The Federal Office for Building and Regional Planning

Publication Strategies of local authorities concerning their municipal housing stock – findings of a survey of local authorities

Editor: BMVBS Series: Forschungen Issue: 145 Published: 2010

Project management BBSR:
Karin Lorenz-Hennig,
Gudrun Claßen ( gudrun.classen@bbr.bund.de )

Summary

Municipal housing companies and municipal housing stock have traditionally played a key role in the German housing market. In recent years, planned or completed sales of municipal housing stock have caused a lively debate on the matter of housing policy.

Against the backdrop of this debate, the Federal Ministry of Transport, Building and Urban Development and the Federal Institute for Research on Building, Urban Affairs and Spatial Development have commissioned the Institute for Urban Research and Structural Policy (IfS) to conduct a research project on the strategies employed by local authorities in relation to their municipal housing stock. The aim of this study is to gather information about the current situation and the importance of the municipal housing stock as well as about the strategies employed by local authorities in relation to this municipal housing stock.

Methodology

In the context of the research project, a survey of all cities and municipalities with populations of at least 5,000, as well as of all counties was conducted by the IfS in the summer of 2009. 1,400 local authorities took part in the survey (with a response rate of 44%), which was supported by the umbrella associations of local authorities. The survey therefore provides a broad empirical basis from which valid conclusions can be drawn. In addition, data was extracted from the annual statistics on municipal housing companies that are collected by the Federal Association of German Housing and Real Estate Enterprises (GdW) and from data gathered by the Bertelsmann Foundation on the financial standing of local authorities.

Findings

In the first instance, the survey of local authorities demonstrates the widespread distribution of the municipal housing stock. 81% of the cities, municipalities and counties that took part in the survey either have shares in municipal housing companies or hold municipal housing units in direct ownership. The number of housing units involved is approximately 1,958 million, which means that, on average, one in ten residential units in these areas falls into the category of municipal housing stock.

The municipal housing stock is controlled to a large degree by municipal housing companies, in which local authorities have a direct or (rather infrequently) an indirect share. Approximately one third of local authorities surveyed have shares in municipal housing companies which own 96% of the municipal housing stock recorded in the survey. While residential units directly owned by local authorities are to be found in a very large number of local authorities (72% of cities, municipalities and counties surveyed), they only represent a small portion of the total number of municipal housing units (4% of the housing stock recorded in the survey).

Ongoing discussions in recent years may have created the impression that many local authorities are willing to part with their municipal housing companies and municipal housing stock (primarily for financial reasons). However, the survey of local authorities shows that most local authorities are willing to adhere to their municipal housing units. The vast majority of local authorities surveyed, that are in possession of a significant quantity of housing stock, attach considerable importance to this stock as a means of pursuing their objectives and fulfilling their tasks in the interests of their communities. Many local authorities assume that their municipal housing companies and stocks will become even more important in the future.

The local authorities indicated a number of reasons for the importance attached to their municipal housing companies and stocks. In the opinion of the local authorities, conventional housing policy duties, such as providing social housing and ensuring affordable rent levels, have gained importance in recent years despite the frequently slack housing market. Most local authorities closely collaborate with the municipal housing companies, which represent key partners in this context. At the same time, other tasks of local authorities (such as urban restructuring, development of local neighbourhoods, renovations to improve energy efficiency etc.) have gained new urgency and significance in recent times and local authorities now see their municipal housing companies and stocks playing a key role in the achievement of their objectives in this regard. This is why many local authorities set targets for their municipal housing companies regarding obligations in the area of housing and urban development policies. Some local authorities require their municipal housing companies to deliver clear and measurable economical, social and ecological advantages ("Stadtrendite").

Another important finding of the study is that, for many local authorities, strategic goals based on policy objectives do not conflict with financial targets when dealing with municipal housing companies. Many local authorities expect their municipal housing companies to generate financial returns in addition to achieving policy objectives. A large number of local authorities employ a strategy of economic consolidation or increasing revenues from their municipal housing companies in some cases linking them with specific targets to increase profit distribution. The target earnings set by some local authorities for the companies are higher now than in the past, a development which must be considered within the context of the financial burdens and risks that a significant number of local authorities have borne for municipal housing companies in recent years.

It should be noted in this regard that the economic standing of municipal housing companies has noticeably improved over the past number of years, as is indicated in the GdW statistics. Falling vacancy rates, rising rents and the favourable development of mortgage interest rates have increased earnings and profitability. In East Germany, urban redevelopment and the demolition of surplus housing units have had major implications in this regard.

Local authorities use a number of instruments to control their shareholdings in municipal housing companies. Conventional instruments (such as annual reports and other reports of the supervisory board committees etc.) are particularly prevalent, while newer controlling instruments, such as financial and strategic key performance indicators, are less commonly used.

The size of local authorities seems to determine the degree of importance they attach to the municipal holding stock. Many of the smaller local authorities are in possession of municipal housing stock but they tend to be small. A very large portion of small local authorities holds a small number of municipal housing units in direct ownership while having no share in municipal housing companies. Municipal housing is understandably of relatively low importance to local authorities in such cases. Directly owned municipal housing units frequently imply financial problems, which is the main reason that some of the local authorities are willing to part with them.

The strategic and financial importance of the municipal housing stock is very high for most of the larger local authorities, which frequently hold shares in housing companies with large numbers of housing units. The reason is that these local authorities see a need for action in many areas within their responsibility and housing companies offer them one means of coping with these challenges. In addition, housing companies in large cities tend to be in a better financial position than those in smaller cities and municipalities with the result that they can offer more favourable conditions to local authorities.

In East Germany, large cities as well, the financial situation of municipal housing companies remains markedly less favourable, despite the positive effects of urban restructuring. Due to high vacancy rates and relatively low levels of rent, the housing companies there are in poorer financial shape and do not have the same opportunities to act on their own initiative as the housing companies in other parts of the country. Despite these limitations, local authorities in the East still attach significant importance to their municipal housing companies. East German municipal housing companies play a central role in urban restructuring and are of key importance regarding the provision of housing to social target groups in the face of low income levels and a difficult labour market situation.

While an overwhelming majority of local authorities want to retain their municipal housing stock in the long term, some plan to sell this stock in future. Their sales strategies now differ from those used in the past and only rarely envisage an outright sale of housing companies or stock. These strategies are instead based on sales of parts of their housing stock in packages or individual privatisations of municipal housing units. According to the local authorities surveyed, future sales levels will drop far below those of the last decade.


The abstract is part of the German publication "Strategien der Kommunen für ihre kommunalen Wohnungsbestände - Ergebnisse einer Kommunalbefragung",
Forschungen 145, Ed.: BMVBS, Berlin 2010 - out of print
ISBN 978-3-87994-477-4, urn:nbn:de:101:1-201011186613
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