The Federal Office for Building and Regional Planning

Research Project: Expansion of municipal property portfolios through construction and acquisition as a housing policy


Below, the key results of the project are presented based on four questions:

What factors shape municipal housing markets?

The influx of population to cities and metropolitan areas, the low rate of construction in the early 2000s and the decreasing fluctuation in the affordable housing segment are generally considered to be the main causes of the current strain on the housing markets. When combined, they represent key factors in the increased demand for already insufficient housing. Economic momentum, the attractiveness of cities and the presence of educational institutions are seen as the main drivers behind this increase in demand. All interviewees mentioned a lack of affordable housing (housing provision for large sections of the population). Municipal housing associations have returned to playing a major role in most cities’ approaches to solving the issue, and are once again considered a direct partner for municipalities in the face of the current challenges. The public purpose of municipal housing provision remains primarily social and socio-political, while at the same time the economic stability of housing associations also needs to be ensured.

How have municipalities reacted to the changing circumstances in the housing market?

Most cities did not carry out any kind of consistent evaluation of the challenges from a municipal or urban policy perspective, let alone implementing any kind of meaningful monitoring. Alongside housing policy concepts, this is often considered to act as a stimulus for tackling current adaptation requirements in the form of (re)organisation measures, however. The challenge here is coordinating municipal, state-specific and nationwide mechanisms in an integrated manner within a constantly changing market, supported by appropriate work with networks and associations. In some cities, the responsible parties within municipal housing associations act as important liaisons with the private real estate market. They have access to different housing policy spheres and are thus in a position both to communicate municipalities’ willingness to cooperate and to represent the wishes and concerns of investors. Municipalities’ reactions to the changing situation in the housing market also take the form of active land policies and real estate relationships between cities and housing associations (including newly founded associations), which are important factors in the further expansion of municipal housing portfolios.

What requirements and strategies are implemented by municipal housing associations?

Municipal housing associations often have to deal with conflicting aims due to their manifold responsibilities. Municipal housing associations need to find a strategic position amid the conflicting demands of quantitative housing requirements, qualitative demands such as affordability and modern standards, and the increasing challenges and restrictions facing the construction of new housing. Despite the different approaches taken in individual cases, there are certain overarching themes. The interplay between different individual strategies – which is the only way to ensure a long-term decrease in rent prices in municipalities with housing markets that are under strain – can only be achieved with a high degree of professionalism in the housing industry. This requirement needs, in turn, to be reflected in the coordination with the municipalities themselves. There are a wide range of roles and responsibilities, not all of which are clearly defined. In some cases, this leads to multidimensional target systems – with varying degrees of obligation. When it comes to the scope and efficacy of strategic specifications, the financial position of the municipal housing association and its participation in the local rental market are central determining factors. An additional challenge is the fact that new housing construction and portfolio development need to be reflected in a coherent overall strategy – especially given that new municipal housing currently arises chiefly from needs-based densification, replacement construction and structural additions.

How well is collaboration and management working between municipalities and municipal housing associations?

In most cases, the relationships between municipalities and municipal housing associations are highly cooperative. On this basis, establishing a new strategic direction has been successful in many municipalities, for example in terms of target figures and ranges for the construction of new (social) housing. A fundamental factor in this success is a clear and binding division and allocation of responsibilities, for example by setting targets, concluding cooperation agreements or by adhering to a business plan. Municipal housing associations now have a wider range of responsibilities to cover and often find themselves facing fundamentally conflicting goals when it comes to strategic housing policy requirements and other specifications on the one hand and their necessary economic viability as a municipal housing association on the other.

Conclusions for best practice

The investigation clearly shows that there is no single solution when it comes to the strategic expansion of municipal housing portfolios. Even among case study cities that showed basic structural similarities, many of them took very different organisational approaches to their explicit expansion strategy. Nevertheless, a cross-sectional comparison reveals overarching findings and recommendations that can help establish and support best practice in this area.

  • Municipal administrations can only meet the demands of the multi-dimensional issue of housing if they implement a viable structure for interdepartmental collaboration (urban planning, urban development, housing/social care, real estate/finance).
  • Forms of collaboration between different stakeholders in the housing market function as a sounding board for an effective municipal housing policy.
  • Collaborative partnerships (which require agreed goals) between the city (administration and politics) and housing associations is reflected in close cooperation on different specialist levels and goes far beyond management via a formal supervisory committee, as enshrined in the articles of association.
  • Balanced target systems for municipal housing associations that take their financial capacity into account can ensure realistic expectations.
  • Municipal housing association portfolios are a reflection of the direct municipal influence on the rental market. As a housing association’s market share grows, so generally does their area of responsibility.
  • Building new housing – including replacement construction – is the main strategy used to expand municipal housing portfolios.
  • Construction projects by municipal housing associations also provide subsidised housing for large sections of the population – associations generally try to offer housing that reflects a mix of incomes, which in turn supports the municipal objective of social diversity.
  • Conceptual foundations and monitoring systems create informed conditions for expansion strategies and communicate the need for action to the public and in political spheres in a substantiated manner – and can also serve as a basis for dialogue formats and roundtables.
  • Municipalities do not set any firm specifications for municipal housing associations in terms of rent prices for newly built housing (beyond subsidised housing). At-cost rents are generally higher than social housing allowances.
  • In highly competitive land markets, municipal housing associations have little chance of acquiring building plots on the private market. They rely on municipal building plots with land prices that enable the construction of affordable housing.
  • Residents not only associate the construction of social housing with affordable living, but also with challenging population groups seeking housing, which can increase problems of acceptance.


The housing industry thinks and acts in comparatively long-term timescales and cycles. Housing as an investment is economically planned, managed and depreciates over the course of decades. In light of this, housing associations react very sensitively to external interference – in particular when this is short-term, motivated by short-lived political trends and based on criteria which are not transparent. This serves to highlight the importance of long-term strategies and planning cycles. In this context, the model of an owner with a steady hand becomes a key prerequisite for a development strategy with long-term stability. At the same time, a municipal housing association is the natural point of contact for every kind of economic problem relating to the cross-sectional issue of housing, and indeed other issues. It is no coincidence that additional responsibilities such as building schools and local transport are often ‘offloaded’ onto municipal housing associations, especially when they have good financial capacity. This capacity quickly diminishes, however, if responsibilities are not allocated according to clear and agreed rules.

However effective a municipal housing association may be, the demands of municipal housing provision cannot generally be met with their help alone. Municipal housing associations nevertheless play a central role. Especially in cases that call for new rental housing to be built following years of unstrained conditions in a given housing market, they can serve as an important driver for other players on the market. This goes hand in hand with the message that municipalities (and their subsidiaries) are taking responsibility and setting a good example, among other things. It can also send the important message that subsidised housing construction is in fact possible. The natural links between managers of municipal housing associations and housing organisations and other providers represents a key channel for information.

At the end of the day, it is only possible to combat strain in a local housing market effectively if as many stakeholders as possible pull together. In addition to municipalities and their municipal housing associations, this also includes the stakeholders that generally represent the majority of the market. In this context, the strategic expansion of municipal housing portfolios fulfils a variety of functions: it offers quantitative relief for the market and widens the options open to municipalities, while also providing important stimulus for the free market. Municipal housing associations often rightly act as an intermediary between these two spheres by demonstrating how public responsibilities and social demands can be combined with economically viable action. The key requirements for this are a clear strategic basis that is not impacted by short-lived political influences on the one hand, and an established degree of financial and operational freedom on the other.

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