
Hamnett, C., 1999, Winners and Losers: the housing market in modern Britain, London (UCL Press).
[ 286 ]
Lindley, R. & R. Wilson, 1998, Review of economy and employment 1997/98,
Warwick (Institute of Employment Research, University of Warwick).
Low Cost Home Ownership Task Force, 2003, A Home of My Own: The report of the Government’s Low Cost Home Ownership Task Force, London (The
Housing Corporation).
Office of the Deputy Prime Minister (ODPM), 2004, Housing in England, 2002/3,
London (Office of National Statistics).
Office of the Deputy Prime Minister, 2005, HomeBuy – expanding the opportunity to own, Consultation Paper, April, London (ODPM).
Office of the Deputy Prime Minister, 2005b, Homes for all – expanding the opportunities for home ownership, News Release 2005/0091.
Quilgars, D. & D. Abbott, 2000, Working in a risk society: families’ perceptions
of, and responses to, flexible labour markets and the restructuring of welfare,
in: Community, Work and Family 3 (1), pp. 15-36.
Quilgars, D. & M. Stephens, 2007, The role of lenders’ policies in arrears management, London (Council of Mortgage Lenders, London).
Siebritis, J., 2005, An overview of the national housing and mortgage markets
in the UK, in: Housing Finance, February, pp. 1–17.
Smith, S., 2005, Banking on housing? Speculating on the role and relevance of
housing wealth in Britain, paper prepared for the Joseph Rowntree Foundation Inquiry into Home Ownership 2010 and Beyond, http://eprints.dur.ac.uk/
Stephens, M., C. Whitehead & M. Munro, 2005, Lessons from the past, challenges for the future for housing policy: An evaluation of English housing
policy 1975-2000, London (ODPM).
[ 287 ]
11 Home ownership and
income insecurity
A comparison of household interview studies in
eight European countries
Janneke Toussaint & Marja Elsinga
11.1 Introduction
Previous chapters have given detailed accounts of how people in eight EU
countries perceive the security and insecurity aspects of home ownership in
relation to renting and in the context of developments in labour markets, financial markets and social protection measures in their country. The aim of
this comparative chapter is to gain more insight into differences and similarities between countries with regard to how people relate home ownership to
income insecurity and to what extent they perceive home ownership as security. This aim is inspired by the idea that home ownership would become increasingly important for financial security and part of personal financial strategies when income security diminishes. This idea forms the central hypothesis for reflection. Our analysis sought to answer the following objectives:
1.How do interviewees perceive income (in)security? To what extent do they
take private measures and count on or do not count on social security?
2.To what extent do interviewees perceive home ownership as secure and
prefer it to renting for security reasons?
3.To what extent do interviewees perceive home ownership as a financial
For all three objectives we consider differences and similarities between
countries and question how households’ perceptions could be related to the
institutional context. The way in which the analysis was carried out is described in Chapter 2. In this chapter we describe the results of the comparison. The text is structured in order of the objectives. Every section start with a
brief sketch of differences and similarities between countries in some key indicators of the institutional context. We then report on differences and similarities in households’ perceptions and explore links with institutional contexts. Finally, in the last section we attempt to give some more concise answers to the objectives and raise some thoughts about the central hypothesis
that home ownership will be more important for financial security and part
of financial strategies when income security diminishes.
11.2 Income insecurity
11.2.1 Some statistics
Households’ income and perceptions of income security depend on individual
circumstances. However, since labour markets and social security differ from
[ 288 ]
Figure 11.1 The unemployment rate (2005) and the share of temporary
employment in seven countries
replacement rate unemloyment
temporary employment 2001
country to country we assume
that there most probably is a
country effect. In this section
we provide a brief overview of
some key indicators of the laBelgium
bour market and social secu5
rity in the countries included
in this book.
Labour market participation
9 10 11 12
unemployment rate 2005
differs from country to country, as do the types of conSource: OECD Employment Outlook; European Labour Force Surveys
tracts. Figure 11.1 provides a
schematic overview of two
indicators of the labour market in seven of the eight counFigure 11.2 Expenditure on social protection and the unemployment
replacement rate in eight countries
tries: the unemployment rate
and the share of temporary
jobs. We assume that labour
market security is lower when
the unemployment rate is
higher and when the share
of temporary jobs is higher.
observe the most secure
labour markets in the lower
left part and the most inse40
cure in the upper right part of
the figure. According to this
figure the labour market in
UK can be considered as
secure, mainly due to its
while the
markets in Portugal, Finland
Hungary Portugal
and Germany are less secure.
1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
expenditure on social protection in PPS per capita
between countries, as shown
in Figure 11.2. A number of
* There are no figures on replacement rates for Hungary
(Belgium, the Nethand Portugal: these are shown on the x-axis.
Sources: Horsewood & Neuteboom (2006); Eurostat
expenditure on social protection and a relatively high
replacement rate. In Portugal and Hungary the welfare state is much less
developed and has a relatively low level of expenditure on social protection.
[ 289 ]
Figure 11.3 People’s perception of the socioeconomic situation,
perception of the current situation compared to the recent past and
expectations about the future, in eight countries
better in the future (%)
Feelings of income security
and insecurity do not relate
only to features of the labour
market and the welfare state
but also to people’s more genNetherlands
eral expectations about the
future. Figure 11.3 provides an
overview of people’s average
opinion about the future situation in a country. This figure
shows that people in Swe0
den, Finland and the UK con-20
sider the situation to be betbetter now (%)
ter than in the recent past.
Source: Eurobarometer 64.2 weighted average of the results (year)
In these three countries people are also rather optimistic
about the future. In Hungary,
Portugal and Germany, on the other hand, people consider the situation to be
worsening at the moment. But the perception of the future in these countries
is different. People in Portugal and Hungary are fairly optimistic; people in
Germany, however, are less inclined to believe that the situation will improve
in the future. The Netherlands and Belgium are in between in both respects.
11.2.2 Perceptions of income risks and safety net strategies
The results of the household interview studies show that in all countries interviewees believed that their own financial situation was not much at risk.
Risks were perceived as unlikely to happen; moreover, people trusted their capabilities and resources to solve problems if they showed up. Yet in all countries interviewees who experienced risks themselves or had close relatives
or friends who had experienced risks had different perceptions; for them the
probability of risks was higher compared to those who had never experienced
risk. Moreover, in some countries several interviewees who seemed to be at
risk in terms of factors like low incomes, relatively high expenses and hardly any resources did not reflect on these risks as much as researchers expected. According to the Hungarian researchers these interviewees tended to underestimate risks; the Dutch researchers found that some vulnerable interviewees ignored risks; while in Germany the researchers reported that these
households regarded social provision as a right and they often discredited
taking out private insurance as narrow-minded or overcautious. The researchers interpreted these attitudes of some vulnerable interviewees as a kind of
psychological coping strategy.
[ 290 ]
Income insecurity: Hungary, Portugal and Germany
Between countries there were differences in the perception of income insecurity, which seemed related both to the current labour market and social security situation, as well as to past developments and future prospects (see Section 11.1). In Hungary and Portugal the interviewees seemed most afraid of
the severe financial consequences of risks; this was especially true for households that qualified as marginal households. In these two countries, the main
risks concerning income that were mentioned were job loss, family risks and
serious health problems. The concerns following from the high perceived level of risks could not be lowered by the welfare system. In Hungary, even interviewees who had considerable financial difficulties tried to avoid relying
on the state. Social benefits were seen as a last resort and only appropriate
for the most desperate; benefits would automatically carry with them a social stigma. The Hungarian researchers explained that although the national
welfare system has become more generous by broadening targets and measures during the process of transition, it still does not offer opportunities to
improve circumstances and impoverishment is very likely to happen. The Portuguese researchers explained that a delay of several months between application for and receipt of benefits causes Portuguese interviewees to resort to
self-initiatives and reliance on so-called ‘welfare-families’. Furthermore, they
argued that even though unemployment benefits are specified by a fixed replacement rate, this is rather low as in general wages in Portugal are low. The
feeling of income insecurity in Portugal and Hungary seemed to be considerably higher than in the other countries, and within these two countries the level of one’s own and family resources were of crucial importance in protecting
oneself from the potentially negative consequences of risks.
German interviewees also perceived a relatively high level of risk, and particularly feared unemployment and health problems. Unlike the Hungarians
and Portuguese, German interviewees did count on social security; all claimed
to feel reassured by the knowledge that they would receive unemployment or
at least social benefits. Nevertheless, the German researchers stated that the
changes occurring in the labour market and the welfare system made German
interviewees feel insecure, as did future uncertainties about further developments of the welfare state. Thus, although the actual welfare level is still rather high compared to other countries, the changes and insecurity about future
developments seemed to make the German interviewees worry about risks.
Income security: Belgium, Finland, the Netherlands, Sweden and the UK
In Belgium, Finland, the Netherlands, Sweden and the UK most interviewees mentioned risks, yet they often put them into some sort of perspective by
conceiving solutions. Most regarded it as unlikely that a loss of income would
impact on their housing situation. In Belgium, Finland, the Netherlands and
Sweden the main reason for this was the considerable benefit (both from
[ 291 ]
Box 11.1 Risks quoted from the country chapters
The above quotes illustrate that homeowners as well as renters have very trusting attitudes
towards future life. Although when it comes to housing opinions are more blurred, for the most
part respondents consider risks unlikely to happen (Belgium).
In their overall assessment of possible risks threatening their housing situation both tenants and
homeowners give the impression that they have a rather trusting attitude towards life. Risks related to housing seem somewhat unclear and diffuse and, for the most part, respondents consider
risks possible but not very likely (Finland).
When assessing risks, both renters and homeowners show a trusting attitude towards life. Still,
homeowning households in particular reflect upon potential risks and try to prevent these as much
as financially and actually possible (Germany).
As pointed out while discussing changes in the meaning of tenures, the risk awareness of households is very high as a result of the learning process that is connected to the main features of the
transition. The nature of risk perception is strongly related to the lack of sufficient safety net arrangements (Hungary).
Interviewees were asked what risks might affect their housing situation. It was striking that people
were initially unsure as to how to answer this question. Their circumstances are generally secure
and they are not used to the idea that events may arise that force them to leave their homes (The
The feelings of insecurity and risks perceived by households differ considerably. For worse-off
owners, perceived risk is immense, revealed by the feeling that, for the most part, everything, from
unemployment or health problems to accidents or even neighbourhood deterioration, would have
a big impact on their housing situation (Portugal).
When discussing serious risks and housing, the starting point is that apart from the marginal
house­holds (8) in the survey, respondents do not worry about it. They assess risks as small overall
even after discussing particular issues […] My interpretation is that the level of risk faced by the
interviewed households is not a question of being evicted or that of repossession. Not even for the
marginalised households (Sweden).
Overall, most respondents recognised few risks to their housing when first asked the question in
interviews […] as the above section suggested, householders tended to feel relatively secure overall
and most risks were seen as negotiable (UK).
state and employer) that they would receive. Many who received benefits in
these countries still lived in the same dwellings as they did when they had
a job. Only in the case of accumulation of several risks (e.g. loss of income
and relationship breakdown) could the situation become problematic; however, generally this was perceived as very unlikely to happen. Interviewees in
the UK saw most risks as negotiable; in the case of unemployment, for example, they referred to a secure second job in their household. Compared to interviewees in Belgium, Finland, the Netherlands and Sweden, the interview-
[ 292 ]
Table 11.1 Countries grouped on the basis of perceived level of income
insecurity and type of safety net strategies
Income insecurity
Income security
family support
United Kingdom
Counting on state/
employers’ provision
ees in the UK did not refer as
much to social provision: they
seemed much more focused
on self-management, which
in this case implies finding
a new job, using savings or
other resources. Remarkably,
when speaking about state support UK interviewees made a clear distinction
between tenants and homeowners: owners should be able to solve their financial problems whereas tenants should receive state aid. Some interviewees in Finland and the Netherlands mentioned this distinction too.
the Netherlands
Grouping countries on the basis of income insecurity and financial strategies
On the basis of perceived income insecurity and financial safety net strategies, we can divide the countries into four categories (see Table 11.1). The first
category is occupied by Hungary and Portugal: here, the perceived level of income insecurity is quite high compared to the other countries and interviewees mainly relied on family support. In the second category is Germany: here,
interviewees did rely on social provision although they were worried about
changes in the welfare system and they did regard the labour market situation as rather risky. Thirdly, in the UK interviewees were rather unconcerned
about possible drops in income, and instead of relying on state aid the UK interviewees had private financial strategies set up or relied on self-management if something were to occur. Among the fourth category consisting of
Belgium, Finland, the Netherlands and Sweden, interviewees had a trusting
attitude as far as income was concerned and they relied on social benefits or
employers’ settlements in the event that they became unemployed.
If we take these groups into consideration and explore the relations to the
institutional contexts (figuring key characteristics ‘Labour market and social
security’), it appears that the perceptions are remarkably congruent with the
characteristics of national institutional contexts, with one exception. In Finland interviewees said they felt secure, whereas labour market indicators
showed the level of insecurity on the labour market to be relatively high. For
example, Germany has similar labour market characteristics to Finland. In
both countries the unemployment rate is relatively high and from the early
1990s onwards labour became more flexible: part-time work and fixed-term
contracts increased. Subsequently, in the same period both national governments were confronted with affordability problems in their welfare systems
and cutbacks in public spending. In both countries politics, welfare reforms,
and the necessity for further cutbacks in social provision remained themes
for discussion. Nevertheless, German interviewees appeared to feel more
insecure than the Finns. This different perception of income insecurity might
be related to recent economic developments. The Finnish researchers speak
[ 293 ]
of a strongly performing economy, whereas the German researchers show a
slowly recovering economy.
Perceived risks and financial strategies: differences between homeowners
and tenants
In Belgium, Finland, Germany and the UK researchers reported that homeowners reflected on a broader variety of risks than tenants. They explained
the difference by the fact that, compared to tenants, mortgaged homeowners
would have a greater financial responsibility; they would have more to lose,
and a greater emotional attachment to their homes. In Germany the researchers stated that homeowners assumed a greater spatial immobility; they reasoned that this might trigger reflections about how to handle risks.
In Finland, Germany, Hungary, the Netherlands, Sweden and the UK researchers reported that homeowners take more private safety net measures; different
factors were said to have an impact on this difference. In Sweden and the UK,
the researchers remarked that for the most part more affluent homeowners
were taking out insurance and setting aside savings, since it was affordable
for them, in contrast to marginal homeowners and tenants. The same seemed
to impact on the difference between renters and homeowners in Hungary.
Here, the researchers reported that tenants face higher risks than homeowners, as tenants, and especially public tenants, appeared not to have any safety net at all. The Dutch researchers stated that mortgage lenders had encouraged homeowning interviewees to take appropriate measures. In Germany
the researchers explain the larger amount of savings of homeowners by the
need to save for maintenance, and the opportunity to save in the Bausparkassen. Finally, in the UK and the Netherlands the researchers noted that housing
allowance is available for tenants and not for homeowners.
Thus in most countries researchers found differences in the range of perceived risks and the safety net strategies among homeowners and renters.
Homeowners usually reflected more on their housing situation and relied
more on private safety nets. Different reasons were brought up as explanations; often home ownership was compared to renting. Firstly, the type of tenure in itself was said to impact on the greater reflection among homeowners:
home ownership would mean a greater financial responsibility, having more
to lose, and homeowners have to save for maintenance. Secondly, differences in household characteristics were said to have an impact: namely, homeowners would have more means to save or to spend on insurance. Thirdly, in
some countries institutional arrangements were said to impact on homeowners’ safety net strategies: mortgage lenders strongly encouraged insurance,
the government encouraged homeowners to save, and homeowners lacked
housing allowances as part of their safety net.
[ 294 ]
11.3 Home ownership: the secure type of tenure?
11.3.1 House price developments and housing policy
2000-2003, % per year
House price developments
The extent to which households perceive home ownership as a security undoubtedly relates to house price developments. Figure 11.4 shows that the UK
experienced real house price increases of 8% per year on average in the period 2000-2003. In a number of other countries (Sweden, Belgium, Finland and
the Netherlands) house prices increased by 3 to 5% per year. House prices in
Portugal increased only slightly and in Germany prices generally dropped,
though within the latter country considerable differences exist between regions. House price developments over a longer period are also likely to impact
on people’s perceptions of security of home ownership. Figure 11.4 shows that
in the UK, Sweden, the Netherlands and Germany real house prices increased
by around 3 to 4% over the period 1970-2003. In Belgium and Finland yearly
increases amounted to 1.6% while in Portugal house prices decreased during
this 33-year period. The Hungarian housing market saw a dramatic boom in
1997–1998 with doubling of real house prices and a steady growth after.
Home ownership appeared to be a secure asset with a considerable return
on investment in particu­
lar in the UK, but Sweden
performed well and
Figure 11.4 Average real house price change 1970–2003 and
2000–2003 in % per year, for seven countries
the scores for the Netherlands, Belgium and Fin­land
also allow us to conclude
that home ownership is a
secure investment. However, it
is doubtful whether home
ownership can be called a
secure investment when considering the house price devel4
opments for Portugal and GerFinland Netherlands
many in Figure 11.4.
1970-2003, % per year
* No figures available for Hungary.
Source: Bank of International Settlements
[ 295 ]
Table 11.2 Housing policy towards home ownership
Home ownership
Mortgage guarantees
Subsidised saving
Subsidy (interest
Germany Finland
abolished abolished interest
Hungary Netherlands Portugal Sweden
abolished no
Low income home ownership
Interest deduction
Tax on imputed rent
Housing allowance
yes ISMI5)
1) Scanlon & Whitehead, 2004.
2) Data not available.
3) RICS European Housing Review, Michael Ball, 2005.
4) Germany does have a depreciation allowance (see http://www2.wiwi.hu-berlin.de/institute/hns/publications/
German-Housing-Policy-Crossroads.pdf ).
5) Income Support Mortgage Interest (payment covers part/all of mortgage interest only).
Source: Quantitative Studies OSIS, Institutional Studies OSIS
Housing policy: home ownership
We also expect housing policy to have an impact on the perception of home
ownership as a secure tenure, not only policy with regard to home ownership itself, but also policy with regard to the alternative: renting. Table 11.2
shows that in most countries encouragement of home ownership appears to
be a policy objective. Sweden is the only exception. The ambition to encourage home ownership appears in countries with a relatively high home ownership rate (Belgium and the UK) as well as countries with a lower rate (Germany, the Netherlands). Different policy instruments are deployed to achieve this
aim. Mortgage guarantees, savings facilities, interest subsidies and grants enable first-time buyers in particular to get an adequate loan and hence a foot
on the property ladder. Homebuying programmes specifically targeted at enabling low income households to buy exist in the UK and the Netherlands.
The fiscal treatment of home ownership is a more general facility. A crucial
point is whether governments see home ownership as an investment or as a
consumer good. The first choice should logically result in deduction of interest and costs and the addition of imputed rent to household incomes before
tax. If the second choice is made, the dwelling is not relevant for income tax.
It appears from Table 11.2 that the UK and Germany see an owner-occupied
dwelling as a consumer good and there is no interest deduction or addition
of imputed rent to income before tax1. Belgium and the Netherlands consider home ownership as an investment and therefore interest can be deduct-
1 The UK withdrew mortgage tax relief in 2001. See, for example, http://www.hmrc.gov.uk/ria/miraswithdrawal.pdf.
[ 296 ]
Table 11.3 Housing policy towards renting
small sector decreasing
public renting,
social renting
by private
Rent control
through social dependent (rent scale)
Rent control
through private rents
(rent scale)
Policy social
Security of
tenure through
private renting
Security of
tenure through
social renting
Hungary Netherlands Portugal
residual large sector rehouse
from shanty
discussion towns
no exclusive
from public
to housing
old contracts: yes
new contracts: no
6 months
Yes: young yes
people in
private sector
3 years,
up to C 615
per month:
> C 615: no
contracts contracts contract up
to C 615
* Data not available.
Source: Institutional Studies OSIS, additional data from researchers in the project
ed and imputed rent should be added. Other countries seem to be somewhere
in between. There is a large variation across the countries in the amount of
interest that can be deducted, ranging from a limited amount (Belgium), to
deduction at a fixed rate (Finland, Sweden), to full deduction at a marginal
rate (the Netherlands).
Housing policy: renting
We explored rental policy in the eight countries and have summarised the results in Table 11.3. This table shows the large differences in size of the rented
sector. When it comes to the security issue, policy towards rents and the law
on security of tenure seem to be relevant here. After all, when rents are regulated and tenants can count on a permanent contract, they have more reason to feel secure than when rents are unregulated and contracts are temporary. Table 11.3 also shows that social tenants in most countries can count
on rent regulation and security of tenure, while arrangements in the private
rental sector appear to vary over countries. In the Netherlands, Sweden and
Germany there is rent control in this sector, whilst in other countries there
are free rents. Policy towards the rental sector is expected to have an impact
on the role of renting and therefore also on the role of the alternative: home
[ 297 ]
Box 11.2 The advantage of building equity in country chapters
They have chosen to buy, because ownership is in the long run more affordable than renting. The
recurrent answer is that renting means losing money, while ownership is a financial investment
and in the end leads to ‘free’ housing (Belgium).
When asking the reasons they justify their decisions by a rational economic motive […] Furthermore, paying a mortgage is seen as preferable to paying rent to a landlord because in that way one
is accumulating wealth for oneself and not for someone else. For many owners the motive is very
clear and simple: “it just makes no sense to give the money away” (Finland).
Home ownership is favoured mainly because the home […] in the long run seems to be a favourable economic housing option, because once the mortgage is amortised the expenses for housing
will decrease (Germany).
Owner-occupation tenure can be described in two ways: as a consumer good and as an investment
good […] In times of hardship, privately owned units’ roles as investment goods gain importance
when the possibilities for solving financial problems are considered and weighed (Hungary).
When questioned on the financial aspects, the interviewees say that when you rent your money
just flows away but when you buy it comes back to you, you build up capital (the Netherlands).
For respondents it only makes sense spending money on their own property rather than spending
money on something they will never own (Portugal).
Since the meaning of housing differed very little between tenures the main point of concern frequently mentioned (in almost the same wording) was that it feels good to pay yourself, referring to
mortgage payments when owning (Sweden).
The main reason given by owners (and renters) for preferring home ownership themselves was
that one day the property would be theirs. Renting was widely regarded as wasted money and
almost every respondent (including most tenants) described rent as ‘dead money’ (UK).
11.3.2 Perceptions of the financial security of home ownership
Before we consider the role of home ownership in the interviewees’ financial safety nets, we will first explore to what extent home ownership is perceived as a security. Many interviewees in all countries valued home ownership since homeowners put money in their own, instead of their landlord’s,
pockets. Although equity is not a term that can be translated immediately into every language (see Chapter 2, Table 2.1), it seems that interviewees in all
countries refer to the advantage of building ‘equity’. For example, the Finnish researchers summarised the interviewees’ responses with “one important
aspect of security attached to home ownership derives from the knowledge
that there is a ‘nest egg’ or ‘seed money’ invested into the property, which is
returned (with a profit at best) to the owner when selling the property”. This
reasoning is similar in all countries (see Box 11.2).
[ 298 ]
When prompted, in all countries interviewees agreed that home ownership is or appeared to be an investment; however, they did not always initially think of their homes as an investment. In the first place a house was
a roof over one’s head, but when house prices rose, interviewees seemed to
become more and more aware that this roof was an investment too. In a strikingly similar way in all countries, interviewees expected house prices to go
up. Remarkably, in Germany, where prices have gone down in some areas and
interviewees claimed to be concerned about house price developments, they
at the same time referred to home ownership as a stable and secure investment. This discrepancy suggests that people can still judge home ownership
as financially attractive when they build equity without considerable revenues from house price increase. In Portugal house prices decreased, yet interviewees did not refer to this unfavourable house price development.
Housing equity and mortgage debt
In general it seems that the lower the mortgage and the larger the amount
of equity, the more secure home ownership is. However, mortgage debts did
not always seem to be straightforwardly related to perceptions of security or insecurity. A remarkable contrast appeared between the perceptions of
the German and the Dutch interviewees. The Dutch seemed rather unconcerned about relatively high loan to value ratios. They perceived it as normal
for young people to take up mortgages that are higher than the value of their
house; moreover, repaying a mortgage with an inheritance was considered as
unwise as one would then forego the advantages of the deduction of interest for income tax for homeowners with a mortgage. In contrast, the German
interviewees explained that young people should first rent in order to save
for a deposit for home ownership. In the event of receiving an inheritance,
they would without any exception use it to repay the mortgage. The Dutch researchers explained that the interviewees seemed to have confidence in a favourable house price development and apparently have faith in income security for young people. The German interviewees, on the contrary, were insecure about house price development as a consequence of the ageing population; they were also worried about unemployment and social provision.
In connection with this issue the Finnish researchers reported a remarkable finding. They argued that the experiences of the economic recession and
a crashing housing market in the 1990s did not make all Finnish homeowning interviewees more careful and cautious. Young and marginal homeowning interviewees in particular seemed to have a ‘tougher’ attitude towards
risk-taking in home ownership. Although they did not have personal experience of the housing crash, the researchers suggest that these respondents
were raised in a more risky institutional environment than that of older generations. Accordingly, they felt safe and secure even if they expressed their
awareness of certain insecurities, such as a combination of a big mortgage
[ 299 ]
and a fixed-term work contract, for example. The Finnish interviewees said
they regarded the risks as worthwhile because buying was eventually for their
own benefit.
In Finland, Sweden and Portugal, interviewees stated that the possibility of
flexible arrangements with mortgage lenders enhanced the feeling of security as a homeowner. In Finland and Portugal they thought that in the event
of unemployment homeowners should negotiate with the bank and arrange
new repayment conditions. The Swedish researcher noticed that some young
and well-informed interviewees enjoyed the flexibility of mortgages; when
the incomes of these interviewees changed they could change the payment of
the mortgage. In the UK the interviewees did not mention this opportunity as
a factor that contributes to security; however, interviewees here had used it
for temporary career breaks, to start a family or undertake training.
Security and insecurity of home ownership: a matter of good and bad
In Hungary researchers described home ownership both as a source of security as well as a considerably ‘risky business’. The interviewees tended to speak
in terms of ‘good’ and ‘bad’ housing decisions that could have long-lasting effects on housing careers and indirectly on people’s life chances. The Hungarian researchers explained that in the process of the transition, tenure preferences changed rapidly from renting to owning; a large part of the former
rental stock had been sold to private owners. It had been crucial for households to make the right decision at the right moment, as the market was volatile and state subsidies unstable. Moreover, dwellings were often of a very
low quality, it was unclear how much they were worth and how much investment they would need to remain in a reasonable condition. The insecure institutional context in transition Hungary seems to greatly enhance the perception of home ownership as a risky business. In Hungary, housing policy and the housing market impacted strongly upon the perception of home
ownership as risky. Still, interviewees thought that being a homeowner was
worthwhile and that home ownership was the most secure tenure, and therefore that risks should be taken.
11.3.3 Perceptions of renting relative to home ownership
Home ownership is often perceived as the secure type of tenure. Building
housing equity plays an important role; however, not in all countries did interviewees perceive home ownership as the best type of tenure in any case. In
Belgium, Finland, Germany, the Netherlands, Sweden and the UK renting was
considered as the more secure type of tenure for people with lower incomes
and for people with unstable lifestyles, jobs and relationships: mostly young
people who wanted to be free of the obligations of a mortgage and mainte-
[ 300 ]
Table 11.4 Interviewees’ perceptions of renting
Acceptable alternative
the Netherlands
Temporary solution
Last resort
nance. In Germany, Sweden
and the Netherlands renting
was also seen as an option for older people and people with unstable lifestyles and an acceptable longer-term alternative; while in Finland, the UK and
Belgium interviewees saw renting more as a temporary solution and the aim
was to end up as a homeowner.
In contrast, interviewees in Hungary and Portugal perceived renting only as
a last resort, as the only option left when people are unemployed, unable to
work due to illness or disability, have experienced relationship breakdown,
or are in financial difficulty. Therefore, being a tenant in these countries
appeared to have a large impact on social identity. In Portugal the researchers
reported that home ownership appeared to be important for social identity
and paves the way for social inclusion. Positive aspects of renting were rarely put forward. Another part of the negative perception of renting seems to be
caused by insecure rental contracts with landlords. The Hungarian researchers reported that tenants felt much less secure than homeowners. Hungarian
interviewees regarded private rented dwellings as hardly affordable and they
feared an arbitrary rise of rents; although less likely to occur, the latter risk
also accounts for the public rental sector. Moreover, the rents in the private
rental sector are considered to be high and insecurity is experienced with
regard to rent increases. In Portugal a division should be made between new
and old rental contracts, as the level of insecurity is different in these two
groups. In contrast to the Portuguese with new contracts, the tenants with old
contracts profit from very low rents. Nevertheless, the Portuguese researchers
explain that these tenants with old contracts now fear that the rents will be
equalised with market rents as the government is reconsidering this rent regulation system.
Social - private
When we explore links with institutional characteristics these findings seem
to be related to housing markets and housing policy. In Portugal and Hungary, the share of rental dwellings is relatively small and governments do not
have the strict rent regulation and tenants’ protection they have at least for
the public rented sector in Belgium, Finland and the UK and both for the public and private rented sector in Germany, Sweden and the Netherlands (see
Table 11.4).
Although in the Netherlands and Sweden interviewees refer to renting as
more secure than owner-occupation, they also express worries about future
developments. In both countries the researchers argue that a change in
the perception of security and insecurity of tenure is occurring. The Dutch
researchers argue that the insecurity about renting was mainly caused by
the fact that the Dutch government was discussing liberalisation of a certain
share of the rented housing stock at the time of the interviews. The Swed-
[ 301 ]
ish researcher concludes her chapter by reporting that tenants are subject
to high rents and they are insecure about future rent developments; furthermore, they have no housing equity to increase their pensions and often little space to increase savings. These findings suggest that the absence of an
affordable and acceptable alternative to home ownership that is not protected by rent regulation and tenant protection enhances the perceived security
of home ownership.
11.4 Use of home ownership as a financial resource
11.4.1 Some statistics on housing finance
Few homeowners have the means to buy a house outright. In most countries
it is common to have a mortgage. There are, however, clear differences between countries. First of all, the proportion of homeowners with a mortgage
differs across countries, ranging from 15% in Hungary (where modern mortgage market products were introduced only at the beginning of this century) to 88% in the Netherlands. At first glance the differences are remarkable
and suggest a potentially enormous impact on the security and insecurity of
home ownership. The value of the mortgage compared to the market value of
the house for recent buyers varies from 70% in Germany and the UK to 112%
in the Netherlands.
Table 11.5 provides an overview of mortgage use. The Dutch are heavy users,
with a high share of mortgagees and high loan to value ratios. Moreover,
interest-only loans are rather popular. It could be said that Dutch homeowners are not building as much housing equity as they could. Although there
is a lack of data, Table 11.5 also shows high figures for Sweden, where housing equity is being used for other aims in order to optimise their fiscal result.
Hungary and Portugal are the best equity builders, while the other countries
are in between.
The next question we will address is the risk associated with a mortgage.
To what extent do households take risks to build up equity? The type of mortgage can give an indication of the risk. Investment and endowment mortgages in general are considered more risky than repayment mortgages. Moreover,
longer fixed interest periods can be considered as a kind of insurance and risk
reducer. Table 11.5 shows that Belgian mortgages seem to be most safe while
UK and Dutch mortgagees have risky mortgage types and UK mortgagees also
have variable interest rates.
Final measures of risk are housing arrears and repossessions, which are
shown in the last rows of the table. This table provides a varied picture. The
UK and Germany are remarkable for their high numbers of repossessions,
[ 302 ]
Table 11.5 Housing finance
the Nether­ Portugal
% of owners with a
mortgage (2001)
LTV recent buyers (2001) 80-85
Duration of loan (2001) 15-20
Possibility of freeing up no
equity (2003)1)
Variable rate or
Fixed 20 Fixed >5 Variable
fixed-interest period
Use of more risky types2)
Arrears % of owners
Number of
repossessions (2001)
1) Doling & Ford, 2003.
2) Investment and endowment mortgages.
3) Data not available.
4) See OECD, 2005, Housing Finance Markets in transition economies, Paris.
5) Only Flanders.
yes but not
Sources: Quantitative Studies OSIS, Institutional Studies OSIS
although they are large countries, and Finland catches the eye by its high rate
of arrears. The Dutch, as the largest mortgage users, do not stand out in terms
of high arrears or high number of repossessions.
11.4.2 Perceptions of the role of home ownership as a
financial resource
The question is whether home ownership is perceived as a financial resource
and is part of people’s financial planning, either in terms of reduced housing expenses due to being an outright owner, by selling, or by mortgage equity withdrawal. Interviewees in all countries mentioned the advantage of reduced housing expenses in old age, and selling and using the proceeds to buy
a new house is also rather common practice. However, the interviewees also appeared to have rather divergent ideas about the role of home ownership
as a source of financial security for welfare needs. Cashing in equity either by
selling the house or by using certain mortgage products that enable the release of capital from the house are not common practice. Subletting is also
mentioned as an option in the event of emergencies in some countries.
Reduced housing expenses
The most self-evident advantage of building equity is that over time mortgage
expenses normally decrease and once a mortgage is repaid housing expenses
are strongly diminished. This advantage of home ownership is mentioned in
[ 303 ]
most countries. It is an important advantage of home ownership for Belgian
interviewees. They refer to old age, as they expect their incomes to be lower when they retire and in this respect contrast the position of outright owners to the position of tenants. In Germany researchers reported that some interviewees voluntarily increased the rate of their mortgage repayment to reduce mortgage expenses and to eventually become outright owners. These interviewees cut back their spending on consumables and leisure, and said that
they took advantage of their current living situation, which was considered
good at the moment but unclear for the future. Reduced housing expenses
are probably perceived as a self-evident feature of owner-occupation in Finland and Hungary, as it is not mentioned in these countries’ chapters.
Releasing housing equity: selling and mortgage equity withdrawal
The action of accessing money from the owner-occupied dwelling for welfare
needs did not seem to be common for all interviewees. The Finnish researchers summarised interviewees’ perceptions of the house as being a kind of
‘sanctuary’. In all countries some interviewees brought up objections against
the use of their homes as a financial resource.
Different reasons for the aversion to access equity by using a flexible or
second mortgage can be uncovered. Interviewees in Finland and Sweden did
not like equity withdrawal while they would have to use additional mortgage
products and they distrusted the banks or thought that banks would unreasonably profit from these kinds of loans. Remarkably, Swedish and Finnish
homeowners also argued that they felt more secure as mortgage lenders were
perceived as flexible with regard to repayment conditions. In Germany interviewees said they would feel uncomfortable taking up an extra mortgage as
they would fear not to be able to repay it. The German researchers showed
that homeowning interviewees in particular worried about unemployment and immobility as a result of home ownership. Furthermore, the German interviewees shared the idea of repaying a mortgage as soon as possible. In Portugal and Hungary interviewees explained that they felt emotionally attached to their homes and did not want to sell them; they regarded equity release as a theoretical option as a very last resort. Finally, in Finland, Hungary, Portugal and the UK interviewees ideally wanted to pass at least a considerable share of the capital on to their children.
Although in all countries some interviewees showed resistance to the use
of their home as a financial resource, this did not necessarily imply they were
all opposed to the use of housing equity. In comparison with interviewees in
the other countries, the British perceived using housing equity as rather normal and in contrast with interviewees in other countries everybody understood the concept of mortgage equity withdrawal for pension purposes. British interviewees mentioned a broad range of possible uses of housing equity: from home improvement to taking a career break; from undertaking train-
[ 304 ]
Box 11.3 Resistance against using the home as a financial resource mentioned in the
countries’ chapters
[…] An overwhelming majority of the owners do not consider using housing resources. If it is considered, it is linked with becoming older […] But by the same token and following the general logic,
a significant number of respondents seriously doubt whether it would be a good idea to use housing property to supplement pension income (Belgium).
Overall, the idea of using housing equity as a source of money seems still very new and strange
for many. For some people housing and particularly the owner-occupied home represents a kind of
“sanctuary”, which should not be mixed up too deeply with economic considerations (Finland).
In Germany homeowners and tenants alike are not familiar with the idea of accessing equity from
housing. Most have not considered utilising their housing. Yet they often implicitly regard housing
as a ‘pension in stone’ or a source of wealth that they can rely on in case of need […] Only if there
were no other alternatives would people consider using their housing as a financial resource in the
future (Germany).
[…] The dwellings play a role in households’ financial security to the extent that the households
consider the dwelling as part of their wealth portfolio. This is, however, seldom the practical
approach and is mentioned as a theoretical option, and in times of hardship and accessing the
wealth stored in housing, downward mobility has disadvantages and the families would most probably consume the ‘gained’ financial resource very quickly […] they tend to be very reluctant to
mobilise their homes for consumption purposes (Hungary).
Some interviewees consider it unwise to cash in the surplus value; they think that people are just
saddling themselves with more debt. They do not wish to take out an extra mortgage on the equity
of their house […] the equity in their home [is seen] as a fund for emergencies (The Netherlands).
On a first approach, most respondents do not consider using housing equity in the future. The
main focus is on housing as a home, to be paid for over time in order to be allowed to rest once
the mortgage ends […] Once paid, the dwelling will gain a new important meaning, that of an asset
to leave to the children (Portugal).
Elderly respondents in particular started to talk about ethics when suggestions were made to use
housing equity for these purposes. It was something deeply wrong to spend what you had tried to
pay off all your life and in addition housing could not be risked (Sweden).
Most UK respondents understood the concept of using money stored in their house for future activities but few had thought through this in any detail […] A couple of people explained they could
not understand why someone would consider this […] (UK).
ing to care in old age; and in the end they would like to have some equity left
to pass on to their children. The Swedish and Dutch interviewees also considered using, or had used, housing equity for various purposes. In the Swedish
chapter the researcher specified the group that was mainly opposed, namely the elderly, while the younger interviewees considered the idea of using
housing equity as more acceptable. Although not yet used as such, some
[ 305 ]
Table 11.6 Dominating perceptions of the use of housing equity and the
importance of intergenerational transfers
Not common to use equity
transfers less important Germany
transfers important
Common to use equity
young Swedish interviewees
the Netherlands
did perceive the use of housSweden
ing equity as appropriate to
boost their income when they
stopped working, or if they
wanted to work part-time. In the Netherlands too, many interviewees did not
seem to have difficulties with the idea of accessing housing equity through a
second mortgage; although the range of purposes became smaller in the latter country when the tax regulation changed (see Section 5.3).
An important reason for accessing equity, or perceiving it as a possibility,
seemed to be related to being familiar with the process of accessing equity
and being familiar with mortgage products that enable access (see Table 11.6).
The British researchers report that financial institutions encouraged people
to use mortgage equity release products, and indeed the British respondents
are the ones in our sample of countries that saw the most various options for
accessing equity. Furthermore, asset-based welfare and the role of home ownership is a topic of policy debate in the UK and not in other countries.
Furthermore, the Dutch case reveals that a relation with tax policy is probable. When equity could be cashed irrespective of taxes for all consumption
purposes, the Dutch did use it for all kinds of purposes. However, when this
tax policy changed, and tax was only deductible when equity was used for
reinvestment in the dwelling, then interviewees only used it for reinvestment.
The perception of home ownership as a financial resource in the UK and the
Netherlands indicates the powerful influence of both financial institutions
and tax policies on the accessing of equity.
In addition, the conditions of the housing market, social security and the
labour market might play a role. In the UK, Sweden and the Netherlands
house prices have been mostly on the rise, and arrears were relatively low;
and at the same time the level of income security was relatively high in all
three countries.
Subletting appeared to be another financially profitable aspect of being a
homeowner: it was mentioned as an acceptable option in the adjacent countries Belgium, Germany and the Netherlands. For some interviewees it was
an option in the event of need (see Table 11.7): in Belgium some interviewees
solved their precarious financial situations by subletting. In the Netherlands
it was at the time of the interviews a financial strategy for more affluent interviewees who either inherited or had large resources that they wanted to invest. Although some German interviewees remarked that they did not consider subletting as attractive because they did not like sharing their homes with
strangers, subletting was perceived as the most acceptable way to use home
ownership as a financial resource, besides selling.
[ 306 ]
Table 11.7 Ways to use home ownership as a financial resource and relative importance
in interviews
Reduced housing
the Netherlands
- not mentioned
+ mentioned
++ emphasised as relatively important
+++ specifically related to income insecurity and part of financial safety net planning
The home as a financial resource for welfare needs?
As Hungarian and Portuguese interviewees experience high income insecurity we expected that home ownership would be more important for them as
a financial resource. Although the interviewees did not find it appropriate to
use equity for a whole variety of purposes, they did perceive home ownership
as an important asset in case of emergencies. In this sense Hungarian interviewees did emphasise the primary importance of home ownership in times
of financial hardship. The Portuguese researchers explained that interviewees
would first sacrifice all other joys as much as possible; however, in the event
of health problems or in old age, and only if no other option remained, interviewees said they would consider using housing equity. In Germany, another
country in which income insecurity was relatively high, interviewees regarded home ownership both as a constraint and an opportunity. On the one hand
they were bothered by the perceived immobility; in the event of job loss one
would be limited in the area in which one could find a new job. On the other hand if the mortgage were repaid housing expenses would be diminished,
and then a homeowner would be financially better off than a renter in the
event of unemployment or low pensions.
11.5 Conclusions
The aim was to gain more insight into how people relate home ownership to
income insecurity and how institutional factors impact on this. In a context
of growing income insecurity, the growing rate of home ownership and deregulated mortgage markets that offer a growing range of products were expected to create new securities and insecurities for homeowners. The central
hypothesis posed at the beginning of this chapter was that home ownership
would be more important in people’s lives for financial security and an aspect
[ 307 ]
of people’s financial safety net planning when income security was lower. To
provide a basis for reflection on this area, we will first give answers to the objectives with which we started this chapter.
How do interviewees perceive income (in)security? To what extent do interviewees
take private measures and count on or do not count on social security?
The perceived level of insecurity differed among countries, as did their strategies, and relations with the statistics were rather clear. We were able to distinguish four types of countries according to interviewees’ perceptions of income security and insecurity and on the basis of safety net strategies. Interviewees in countries in the first category perceived a relatively high level
of income insecurity and their strategy was based on self-management and
family support. These countries, Hungary and Portugal, had in common that
their labour markets were relatively insecure and social security was relatively low. In these countries interviewees argued that social security could not
improve people’s situation; on the contrary, people would do better to avoid
relying on benefits as a social stigma was attached to using them. Furthermore, the importance of family support and one’s own resources were considered as crucial for perceptions of security and insecurity.
Interviewees in the second category, Germany, also expressed feelings of
income insecurity, yet they did rely on social security. This country is characterised by an insecure labour market and a relatively high welfare level.
The perception of income insecurity, despite the relatively high level of social
provision, was explained by unfavourable changes that had occurred in the
labour market and social security. People’s future prospects about the socioeconomic situation were also rather pessimistic.
In the third type of country interviewees perceived income security and
their safety net strategies were mainly based on self-management. This country, the UK, was characterised by a relatively secure labour market. Furthermore, the strategies could be explained by the liberal welfare regime.
Finally, in the fourth group of countries interviewees perceived income
security and relied on social welfare. Most of these countries – Belgium, Finland, the Netherlands and Sweden – were characterised by a secure labour
market and social security. However, one country, Finland, was characterised
by a relatively insecure labour market situation. Recent developments and
future prospects would seem to be the explanatory factor here; people in this
country were relatively optimistic about current and future socioeconomic
Homeowners usually reflected more on their housing situation and had
more savings and insurance compared to tenants. Different reasons were
brought up that relate to home ownership in itself: a greater financial responsibility, having more to lose, homeowners needed to save for maintenance,
[ 308 ]
households’ financial characteristics: homeowners have more means to save
or spend on insurance, and institutional characteristics: mortgage lenders
strongly encouraged insurance, governments encouraged people to save, and
homeowners lacked housing allowances as part of their safety net.
To what extent do interviewees perceive home ownership as secure and prefer it to
renting for security reasons and how is this related to income (in)security and the
housing and mortgage market?
Although a roof over one’s head was mostly the most important reason to buy,
housing equity was an argument mentioned early on in all countries when interviewees explained their choice for home ownership. Interviewees said they
would rather pay money into their own pocket than a landlord’s pocket. To be
able to buy a house and to put that money in their own pocket, most interviewees took up a mortgage. In the beginning the mortgage was perceived as
a burden; in the long run interviewees said they would feel more secure because of diminishing housing expenses. The perception of home ownership as
a safe and stable investment appeared not to be straightforwardly related to
recent rising house prices (Germany); thus the perception of home ownership
as secure is not fully dependent on the functioning of the housing market.
We witnessed a mixed picture of security and insecurity attached to home
ownership in Hungary, where house prices had been volatile, the quality of
part of the owner-occupied sector is low and housing policy has been unstable. To put it briefly, the housing market and housing policy contributed to the
insecurity of home ownership; nevertheless home ownership was perceived
as the most secure type of tenure.
Home ownership appeared not always to be perceived as the most secure
type of tenure. This was mostly the case in countries where renting was perceived as an acceptable alternative to home ownership. In countries where
there was a considerable share of rental dwellings and housing rental policy, and specifically rent regulation and tenant protection, was well arranged
for both the private and the social rental sector, in Germany, Sweden and the
Netherlands, renting was perceived as acceptable for those on low incomes,
for young people, for people with unstable lifestyles, like those in unstable
employment, for example, and lastly for elderly people, who do not like to
have responsibility for maintenance in older age. In Finland, the UK and Belgium, countries where only the social rented sector was protected, interviewees regarded renting as the best type of tenure for lower income households
and as temporary housing for young people, however, the emphasis is put on
renting as a temporary solution. Finally, in countries where both sectors are
marginal and mostly poorly protected (Hungary and Portugal) it is perceived
as a last resort for people who are financially not able to enter home ownership; the sector is perceived as highly insecure.
[ 309 ]
To what extent do interviewees perceive home ownership as a financial resource
and how does this relate to the institutional context?
If we consider the use of home ownership as a financial resource it appears
that home ownership is used as such in all countries. Home ownership, for
example, provides reduced housing expenses, housing equity can be accessed
by selling or by taking up a second mortgage, and finally home ownership
provides the opportunity to sublet part of the house. However, not all these
ways of using home ownership as a financial resource were self-evidently applied as such in every country. The benefit of reduced housing expenses in old
age appeared to be a commonly valued security, as was using the proceeds of
a sale for buying a new dwelling, whereas selling and mortgage equity withdrawal for welfare needs were perceived with more restraint.
When we consider to what extent home ownership as a financial resource
is related to welfare needs, we consider only a few countries. In Belgium interviewees explicitly linked home ownership to reduced housing expenses in old
age. In Germany, too, reduced housing expenses were related to future income
insecurity, not only in old age but also in the event of unemployment. In Hungary and Portugal the owner-occupied dwelling was seen as a last resort to
rely on in case of dire financial need, in which case the dwelling would be
sold. In the UK interviewees reflected on taking a second mortgage as part of
their financial planning.
Notably, in Sweden and the Netherlands releasing housing equity by taking
up another mortgage was rather common practice yet reflected upon more as
a kind of surprise, a bonus, as unexpectedly house prices had been rising rapidly.
Home ownership as an asset: a new perception?
Now we return to the central hypothesis stated at the beginning of this chapter. To what extent is home ownership more important in people’s lives for financial security and to what extent is it an aspect of people’s financial safety
net planning when income insecurity is low? Income insecurity covers both
labour market and welfare provision (Table 11.8 shows the overview).
In Hungary and Portugal interviewees were most insecure about their
income and relied on private measures. We expected that in these countries
home ownership would be perceived as relatively important for security reasons. Indeed, home ownership was perceived as the secure type of tenure and
as a financial resource to rely on in case of emergencies for welfare needs –
interviewees mostly thought of selling, which would have a sweeping effect
on their lives. In Hungary home ownership did not only provide security to
the homeowning household, but often had a function in a broader family network. However, home ownership was not only the secure type of tenure for
financial reasons, but also because renting was not perceived as a serious
[ 310 ]
alternative in either country. In Portugal tenants were considered as socially
excluded. In Hungary home ownership was also described as insecure, since
the timing and the process of buying could have far-reaching consequences
for the rest of people’s lives and the quality of the dwellings caused insecurities.
In Germany changes in social security and a risky labour market made people insecure about their incomes despite a still rather generous social provision. On the basis of the central hypothesis we expected that the meaning
of home ownership would be changing in Germany, and would become more
important for security reasons. We found divergent effects of the perceived
income security changes on the meaning of home ownership. On the one
hand, home ownership was said to be part of financial planning as housing
expenses decrease while repaying the mortgage. Reduced housing expenses
were not only related to old age, but people were also very much motivated to
repay as quickly as possible so that if they were to lose their jobs, their housing expenses would be considerably lower. However, on the other hand, interviewees appeared to be much more careful before entering home ownership
and some homeowners felt rather inflexible as a homeowner. The obligations
of a mortgage were perceived as a burden and home ownership as a cause for
immobility. Renting was seen as more secure in periods of unstable jobs, relationships and financial circumstances.
In the UK, people did not rely on social security but more on self-management. Home ownership was expected to provide security as a financial
resource. This appeared to be true, most importantly through mortgage equity withdrawal; rising house prices appeared to be an important factor that
enhanced the feeling of security in this respect. Still, people were careful and
generally wanted to leave an inheritance for their children.
In Belgium, Finland, Sweden and the Netherlands people were secure about
their incomes and relied on social security. In these countries we expected
that home ownership was not an important tenure for financial security. Generally however, home ownership was seen as a nest egg, a fund for emergencies, yet not explicitly related to welfare needs. The only exception was Belgium, where home ownership was perceived as part of financial planning for
old age, as homeowners would then have lower housing expenses compared
to tenants. Furthermore, in Sweden and the Netherlands withdrawing equity was a rather common practice, yet it was perceived more as a surprise or
bonus than as a part of financial planning.
Whereas in all countries reduced housing expenses and having a nestegg were perceived as a financial security, interviewees in Hungary, Portugal, Germany, the UK and Belgium seemed to relate home ownership explicitly to income insecurity. The ways in which people would use their homes
as part of their financial strategy were different: reduced housing expenses
and selling were the most common strategies; mortgage equity withdrawal
[ 311 ]
Table 11.8 Ways to use home ownership as a financial resource and for what purposes, mentioned in interviews
Belgium (Ghent)
Reduced housing
Old age
Finland (Turku)
Germany (Hanover)
Old age
Hungary (Budapest)
the Netherlands
Old age
Portugal (Caldas da
Old age
Education of child
Sweden (Gävle)
Old age
UK (York)
Old age
Equity withdrawal
New house
Intergenerational transfer
New house
Intergenerational transfers
New house
Business startup
Business startup
Home improvement
Home improvement
Care needs
Children’s education
New house
Emergencies (both self
and family)
Intergenerational transfer
New house
Intergenerational transfer
Old age
Pension fund
Old age
Home improvement
Buy out partner
New house
Health care
Old age
Intergenerational transfer Emergencies
New house
Home improvement
Old age
Stop working
Intergenerational transfer Working part-time
New house
Home improvement
Home improvements
Pay off other debts
Career break
Leisure and holiday
Deposit for a rainy day
Old age
Care needs
Buy second property
Business startup
Children’s education
was only common practice in the UK where considerable house price increases occurred and where mortgage equity release products were available. The
importance and security of home ownership appeared not to be straightforwardly related to benefits of building up housing equity and income insecuri-
Make living
Old age
[ 312 ]
ty. Factors that influenced this relationship were most importantly the rented
sector, and the extent to which this sector provided a fully acceptable alternative to home ownership; and also the quality of people’s homes and worries
about maintenance and further unstable housing policy raised insecurity of
home ownership in some countries.
We expected that home ownership as an important source of security was
a new development as labour markets become more flexible, social security diminishes and the financial market delivers more and more equity withdrawal products. However, this research suggests that home ownership provides people with security in rather traditional ways, namely by reduced
expenses in old age and by selling. This raises the question of whether home
ownership obtains a ‘new’ meaning as an asset in the context of temporary
jobs, periods of unemployment and a government that withdraws from social
security. Chapter 12 will elaborate further on this question and consider the
associated concept of asset-based welfare policies.
Ball, M., 2005, RICS European Housing Review 2005, London (Royal Institution
of Chartered Surveyors).
Bank of International Settlements, 2006, Housing finance in the global financial market, CGFS working group report, no. 26.
Eurobarometer 62, 2005, Public opinion in the European Union, on website: http://ec.europa.eu/public_opinion/archives/eb/eb62/eb_62_en.pdf. Eurostat, European Labour Force Survey, Luxemburg (EU): http://epp.eurostat.ec.europa.eu/portal/page?_pageid=1913,47567825,1913_
Eurostat, op website: http://epp.eurostat.ec.europa.eu/.
Horsewood, N. & P. Neuteboom (eds.), 2006, The social limits to growth, Security and insecurity aspects of home ownership, Amsterdam (IOS Press).
OECD Employment Outlook, 2005, http://www.oecd.org/document/1/
Scanlon, K. & C. Whitehead, 2004, International Trends in Housing Tenure and
Mortgage Finance, London (Council of Mortgage Lenders).
[ 313 ]
12 Reflections on asset-based welfare and
future research
Marja Elsinga, Janneke Toussaint & John Doling
12.1 Introduction
Housing equity plays a role in people’s financial planning in the eight countries of this study. In all eight countries, households consider housing equity as a nest egg and financial security that can be relied upon in the event of
bad luck. Moreover, in some countries we found signs of what we could call
asset-based welfare planning: housing equity is used for purposes that could
be part of welfare facilities provided by the government. In other words, we
found some signs of what we might call ‘housing asset-based welfare’.
The idea of asset based welfare was developed in the USA and is considered to be a complementary system to traditional welfare tools. In Europe, the
UK and Sweden have launched asset based welfare programs. Housing equity
could be considered as part of such a program and as an addition to existing
welfare programs. Here we explore how this concept, which was developed in
an Anglo Saxon context, could apply to housing in eight different countries.
We search for signs of housing asset based welfare exploring households’ perceptions and behaviour and the institutional contexts of the eight countries.
This chapter further reflects on the concept of asset-based welfare that was
introduced in Chapter 1. It describes what is meant by asset-based welfare
and how asset-based welfare policies can be shaped. We elaborate on what
could be considered as housing asset-based strategies for households and
housing asset-based policies. We then reflect on the previous chapters and
describe the signs for housing asset-based welfare in the eight countries. Finally, we reflect on these signs of asset-based welfare, on the OSIS project
and current developments and point at issues of importance for future
research in this field.
12.2 Asset-based welfare
12.2.1 What is asset-based welfare?
Sherraden (1991) introduced the concept of asset-based welfare as an alternative to a means-tested welfare regime. His observation is that means-tested
welfare provision has failed. Such policies make the poor dependent on the
government and are not able to create opportunities for these people. Sherraden sees a role for assets in welfare policies, and believes that assets change
the way people think about the world: they start thinking about the long term
and set long-term goals. Moreover, holding assets supposedly increases participation in the community and investment in self, financial instruments
[ 314 ]
and enterprise for greater returns. He therefore holds the opinion that an active social policy that promotes engagement is better suited to a post-industrial society than traditional welfare arrangements (Sherraden, 2003). He further developed the concept of asset-based policy and poses that any assetbased policy system should complement, not replace, existing income-based
polices. A mature asset-based policy should be shaped by four core principles:
inclusive, progressive, coherent and development. The most important principle is inclusiveness: a policy should be large-scale and fully inclusive, with
progressive funding, in order that everyone participates and has resources for
life investments and social protection.
This idea of asset-based welfare policy is criticised by, for example, Emmerson & Wakefield (2001), who doubt the independent effect of asset-owning
on individual life chances. They state that the existing evidence of individual
effects on individual life chances is not strong enough to justify a large-scale
programme of asset-based welfare policies. Perhaps more convincing are
arguments that engaging people in the process of saving, and thereby learning to plan ahead and learning about financial institutions, can help poorer people to create more opportunities in life (Emmerson & Wakefield, 2001).
Their criticism points at the independent effect of assets: they do not believe
that assets change the mind. But they do recognise that the role of learning
– with help if necessary – to plan for the longer term can be a way to provide
households with opportunities.
12.2.2 Is there a role for housing?
Housing is an important asset and for many households the largest investment they will make in their lifetime. Moreover, home ownership is encouraged by many governments and there are different underlying reasons for
such policies. Building assets, encouraging responsibility of households and
encouraging households towards involvement in their community and in society as a whole are reasons for governments to encourage home ownership
(see, for example, Rohe, 2001). Ideas on encouraging home ownership were
mentioned in policy documents in Germany and the Netherlands as early as
the 1950s (Behring & Helbrecht, 2005; Elsinga & Hoekstra, 2005). The ideas behind policies to encourage home ownership are surprisingly in line with the
basic idea of asset-based policy. The encouragement of home ownership can
therefore be considered as part of an asset-based policy.
In the UK, asset-based policies are becoming normal in the policy discourse
and housing equity is part of this. According to Groves, Murie & Watson (2007)
housing is no longer a wobbly pillar of the welfare state alongside a generous,
redistributive welfare system. Housing has become, rather, the keystone for a
more individualistic economic and social policy agenda. It is citizens taking
responsibility for their own welfare and investment in home ownership that
[ 315 ]
provides the mechanism for welfare in different stages of life. Home ownership is increasingly seen as the key to life chances. Groves et al. (2007) consider the Right to Buy, Shared Ownership and Home Buy schemes as instrumental in an asset-based housing policy.
In this chapter we are looking for signs of housing asset-based welfare in
the eight countries under study. We will therefore elaborate on the ideas of
Sherraden about the effect of holding assets and his ideas on asset-based policy. We will describe what could be considered as housing asset-based welfare
and take the perceptions and behaviour of households and the way housing
policy is shaped into account.
We can distinguish three signs of what can be considered as housing assetbased perceptions and behaviour (non-exhaustive list):
nhouseholds consider home ownership as an asset;
nhouseholds use housing equity in their financial planning;
nhouseholds take housing equity into account for their safety net and welfare needs.
Considering housing policy, we will take two of the four criteria as described
by Sherraden into account: inclusiveness and progressiveness. Unfortunately
it is not possible to reflect on the other two criteria since the collected material does not allow for conclusions in these areas. We can translate the two principles of Sherraden into three signs of housing asset-based policies:
nhome ownership is encouraged by housing policy;
nthe encouragement of home ownership is targeted at low income groups;
nthe encouragement of home ownership is inclusive, thus addressing all
households and thus not stimulating lower income groups to rent.
12.2.3 Signs of housing asset-based welfare
Households’ perceptions
Although a roof over one’s head was the most important reason to buy, housing equity was an argument mentioned early on in all countries when interviewees explained their choice for home ownership. Interviewees said they
would rather pay money into their own pocket than a landlord’s pocket. The
security of being a homeowner was not always self-evident, however: in general it mainly provided security for those people who were secure about their
incomes when they entered home ownership, and for all homeowners once
they repaid their mortgages. In some countries and for some groups of people
(e.g. low income households, households with short-term relationships and
jobs) renting was perceived as preferable for security reasons, either as a temporary solution (Finland, Belgium and the UK) or as a long-term acceptable
alternative (Germany, Sweden, the Netherlands), dependent on housing policy that dictates the security of renting. Renting was seen only as a last resort,
[ 316 ]
and for people without any financial opportunities, in Hungary and Portugal.
Here, tenants were perceived as being socially excluded. In Hungary home
ownership was also described as insecure, since the timing and the process of
buying could have far-reaching consequences for the rest of people’s lives and
the quality of the dwellings caused insecurities.
Homeowners usually reflected more on their housing situation and had more
savings and insurance compared to tenants. Different reasons were brought
up: a greater financial responsibility, having more to lose, the need to save for
maintenance, homeowners have more means to save or spend on insurance,
mortgage lenders strongly encouraged insurance, governments encouraged
people to save, and homeowners lacked housing allowances as part of their
safety net. Thus, not only does having an owner-occupied home – an asset – stimulate homeowners to build a private safety net, as Sherraden assumes, but
also household characteristics, financial institutions and government policies.
Home ownership could be benefited from as an asset in three ways: first
by reduced housing expenses once the mortgage is repaid, second by selling
the house and using the proceeds, and third by mortgage equity withdrawal. Reduced housing expenses in old age appeared to be common practice,
whereas selling and mortgage equity withdrawal was often a more troubling
perspective for households in the event of a drop in income. In all countries
people seemed cautious about accessing housing equity; they referred to their
homes as a ‘sanctuary’ that should not be caught up too much in economic considerations. They seemed to strive towards outright ownership and in
some countries interviewees wished to pass the capital on to their children.
However, the options of selling and mortgage equity release were sometimes used without question when one wanted to buy a new house, or when
house prices had risen so much that one did not feel at risk by releasing some
housing equity. Therefore we now distinguish another dimension that evaluates the different kinds of purposes and related levels of necessity of the use
of housing equity. We distinguish three categories: housing equity as part of
financial planning; housing equity as a bonus; and housing equity as part of a
safety net strategy (see Table 12.1).
When we speak about housing equity in financial planning, we mean that
people assume certain income developments over their lives, and they perceive housing equity in relation to this development. This specifically holds
in every country for reduced housing expenses when living on a pension and
being outright owner. The Belgian interviewees explicitly made the link with
pensions; reduced housing expenses were perceived as an important advantage of homeowners in old age. In Hungary and Finland reduced housing
expenses were not mentioned, yet we assumed this was a self-evident advantage of home ownership. Furthermore, selling in old age and moving to the
rental sector formed part of the financial plans of some interviewees in the
Netherlands and Sweden.
[ 317 ]
Table 12.1 Perceptions of home ownership and housing equity
Housing at asset Home ownership in financial planning
Reduced Selling Mortgage equity
the Netherlands
Housing asset part of safety net strategy Income insecurety Nest egg
& welfare needs
In the Netherlands and Sweden, people mainly perceived the opportunity
of mortgage equity withdrawal as a pleasant surprise and they used housing
equity as a bonus resource. For example, they bought a caravan, furniture or
financed the renovation of their shower and sink into a luxurious bathroom.
In these countries, mortgage equity withdrawal did not add to financial security. In the UK, mortgage equity withdrawal was also to some extent used as a
nice surprise for, for instance, a holiday or buying a second property; however, for the UK interviewees housing assets also have a more emergent role in
their safety net strategies.
Housing equity being part of a safety net strategy is the final category to be
used in the event of an unexpected drop in income or welfare needs. Here we
can distinguish two roles of home ownership, first as a nest egg to be used in
inconceivable worst-case scenarios; and second as a financial resource directly related to income insecurity and welfare needs. In all countries, home ownership is perceived as a nest egg. In Hungary, Portugal, Germany, and the UK,
however, home ownership contributed directly to financial security. In Hungary and Portugal becoming a homeowner was regarded as important for financial security, selling the house was perceived as a last resort for emergencies;
it would have a sweeping effect on interviewees’ future lives. In Germany
interviewees related reduced housing expenses explicitly to the risk of unemployment and in the UK people perceived mortgage equity withdrawal as a
rather acceptable way to release equity, mainly for old age, but also to protect
against potentially negative financial consequences of risks.
Housing policy
We will now search for signs of housing asset-based welfare in housing policy using the three criteria described in the previous section. The first criterion is encouragement of home ownership. Table 12.2 shows that all countries
except for Sweden encourage home ownership. This policy aim is achieved in
different ways, ranging from regressive tax policies to instruments targeted
at lower income households, as shown in Table 12.2. In Germany, Finland and
Hungary there are government-supported saving schemes which encourage
people to save for the down-payment necessary to buy a house. Enabling access to home ownership is also possible by increasing borrowing capacities. A
government mortgage guarantee is an instrument which allows a higher loan
to value and can result in a lower interest rate. Five of the eight countries apply a government mortgage guarantee. This instrument enables households
to enter home ownership without saving or with less saving.
[ 318 ]
Table 12.2 Housing policy
Targeting low incomes
of home ownership Savings
Mortgage Grant/
the Netherlands UK
the Netherlands Sweden
* Social housing is a reasonable but stigmatised alternative to home ownership.
Renting satisfying
the Netherlands
Then there are grants, interest subsidies and housing allowances. In Finland,
Portugal and Hungary subsidies and grants for low income households are
available. The UK has the Right to Buy scheme, which provides a reduction on
the sales price of the dwelling. Finally, intermediate housing tenures have been
developed in the UK and the Netherlands. The UK has the Shared Ownership
and Shared Equity schemes, which enable households with lower incomes to
buy at an affordable price and to partly rent (Shared Ownership) or to pay back
a certain amount after selling (Shared Equity). In the Netherlands different
housing associations apply similar but slightly different Shared Equity schemes
(for example Koopgarant and Sociale koop). These new tenures do not only make
housing more accessible but also reduce the risk of house prices going down.
The scope and effectiveness of such programmes was not the object of
our research but the results indicate that such policies are not inclusive policies as meant by Sherraden. On the contrary, in many countries there is a
social rental sector meant for lower income groups. For some households
home ownership is highly desired but only social or private renting is accessible. In other countries (Germany (private and social renting), the Netherlands,
Sweden, Finland, the UK and Belgium), there is government support to create a satisfactory alternative in the rental sector for lower and other income
groups. For the latter two countries it could, taking the result of the interviews into account, be discussed whether social renting is a satisfactory alternative or a last and marginal resort.
Housing asset-based welfare?
We found that homeowners are using housing equity in their financial planning: low housing expenses in old age are considered more or less explicitly as part of financial planning. Moreover, we found signs of housing equity in safety net strategies: housing equity plays a safety net role, for example, in the event of unemployment or other emergencies. This was the case in
Hungary and Portugal, where housing equity lies at the core of interviewees’
safety net strategies. In the UK and Germany, welfare regimes are under discussion and households do not rely on the government but think about their
own safety nets. Although the level of facilities in the UK is considerably low-
[ 319 ]
er than in Germany, in both countries households translate policy discussions
and worries about the future into a safety net strategy, for example for the
case of a drop in income, where housing equity plays an important role. In
Sweden, Finland, Belgium and the Netherlands households rely to a large extent on welfare benefits for income security. Belgium, where housing equity has a key role in particular in pension planning, stands out in this respect
more than the other three countries.
Housing equity appears to be part of households’ financial planning and
there is a relation to the level of welfare facilities. The lower the level, the
more important housing equity is in households’ safety net strategies. Housing equity is mostly used in the more traditional way: having low housing
expenses in old age is considered as most important. Mortgage equity withdrawal appeared to be an abhorrence to many households: saving money in
the house is a virtue while withdrawing money is considered a vice. However,
there are also households who are withdrawing equity and households who
would consider doing so in the future. This trend can be found in countries
with rapid house price increases. House price increases that exceed average
price increases provide households with extra.
Considering households’ perceptions and housing policies we conclude that
Hungary and Portugal show most similarities to what could be called a housing asset-based welfare policy: home ownership is encouraged, subsidies are
targeted and there is low government support for alternative tenures. However, the housing policy does not yet meet all the criteria of Sherraden. In particular the inclusiveness criteria is not met: apparently the targeted subsidy
schemes do not provide access to all and the result is that there are tenants
who would prefer to be homeowners but are not able to access this housing
Our research results provide more fuel for reflection on Sherradens’ concept
of asset based welfare and more in particular the idea of housing asset based
welfare. First the relation between assets and opportunities: our results show
that being a homeowner is no guarantee for opportunities: the previous chapters report on the lives of marginal homeowners and show that home ownership does not necessarily create opportunities.
Being a homeowner is not a guarantee for better life, but being a tenant
can mean a stigma. In countries where home ownership is the majority tenure and the tenure desired by most people, home ownership becomes the
norm as in Hungary, Portugal and to a lesser extent Belgium and the UK. The
interviews show that assets do not necessarily provide opportunities for low
income groups but it appears that being outside ownership has a stigma. Not
being a homeowner means having fewer opportunities.
Then the practical and emotional consequences of housing being a part of
a safety net. The cases of Portugal and Hungary very clearly show the problem of housing equity as a safety net facility. When in need, people cannot
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access their safety net and they have to move, on top of the other problems or
threats they experience.
A housing asset-based policy could strengthen the fault line between home
ownership and renting in particular when such a policy does not provide
access to housing equity for all households. That is why Sherraden emphasises an asset-based policy should be inclusive. An inclusive policy that
would provide access to home ownership will impact on the meaning of tenure. Renting will become a choice instead of a restriction, or will end up as
a redundant housing tenure since there will be no demand for it. In other
words, a housing asset-based policy that meets the inclusiveness criteria of
Sherraden is likely to lessen the fault line.
12.3 Discussion
This section explores options for future research. It starts with a number of
questions resulting from the research findings described in this book relating to the possible role of housing in the concept of housing asset-based welfare. It then elaborates on the scope of the OSIS project and on recent developments and the implications of these developments for future research.
12.3.1 Further questions on housing asset-based welfare
The concept of asset-based welfare and in particular a role for housing equity seems a tempting addition to welfare arrangements for governments who
are coping with changing societies and welfare budgets that are often under
pressure. Housing equity can be an addition or alternative to existing welfare
arrangements such as pensions. Such a shift, however, has many consequences. The previous chapter unravelled how households deal with housing equity
under changing circumstances such as changing welfare states and financial
markets. Such a shift also deals with responsibilities and dependencies and
new ideas of what is considered fair and sustainable. Asset-based welfare policies suggest a shift from governments towards individual households: a shift
with a number of drawbacks or at least unanswered questions concerning the
role of housing.
Financial planning
Income support feeds the stomach but assets change people’s minds, as Sherraden (1991) poses. This project explored the minds of homeowners and tenants and in particular their perception of housing equity and their safety
net strategies. The interview results showed differences between homeowners and renters. Homeowners in general worry more and have more insurance. However, this insurance is not always the result of better planning and
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well considered insurance strategy but sometimes just an obligation to protect the lenders that provide the mortgage. So there is an indication that assets change the mind. The asset management however, is not only felt as creating opportunities and financial control in particular where financial institutions play a role. The interview results showed that distrust towards lenders exists. In particular in relation to equity release, households are afraid
that these products are in the first place beneficial for lenders. Moreover, the
results show that holding assets does not automatically make households
good planners. If housing equity becomes more central in households’ financial planning and their safety net strategy, the relations with lenders and financial advisors will become more intense. Flexible mortgage payments and
mortgage equity withdrawal may become more usual options in households’
planning. Therefore the role of lenders and financial advisors, the transparency of the equity release market and financial education of borrowers are subjects that need further attention.
Social equality
Housing asset-based policies might impact on social equality on the differences between income groups. An increase in home ownership has an impact
on housing equity and therefore on social equality. Malpass (2006) states that
currently housing equity amplifies social inequality in the UK. Others found
that home ownership is not a key to success, as for example described by Ford
et al. (2001) and Norris et al. (2006). Homeowners can get into serious financial
problems, leading to repossession.
Moreover, the generation aspect is at stake. Esping-Andersen & Sarasa (2002)
reconsider what they call the generational conflict. They point at the fact that
the recent retirement cohorts are the triple beneficiaries of circumstance.
They spent most of their active life in periods of rapid real wage growth, full
employment and rising job security with concomitant experience-based salary gains. This cohort also benefited from considerable house price increases
and could build equity. When this generation uses mortgage equity withdrawal to supplement their income this will have an impact on future generations.
They might be spending their children’s inheritance or be SKI-ing (Spending
the Kids’ Inheritance) their equity away (Rowlingson & McKay, 2006).
Lastly, we come to the difference between homeowners and tenants. Will
such a policy result in an income distribution that runs analogously with tenure distribution? In other words, are tenants the lower income groups and
homeowners the non-low-income group? Moreover, is there a place for renters
or maybe for intermediate housing tenures in a housing asset-based policy?
House price development at the core
In the idea of asset-based welfare and in particular housing equity release,
house price development is crucial. In many studies it is assumed that house
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prices structurally increase more than inflation. Such an assumption might
be doubted in the long run. House prices can also decrease as the current
crisis in the USA shows. The effects of house price decrease are showed in
the case of Germany in our project; Germany is one of the European frontrunners in ageing. Such a development impacts on the way households perceive home ownership and make their housing decisions. The fear for house
price decreases increased risk awareness in Germany and resulted in hesitations about entering home ownership. Important questions therefore are how
house prices will develop in the future and how periods of house price decrease can be overcome. If housing equity becomes a key asset in financial planning it is crucial for
households to be informed about house price developments for their financial planning and in particular about the risk of house price decline. Moreover, when housing may become an element in an asset-based welfare strategy, house price developments will seriously impact on the future of welfare.
This raises questions about the usefulness of housing equity insurance, and
the idea of intergenerational social security and may be even a new financial
order as described by Shiller (2003).
The role of government
House price development is also more than relevant for governments. If house
prices rise faster than any other object, home ownership becomes relatively more and more expensive. A policy to enable access to home ownership for
lower income groups will therefore become more and more expensive. Moreover, such a policy will become a pillar for house price increases. The question
is what role government intends to play in this respect. Smith (2006) states
that in the absence of active governance around the use of housing wealth,
whole economies and entire housing systems are susceptible to the risk embedded in a new financial order of owner-occupation.
Another question for governments is how they define their aim in housing policy. Is the only aim to provide access and hope for independent homeowners that plan and finance their own future? Are the homeowners that fail
and the renters who are out of the system responsible for their own fate and
no concern of the government? Or is there a role for the government in stimulating stable house price development providing some kind of safety net? In
other words, the sustainability of housing asset-based welfare and the role of
government are issues that demand further development and research.
12.3.2 Countries covered by research
It is clear from earlier chapters that between countries there are differences that appear to influence the ways in which households think about home
ownership in relation to security and insecurity. These differences include the
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institutional framework in the form of their labour markets, at least insofar
as they will influence the actuality and perception of the likelihood of unforeseen unemployment. The nature of the financial product, for example whether housing loans are fixed or variable interest, may also be important in shaping the perception of a household’s level of risk, while the type and generosity of social insurance will provide households in different countries with
greater or lesser protection against the consequences of adverse events. There
are also significant cultural variations, such that in some countries the role of
the family as an agent of social welfare, or the view of real estate as a family
project transcending generations rather than an individually-owned product,
is part of a complex picture.
Given the diversity between nations, alongside an objective of achieving an
understanding of security and insecurity aspects of home ownership across
Europe, the question arises of which member states need to be investigated,
and if that is not to be all of them, then which countries will form the appropriate sample?
At the time at which the OSIS project was conceived and proposed (2002)
the European Union consisted of 15 member states. Aside from any methodological considerations about whether or not sufficient information about
the main variations could be estimated from anything other than a hundred
per cent sample, financial considerations determined that interviews would
be held in a maximum sample of seven or eight countries. Against this constraint, attempts were made to ensure a selection that covered what appeared
to be the main variations. Thus, the selection included examples of countries
with different types of welfare systems (according to the Esping-Andersen
type classification of regimes), different levels of home ownership and renting
as well as different types of (labour and financial markets) economic growth
(see methods). It was perhaps in the then accession states that the greatest under-representation occurred. Of the 10 countries that were to become
member states in 2004, and the two in 2007, forming the current EU27, Hungary alone was selected.
One challenge to be faced in obtaining a more inclusive picture of security and insecurity, then, is to extend the analysis, through all the stages of
achieving conceptual equivalence and realistic vignettes, to more countries,
particularly to the newer member states.
12.3.3 Recent developments
If we endeavour to extend the geographical scope of the investigation reported
here, there are other extensions that warrant consideration. Five or six years
on from the conception of the study, the world has changed in important
ways: the institutions we have seen as forming part of the context of individuals’ thoughts and actions have evolved, while policy debates in the European
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Union, as well as the member states, have taken new directions and new emphases. These changes by no means make the study of security and insecurity redundant; they remain central considerations for the European household
and, indeed, the changes arguably make them even more so. Rather they suggest, at the least, that the emphases of the investigations merit some re-balancing and even that new avenues for investigation should be pursued.
Of the many changes affecting Europe, two seem particularly significant.
The first is the expansion in size and activities of financial markets that are
making the investment in and the realisation potential of home ownership
more accessible. The second is demographic changes that are influencing
both the intergenerational equation as well as encouraging one of the security aspects of home ownership, namely its promotion as a complement to –
perhaps even a substitute for – social protection.
Financial markets
Recent economic research covering a number of countries reports that in 2000
in France, Germany and Italy about half of total household wealth was housing wealth, with the proportion being about 65 per cent in Spain and just below 40 per cent in the Netherlands and the UK (Altissimo et al., 2005). In that
this indicates the quantitative significance of the wealth held by European households in the form of housing, other research has demonstrated both
that some households are willing to realise some of their housing wealth in
order to support consumption, and that their willingness is tied to the nature
of the financial markets and financial products available in their countries.
Thus, economic studies of housing wealth and consumption (e.g. Catte et al.,
2004; Ludwig & Slok, 2002) show that the marginal propensity to consume relative to housing wealth is, in the countries tested, significant and positive. In
other words, when house prices rise so that households have more housing
wealth, consumption also rises, and indeed generally more so than an equivalent rise in financial assets. However, the marginal propensities were higher
for those countries with higher levels of mortgage debt as a ratio of GDP – that
is, in the Netherlands, Sweden and the UK rather than in Germany, France, Italy and Spain.
This being the case, it is significant that, while there are large differences
across EU member states in mortgage debt as a ratio of GDP, in all member
states the ratio has been increasing (EMF, 2006). Moreover, there has been a
general tendency for the range of products available, including equity release
products, to increase (EMF, 2006). The ECB’s July 2006 survey of bank lending indicated that in the eurozone about 10% of loans secured against real
estate were used for some purpose other than to purchase a principal residence (ECB, 2006). All of this suggests that financial market developments
have been, and will continue to be, significant in shaping the opportunities
for, and the practice of, using housing assets.
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Demographic change
The processes of demographic change are leading to a Europe where, on the
one hand, fewer people are having children and those that do have fewer
child­ren, and, on the other hand, the ratio of retired to working age people
is increasing. Both factors appear to have implications for the way in which
housing assets are being viewed as a source of income in old age.
In recent years the practice of SKI-ing (Spending the Kids’ Inheritance) has
gained some popular recognition, particularly but not only in the UK. In itself
this may be taken to reflect a new reality in which the bequest motive has
become less dominant. One possibility is that as more people reach old age
without having had children, questions of the home as a bequest and the significance of intergenerational transfers and solidarity take on a different hue:
some might want to leave a charitable bequest, but evidence from the UK
indicates that increasing numbers want to spend it on themselves (Rowlingson & McKay, 2007). In short, if there are no children, SKIING is not possible
and is simply replaced by spending. To the extent that birth rates have fallen
in all member states and are particularly low in southern Europe and some of
the former communist countries that have become newer member states (see
Mulder & Billari, 2006), we might want to explore what this means for housing
as a family project, and the extent to which its role as a financial investment
for use by the buyer becomes more important.
Such a direction takes on added relevance in the context of the growing
perception in the EU and the member states of the need to address the challenges of demographic change (see European Commission, 2005). Here, a ‘pensions crisis’ brought about by the plummeting dependency ratios is a particular concern. Thus, as the Kok Report had argued:
These developments will have profound implications for the European economy and
its capability to finance European welfare systems. Ageing will raise the demand
for pensions and healthcare assistance at the same time as it reduces the number of
people of working age to produce the necessary income (European Commission,
2004 p. 13).
An earlier response to these problems is recorded in a view reported in a communiqué from a meeting of the housing ministers of all the then EU member
states. This view was that older homeowners should make use of their housing assets to pay for their old age: In most EU member states, older people live
in owner-occupied housing. This means that many older people possess capital in the ownership of their homes. The ministers were aware of the need
to explore new ways of helping older people to safely utilise their capital, for
example, to obtain the housing and support services they need, to repair or
adapt their existing homes or to release income to cover the costs of support
services or to purchase new accommodation with support services availa-
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ble (Finland, 1999 para. 9). This is consistent, in turn, with some more general developments in the systems of social protection in some member states
through the promotion of the idea of asset-based welfare. Home ownership
can be seen as a means whereby individuals may build up a sort of personal provident fund which can be called upon when needed. Thus, one response
to the perceived European-wide problems of ageing populations and the sustainability of state pension schemes is to encourage more people to become
homeowners and to see their homes as a form of personal pension provision.
In that way forced, personal saving in the housing market may be viewed as
substitutes for tax and public spending.
While this may be a matter of public policy development, European homeowners may be adapting their strategies in response to them. Thus research
in the UK (Cerny et al., 2006) has concluded that national patterns of household wealth, including the relative size of housing wealth, are sensitive to
demographic changes and pension reforms. For example, people tend to hold
more housing wealth when state pension rates are lower and populations age
so that “links between the property market, demographic change and pension
reform seem to be significant” (Cerny et al., 2006 p. 25).
12.4 Conclusion
Developments on the one hand in financial markets, and on the other hand
linking demographic change with public policy moves toward supporting the
use of housing assets, are changing the context for European homeowners.
This enormous shift in housing markets, financial markets and demographic
developments will have a large impact on households and on housing and social security systems. In this changing context the importance of the security
and insecurity aspects of home ownership is reinforced.
This book reports on the link between housing equity and welfare in particular as a resource for old age. This link is clear: home ownership is a way of
saving for old age and it is considered as a nest egg. However, equity release
is everything but common. To many households saving is a virtue and withdrawing money is seen as a vice. There are however signs of growing importance of equity release in particular countries with rising house prices. This
might be a welcome and tempting trend, however a trend with clear risks and
drawbacks and a trend which requires excellent financial skills by individuals,
governments and lenders to take sustainable decisions. The current US mortgage crisis makes clear that even for professional financial institutions calculating and pricing risk is everything but easy.
[ 327 ]
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Behring, K. & I. Helbrecht, 2002, Wohneigentum in Europa, Ludwigsburg
(Wüstenrot Stiftung).
Catte, P., N. Girouard, R. Price & C. Andre, 2004, Housing Markets, Wealth and
the Business Cycle, Economic Department Working Papers 194, Paris (OECD).
Cerny, A., D. Miles & L. Schmidt, 2005, The Impact of Changing Demographics
and Pensions on The Demand for Housing and Financial Assets, CEPR Discussion Paper (5143).
ECB, 2006, The Euro Area Bank Lending Survey, July, European Central Bank,
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social analysis of mortgage arrears and possessions, Bristol (Policy Press).
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Prices on Consumption in OECD Countries, IMF Working Paper WP/02/1.
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(Rowntree Foundation).
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The research team
Pascal De Decker studied sociology and urban planning at Ghent State University and obtained a PhD in social and political sciences at the University of
Antwerp. His field of interest, research and teaching covers housing and urban problems and policies. He currently works part-time for Ghent University
College, and part-time for the Sint-Lucas School of Architecture Ghent/Brussels. He conducted the OSIS research for the University of Antwerp (Research
Group on Poverty, Social Exclusion and the City: OASeS). Before entering the
research world, Pascal worked for Ghent city council, and from 1995 to 1999
was a member of the Cabinet of Flemish ministers responsible for housing
and urban policies. He is currently a member of the editorial board of the Journal of the Built Environment, and a member of the advisory board of the European Journal of Housing Policy. Pascal was recently appointed as a member of
the Flemish Housing Council, an advisory body to the Flemish government.
E-mail: [email protected]
Hannu Ruonavaara is a lecturer in sociology at the Department of Sociology
at the University of Turku, Finland. He holds a PhD in sociology and currently lectures on the sociology of housing at his home university. Between 2004
and 2006 he was responsible for the Finnish part of the OSIS project. His research interests include comparative historical housing research, methodology of historical sociology and social theory.
E-mail: [email protected]
Päivi Naumanen is a sociologist specialised in education and labour market
policies. She holds a PhD in sociology and works as a senior researcher in the
Department of Education, University of Turku. Between 2004 and 2006 she was
a senior researcher in the Department of Sociology and conducted research in
two EU-funded projects, OSIS and PROFIT, both dealing with the labour market and welfare institutions and policies. Her research interests include education and citizenship, the sociology of adult education, gender and education, educational needs, employment and labour market policy, intergenerational inequalities, housing and socio-economic security and international
and supranational policies of education.
E-mail: [email protected]
The Department of Sociology at the University of Turku (http://www.soc.utu.
fi/en/) was established in 1926 and is the oldest sociology department in Finland. The present teaching staff consists of two professors, a lecturer, a sen-
[ 330 ]
ior assistant and three assistants. Every year some 30 new students start their
MA studies at the department. Sociology is also a very popular minor subject
across faculty boundaries. The number of PhD students and researchers in the
department is around 30. The Department of Sociology is part of the Faculty
of Social Sciences, which has a community of almost two thousands scholars.
The Department of Sociology’s mission is to generate new information and
understanding of Finnish and European societies through research, and to
provide high-quality teaching. The role of comparative research has recently become more important in the department’s research activities. In addition
to basic research dealing with general theoretical and methodological issues
of sociology, the main fields of research in the department include: cultural
change, education, environmental questions, housing, social problems, social
stratification and social mobility, and sociology of work.
Ilse Helbrecht is a full professor of human geography at the University of
Bremen, Germany. In 2002 she was a visiting professor at the University of
Amsterdam (UvA). She has been involved in several international, comparative research projects on home ownership in Europe, and was a member of
the Enquiry Committee on ‘the Future of Cities’. She is currently vice-rector
for academic affairs at the University of Bremen, and a member of the Advisory Editorial Board for the journals Environment and Planning A, and Geo­
graphy Compass.
E-mail: [email protected] After her studies of Geograhy and Sociology at the universities of Marburg and
Freiburg/Germany, Gudrun Tegeder worked as project manager and researcher
at the Institute for European Urban Studies at the Bauhaus University Weimar
/Germany. She then joined the University of Bremen/Germany as research assistant for the OSIS project. Her research focuses on the relationship between
technology and urban society as well as on housing.
E-mail: [email protected]
The Department of Geography at the University of Bremen (http://www.geographie.uni-bremen.de/) consists of five working groups. Their research focuses on applied geography in the fields of demographic change, housing markets, transport policies, inner city developments, and urban and regional policies, and on research methods in geography. Two of the working groups are
co-founders of the newly established Research Centre for Urban and Regional
Studies (Forschungsinstitut Stadt und Region, ForStaR) in which interdisciplinary
work with sociologists has centre stage.
[ 331 ]
József Hegedüs, PhD, is managing co-director of the Metropolitan Research Institute, Budapest (http://www.mri.hu/), and is an economist, sociologist and
research fellow with over 25 years’ experience in urban economics, urban sociology, housing policy and municipal finance issues. He is co-organizer of the
East European Working Group of the European Network for Housing Research.
In addition to his research activities, he has worked on several technical assistance projects in the Central and Eastern European region and has been
involved in a variety of European-level research and consultancy projects
and European Community Framework programmes. Since 1996 he has been
a member of the Housing Policy Council, a high-level inter-governmental advisory group in housing policy matters, and a member of the Advisory Board
of Global Research Network on Human Settlements (HS-Net), an international
board that has acted in an advisory capacity to UN-HABITAT since 2004. József
lectures in urban sociology, housing policy and intergovernmental fiscal relations at a number of renowned Hungarian universities.
E-mail: [email protected]
Nóra Teller is a sociologist, research fellow at the Metropolitan Research Institute, Budapest (http://www.mri.hu/), with six years’ experience in housing
research, research and consultancy on local economic development, and decentralization. She has been involved in developing local housing strategies
and in conducting research on issues involving social housing construction
and housing allowances in Hungary. She worked on the development of social housing indicators for the Hungarian Central Statistical Office, and provided consultancy services for several Hungarian municipalities and ministries in projects involving social housing and rehabilitation. She has been involved in several European-level research projects, and in training activities
for local economic development, urban and housing management for international expert groups.
E-mail: [email protected]
The Metropolitan Research Institute (MRI) was established in Budapest in
September 1989. Since then, MRI has become a recognised institution working
in the areas of housing policy and urban development as well as local government finance research in Hungary. The institute undertakes research and consultancy assignments, organises conferences and designs and provides training in these areas.
[ 332 ]
The Netherlands
Marja Elsinga is a senior researcher in the OTB research institute of Housing,
Urban and Mobility Studies. She was awarded a PhD in 1995 with her thesis
on low income home ownership. She is currently a senior researcher and programme leader of the Housing Systems research programme. She has considerable experience in academic and contract research into the housing market
and housing policy. Her key interests are the risks of home ownership, housing affordability, and social housing. She is review editor of the European Journal of Housing Policy and chair of the working group on Home Ownership and
Globalisation for the European Network of Housing Research.
E-mail: [email protected]
Janneke Toussaint is a junior researcher with a degree in psychology. She
joined OTB in 2004 in the Housing Systems research group. She is currently
working on a PhD project on security and home ownership. Her main interest
is in households’ perceptions of the risks and securities of home ownership
and the role of home ownership as an asset in relation to welfare.
E-mail: [email protected]
OTB Research Institute on Housing, Urban and Mobility Studies (www.otb.
tudelft.nl) was founded in 1985. OTB specialises in independent research and
consultancy in the field of housing, construction and the built environment.
The institute is part of Delft University of Technology. The core activities of
OTB Research Institute are scientific research and contract research and policy advice. The policy areas of OTB Research Institute are centred around various aspects of the built environment. Housing Systems is one of the seven research groups in OTB. The objective of this group is to examine and explain
the manner in which housing systems function, thereby contributing to the
development of theory and the housing debate.
Isabel Baptista is a researcher at CESIS – the Centre for Studies for Social Intervention. Her main research interests are poverty and social exclusion, in
particular extreme urban marginalisation and social policies. She has been
the Portuguese correspondent for the European Observatory on Homelessness, and the Portuguese representative on the EU Network of Independent
Experts on Social Inclusion. Recent publications include Baptista, Isabel et al.
(2006), The changing role of service provision: barriers of access to health services for
homeless people, FEANTSA; Baptista, Isabel & Cátia Maciel, Trends, recent developments, active inclusion and minimum resources, http://ec.europa.eu/employment_
[ 333 ]
social/social_inclusion/docs/experts_reports/portugal_2006_en.pdf; Baptista,
Isabel, Pedro Perista, et al. (2003), The dynamics of income poverty and social
exclusion in Portugal, in: The dynamics of social exclusion in Europe, Cheltenham
Glos (Edward Elgar).
E-mail: [email protected]
Pedro Perista is a researcher at CESIS – the Centre for Studies for Social Intervention. Besides housing, his main research interests include poverty and social exclusion, social policies, social quality and migration. Recent activities
have also included consultancy and evaluation. Recent publications: Perista,
Pedro et al. (2005), ‘Social quality in Portugal: reflecting on the context and
the conditional factors’, in: The European Journal of Social Quality 5 (1 & 2), New
York/Oxford (Berghahn Journals); Perista, Pedro (2005), ‘Imigrantes de Leste na
AML: novos fluxos, novos perfis?’, Cidades Comunidades e Territórios, no. 9, Lisboa (CET); and Baptista, Isabel, Perista, Pedro et al. (2003), The dynamics of income poverty and social exclusion in Portugal, in: The dynamics of social exclusion in Europe, Cheltenham Glos (Edward Elgar).
E-mail: [email protected]
CESIS – Centro de Estudos para a Intervenção Social (Centre for Studies for
Social Intervention, http://www.cesis.org/) is an independent not-for-profit organisation of researchers with a wide range of disciplinary backgrounds
working to promote evidence-based, policy-relevant research at both national
and European levels. Founded in 1992, the centre’s first publications on poverty (dating back to 1986) played a major role in launching this line of research
among the scientific community in Portugal, and at the same time gave a
powerful impetus to public and political awareness of the phenomenon of impoverishment in Portuguese society. The centre has, since then, attempted to
deepen and enlarge this scope of research by disseminating its research results with a view to: 1. their application in a wider context; 2. direct action
being taken to promote an evidence-based definition of efficient policies for
eradicating processes of social marginalisation/exclusion; and 3. increased
visibility of the needs and expectations of marginalized and excluded people.
Eva Andersson holds a PhD in social and economic geography. Her dissertation in 2001 From Valley of Sadness to Hill of Happiness - The Significance of Surroundings for Socio-economic Career laid the foundation for research on residential segregation and its effects. Post doc periods were spent at the School of
Public Health at Harvard University, and later at the Institute for Future Studies, Stockholm. She is currently working as an assistant professor at the Insti-
[ 334 ]
tute for Housing and Urban Research (IBF) at Uppsala University in Sweden.
E-mail: [email protected]
The Institute for Housing and Urban Research, located in Gävle (http://www.
ibf.uu.se/PERSON/evaa/eva.html), is a multi-disciplinary research department
established in 1994 under the auspices of the Faculty of Social Sciences at
Uppsala University. The main theme of Eva’s research is residential differentiation, with a particular interest in the consequences of neighbourhood effects
on educational achievement and general socio-economic careers. She has also been involved in projects on health as a factor in regional economic development, and in projects on residential mobility, and demographic issues such
as the ageing Swedish population.
United Kingdom
Deborah Quilgars is a senior research fellow at the Centre for Housing Policy at the University of York. Her main research interest is in housing, risk and
safety nets. Along with Professor Janet Ford, Deborah undertook a number of
projects evaluating the role of private insurance and state safety net provision for mortgagors in the UK. Deborah is also an expert in housing and support services over the life-course, and particularly homelessness provisions
for young people. In addition to her UK work, she recently completed an EU
project on inter-agency working in homelessness services. Deborah is a qualitative research specialist and, together with OTB colleagues, coordinated the
qualitative element of the OSIS project.
E-mail: [email protected]
Anwen Jones is a research fellow at the Centre for Housing Policy, University of
York. Her research specialisms are in homelessness, anti-social behaviour and
comparative studies. Anwen has conducted a number of evaluations of homelessness services, including daytime service provision, services for families, for
alleged perpetrators of anti-social behaviour, and ex-service personnel. In addition to OSIS, Anwen has also completed EU projects on cooperation in homelessness services and financial literacy. Recent publications include: Jones, A.,
D. Quilgars, M. Elsinga, & J. Toussaint (2007), Home owners’ perception of and
responses to risk, in: European Journal of Housing Policy 7 (2), pp. 129-150.
E-mail: [email protected]
The Centre for Housing Policy at the University of York (http://www.york.
ac.uk/inst/chp/) was established in 1990 with the support of the Joseph Rowntree Foundation, and is one of the largest housing research centres in the UK.
The centre is committed to a research focus that explores the relationship be-
[ 335 ]
tween a wide range of housing issues and other aspects of social policy. A key
research theme is changes in home ownership, including affordability issues,
safety nets, and the security and wealth aspects of owner-occupation. Recent
work has been completed for the EU, the Department of Communities and Local Government, and the Council of Mortgage Lenders.
John Doling holds the chair in Housing Studies at the University of Birmingham. He has researched and written widely on housing systems and housing
policy, urban regeneration, poverty and social exclusion, and ageing. In recent
years, the main concentration has been on home ownership – particularly related to economic and political change. The focus of attention has been on
Britain and other advanced industrialised countries in Europe, North America and the Asia Pacific Region. He has coordinated a number of EU-funded
projects including HOSE (Home Ownership – Social and Economic Problems),
APPLE (Ageing Populations: Policy Lessons from the East) and OSIS (Origins of
Security and Insecurity).
E-mail: [email protected]
The Institute of Applied Social Studies is part of the School of Social Sciences
at the University of Birmingham, UK (http://www.socsci.bham.ac.uk/). Its research activities cover a range of issues including: poverty and social exclusion, social care and mental health, families, children and communities, criminal justice, housing, and wealth and wellbeing.
Housing and Urban Policy Studies
1. Boelhouwer, P. and H. van der Heijden, Housing systems in
Europe: Part I, a comparative study of housing policy
992/298 pages/ISBN 90-6275-769-3
2. Papa, 0., Housing systems in Europe: Part II, a comparative
study of housing finance
1992/210 pages/ISBN 90-6275-770-7
3. Lundqvist, L.J., Dislodging the welfare state? Housing and
privatization in four European nations
1992/144 pages/ISBN 90-6275-771-5
4. Gilhuis, H. and S. Volbeda, Collective self-help housing in Brazil
1992/176 pages/ISBN 90-6275-672-7
5. Priemus, H. and G. Metselaar, Urban renewal policy in a
European perspective, an international comparative analysis
1992/68 pages/ISBN 90-6275-787-1
6. Priemus, H., M. Kleinmann, D. Maclennan and B. Turner, European monetary, economic and political union: conse quences
for national housing policies
1993/57 pages/ISBN 90-6275-840-1
7. Visscher, H., Building control in five European countries
1993/162 pages/ISBN 90-6275-908-4
8. Kruythoff, H., Residential environments and households in
the Randstad
1993/241 pages/ISBN 90-6275-927-0
9. Danermark, B. and I. Elander, Social rented housing in
Europe: policy, tenure and design
1994/182 pages/ISBN 90-6275-942-4
10. Anyumba, G., Kisumu Town: history of the built form,
planning and environment: 1890-1990
1995/372 pages/ISBN 90-407-1067-8
11. Boelhouwer, P.J. and A.J. Menkveld, Housing expenditure in
Western Europe: macro and micro quotas
1996/58 pages/ISBN 90-407-1327-8
12. Smith, J.E., What determines housing investment? An investigation into the social, economic and political determinants of
housing investment in four European countries
1997/219 pages/ISBN 90-407-1420-7
13. Boelhouwer, P.J. (ed.), Financing the social rented sector in
Western Europe
1997/115 pages/ISBN 90-407-1433-9
14. Lambregts, B.W. and M. Spaans, The development and
financing of public real property in urban areas in Belgium,
Germany, France and Great Britain
1998/126 pages/ISBN 90-407-1692-7
15. Sheridan, L. (principal author and editor), The control and
promotion of housing quality in Europe. Part I Country
2001/296 pages/ISBN 90-407-2148-3
16. Sheridan, L., The control and promotion of housing quality in
Europe. Part II Comparative analysis
2001/184 pages/ISBN 90-407-2149-1
17. Krantsz, B., E. Oresjo and H. Priemus, Large scale housing
estates in Northwest Europe: problems, interventions and
1999/164 pages/ISBN 90-407-1928-4
18. Ipenburg, D. and B. Lambregts, Polynuclear urban regions in
North West Europe. A survey of key actor views
2001/135 pages/ISBN 90-407-2180-7/978-90-407-2180-9
19. Sunikka, M., Policies and regulations for sustainable building.
A comparative study of five European countries
2001/133 pages/ISBN 90-407-2266-8/978-90-407-2266-0
20. Spaans, M., The implementation of urban revitalization
projects. An international comparison
2002/338 pages/ISBN 90-407-2256-0/978-90-407-2256-1
21. Doling, J., and J. Ford (eds.), Globalisation and home
ownership. Experiences in eight member states of the
European Union
2003/231 pages/ISBN 90-407-2425-3/978-90-407-2425-1
22. Beerepoot, M., Energy regulations for new building. In search
of harmonisation in the European Union
2002/189 pages/ISBN 90-407-2325-7/978-90-407-2325-4
23. Meijer, F.M., H.J. Visscher and L. Sheridan, Building regulations
in Europe. Part I A comparison of the systems of building
control in eight European countries
2002/200 pages/ISBN 90-407-2373-7/978-90-407-2373-5
24. Meijer, F.M., H.J. Visscher and L. Sheridan, Building regulations
in Europe. Part II A comparison of technical requirements in
eight European countries
2003/280 pages/ISBN 90-407-2449-0/978-90-407-2449-7
25. Meijers, E.J., A. Romein and E.G. Hoppenbrouwer, Planning
polycentric urban regions in North West Europe. Value,
feasibility and design
2003/210 pages/ISBN 90-407-2420-2/978-90-407-2420-6
26. Lambregts, Bart and Wil Zonneveld, Polynuclear urban
regions and the transnational dimension of spatial planning.
Proposals for multi-scalar planning in North West Europe
2003/109 pages/ISBN 90-407-2462-8/978-90-407-2462-6
27. Zonneveld, Wil and Jan Jacob Trip, Megacorridors in North
West Europe. Investigating a new transnational planning
2003/92 pages/ISBN 90-407-2472-5/978-90-407-2472-5
28. Turkington, R., R. van Kempen and F. Wassenberg (eds.), High
rise housing in Europe. Current trends and future prospects
2004/284 pages/ISBN 90-407-2483-0/978-90-407-2483-1
29. Boelhouwer, Peter, John Doling and Marja Elsinga (eds.), Home ownership. Getting in, getting from, getting out
2005/205 pages/ISBN 90-407-2594-2/978-90-407-2594-4
30. Doling, John and Marja Elsinga (eds.), Home ownership.
Getting in, getting from, getting out. Part II
2006/266 pages/ISBN 978-1-58603-634-3
31. Horsewood, Nick and Peter Neuteboom (eds.), The social
limits to growth. Security and insecurity aspect of home
2006/202 pages/ISBN 978-1-58603-699-8
32. Elsinga, Marja, Pascal De Decker, Nóra Teller and Janneke
Toussaint (eds.), Home ownership beyond asset and security.
Perceptions of housing related security and insecurity in
eight European countries
2007/336 pages/ISBN 978-1-58603-830-4
Copies can be ordered at www.dupress.nl. The numbers 1 up
to 13 are no longer available.
Marja Elsinga/Pascal De Decker/Nóra Teller/Janneke Toussaint (eds.)
ISBN 978-1-58603-830-4
Home ownership beyond asset and security
Changes in housing, welfare policies and labour markets
situate households in new dynamics, roles and relationships. More and more European households are becoming
homeowners: mortgage debts increase, but at the same
time housing wealth accumulates. Further, welfare regimes
are gradually dismantled, labour markets become more
flexible and financial markets become more competitive.
These changes impact on households’ perceptions and
housing decisions. But how?
Can home ownership be considered a safe haven in a world
that becomes more and more insecure? Do homeowners
consider housing equity as additional income in old age? Is
home ownership considered an asset that can be released
in case of welfare needs? These are questions that lie at the
core of this research project. This book reports on perceptions and housing strategies of more than 200 households
in eight different countries. Countries that are situated in
different parts of Europe and that have different histories,
institutions, policies and cultures.
Home ownership beyond
asset and security
Perceptions of housing related security and
insecurity in eight European countries
Marja Elsinga
Pascal De Decker
Nóra Teller
Janneke Toussaint (eds.)
Delft University Press is an imprint of IOS Press
OTB research institute for housing, urban and
mobility studies
H o u s i n g
a n d
U r b a n
P o l i c y
S t ud i e s
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