The housing market in Italy, with a focus on the social housing sector
In a country like ours, traditionally characterised by a level of property ownership that is among the highest in Europe (close to 70%) and an illiquid and slow-moving rental market, the continuing economic and financial crisis and the consequent impact on household disposable income have led to an increasing focus on home ownership and the sustainability of the social development model.
A large number of households show signs of housing difficulties:
Nowadays, housing problems are not exclusively focused on the most vulnerable sections of the population, but also on a wider pool of people who, although they can rely on an income and relatively stable conditions, have significant difficulty in accessing the housing market.
But while people in situations of economic “precariousness” can usually access public residential housing, people in situations of “distress” that do not fall within the economic poverty brackets required for public housing, and are unable to find housing at market conditions, can find support from social housing.
As regards the sustainability of the social development model, the Italian housing market is highly inflexible, which risks undermining the ability to provide an adequate response to the needs of society, mainly because of poor liquidity in the rental segment and the fact that prices no longer represent the crossover between supply and demand. In this context, the housing issue has an ever more important effect on urban structures.
The burden of housing costs – both in terms of buying and renting – leads to a progressive displacement of the population towards towns on the outskirts of major urban areas, generating new problems related to:
This process conflicts both with the existence of a “hidden” urban residential availability (unused or used through black-market renting) and with the potential availability of new housing arising from the transformation and renovation of existing publicly-owned buildings.
Rethinking the residential market
This background reveals a profound need to rethink the residential market as a whole, via a true paradigm shift whereby home ownership regains a key role in societal development and solutions are developed that – without infringing on public finance requirements – are available to a wide spectrum of people, including those facing housing problems.
Social housing presents an opportunity against the background of a public residential housing supply characterised by a progressive decline in state resources, the abandonment of structural policies in favour of one-off interventions and the transfer of implementing powers to the regions.
Inefficiencies in the management and sale of public property have also meant it has not been possible to drive the processes that could generate sufficient resources to ensure housing at affordable prices for the various sections of the population affected by problems accessing the property market.
The “National Housing Plan” marked an initial turning point, at least in terms of approach: central appropriations and a new paradigm for scheme selection have incentivised the involvement of private investors and the mobilisation of various levels of government, in a public-private partnership approach for building social housing. At the same time, the social housing option began to emerge.
Despite the emergency situation, however, the State Audit Court has found that the actual implementation of the 2008-2009 plan has been anything but quick: the slowness of administrative processes, the extreme regional disparities in the implementation of national legislation and lack of central direction have prevented even a minimum of commonality in the planning and economic-financial aspects of the schemes, slowing implementation.
In recent years, with the approval of the final rankings of the proposals and the launch of the FIA, there has, however, been a more complete definition of the investment commitments, project identification and, at least in part, housing construction.
In this regard, however, it should be noted that while the integrated system of real estate funds has been a success, it may not be a complete answer to the housing issue in Italy.
In fact it is worth remembering that social housing – since it is designed for people without “precarious” incomes and involves sub-market rents that are instead determined according to the economic and financial sustainability of the initiatives – caters mainly to the so-called grey area and not to the segment of the population whose needs require broader and more comprehensive initiatives from central and local governments.
An initial response to some of these issues seems to come from the new measures launched by the Government (Law 80/2014) to support rent-controlled lets, promote the recovery and rationalisation of existing public housing, and to support the supply of social housing.
With all of this in mind, real estate funds can provide a way to identify best practices in Italy, both in terms of process (the financial structures for performing the works, including through greater use of forms of partnership) and in terms of product (the best projects from the point of view of the quality of the building with particular focus on environmental, energy and social aspects).
Following the economic-financial crisis of 2007 and after a long phase of expansion supported by low mortgage interest rates, the Italian real estate market began facing difficulties as a result of a major decrease in both the purchase of housing and in real estate prices.
Development projects and financial instruments
European financial instruments to support business and investment, and the role of national development banks