Since the beginning of 2022, Eteron’s project “Sky-high Rents” has tried to highlight the significance and scale of the rental housing issue, as well as its various aspects. Moreover, in June, we published the “Policy Paper: For the right to affordable rental housing”, which included specific policy proposals and requests in order to effectively address said issue.
On 10th September 2022, the Prime Minister finally announced the government’s policy plan regarding housing, and on 15th September the measures were presented in more detail by government ministers at a press conference.
Of course, the recognition of the problem and the formulation of specific proposals to address it is in itself a positive development. However, we need to carefully evaluate the proposed measures to see whether they will bring about meaningful improvements for tenants, thus reducing the housing insecurity in which they live and the increased risk of impoverishment to which they are exposed.
In fact, it is difficult to evaluate the measures suggested by the government, as their efficiency will depend on the conditions of their implementation. However, the shortcomings that do exist are indicative and show that unless there is political will to address them in an appropriate manner, it is very much likely that resources will be wasted without achieving the expected social impact.
In the following paper we shall identify and analyse 6 important gaps and shortcomings that we believe should be taken into account in the public debate.
1.Rental housing market regulation
Α. Rent Control
The fact that rent control as a measure wasn’t even mentioned in the government’s suggested interventions to tackle the housing crisis, was a serious omission. Given the exceptional circumstances of high inflation, the energy crisis and the extremely overburdening of the majority of Greek households, the current conjuncture calls for emergency solutions. One of the measures suggested by the research working group in Eteron’s “Policy Paper: For the right to affordable rental housing”, was rent control.
More specifically, the authors note that “rent control refers to a number of interventions in the private rental housing market, aiming mainly to mitigate the overwhelming increase in rents. The three main intervention methods are: a) imposing a rent cap in all new leases, b) controlling rent increases for lease renewals and c) control yearly appreciation rates for active leases. In Greece such measures have been implemented on different occasions, when said measures were deemed necessary due to “emergency situations”. The most recent example was during the pandemic health crisis, when the State decided to intervene in the private rental housing sector. This proves the argument that [implementing such measures] is in fact a matter of political will, funds’ allocation and additional support through other relevant policies.
What can be done?
According to Eteron’s research working group, the following measures could be implemented:
Β. Social and affordable housing in the existing stock
Given the large existing housing and building stock in Greek cities, it is crucial to develop tools that would facilitate the conversion of houses and/or whole buildings, regardless of whether they belong to the State or to private individuals/ companies or whether they are currently inhabited by tenants or are vacant, in order to increase the supply of affordable rental housing. To this end, the government announced its intention to renovate 14,000 vacant houses in order for them to be used as long-term rental properties. However, if we compare this number with the total number of vacant houses in Greece (770,000 according to the government and 900,000, according to the Hellenic Statistical Authority’s 2011 census), we understand that the potential for intervention is significantly greater. At the same time, many additional measures could be taken for the reintegration to the long-term rental market of properties beyond those that are currently vacant.
What can be done?
As elaborated in Eteron’s Policy Paper, it is necessary:
C. Tenants’ protection and empowerment
Respectively, there should be a protection and empowerment framework in order to support tenants. Given the fact that in Greece, tenants have very little/weak representation while at the same time there is a lack of tools and mechanisms for monitoring, documentation and intervention in the rental housing sector, there is a need for:
2.Short-term leasing/ Airbnb regulation
The fact that there aren’t any government intervention proposals regarding the regulation of short-term leasing through platforms, is in itself a very significant omission. This creates insurmountable problems when it comes to tackling housing insecurity, since malfunctions that have emerged over the past few years in the rental housing sector point to the lack of short-term leases’ regulation as being a deciding factor.
The way that the expansion of the short-term leasing phenomenon affects the rental housing market is simple. Since said activity is more lucrative, more and more property owners choose to withdraw their houses from the long-term rentals’ market and only make them available through short-term leasing platforms. Therefore, supply decreases while demand levels remain the same – or even increase – and as a result, the rental property prices increase.
This phenomenon has specific geographical characteristics as already analysed in a paper written by D. Balampanidis and E. Papatzani in February 2022 for Eteron, since cities and areas of tourist interest present a strong concentration of properties only available for short term lease (Athens, Thessaloniki, Crete, islands). Besides, recent cases that have been brought to the spotlight regarding the difficulties faced by teachers, doctors and students who are struggling to find accommodation in said areas are directly linked to this trend. In the same paper, the authors also highlight another important characteristic of short-term rentals: the tendency for flats to be concentrated in the hands of property management companies, thus giving them considerable bargaining power in setting prices, while at the same time raising questions about the distribution of the surplus value generated by short-term rentals. As stated by D. Balampanidis and E. Papatzani, “the number of hosts who list more than two different properties on the platform is increasing constantly (reaching over 62.5% at this time), while at the same time, more and more property management companies enter the Airbnb market, some managing tens of properties (some have a portfolio of over 160 properties)’’.1
According to certain articles in the press, the government chose not to delve on the issue of short-term leasing because of the lack of stability that exists in this particular market. But on the one hand, the very lack of stability is mainly due to the pandemic that has affected the entire tourism industry, while on the other hand, the absence of regulation is a crucial factor that puts further upward pressure on rents.
What can be done?
In the “Policy Paper: For the Right to Affordable Rental Housing” published by the Eteron research group in June 2022, a set of actions on this issue is outlined. Suggested actions include:
Use of Recovery Fund (RRF) resources
One of the major difficulties in implementing a coherent national housing policy is that it requires substantial financial resources and large public expenditure. The investments required for the construction or renovation of buildings, the combination of tax incentives, guarantees in the banking system, etc., raise the financial bar considerably, especially in countries such as Greece, where fiscal constraints make this problem more acute.
The implementation of the Recovery and Resilience Fund, amounting to approximately €800 billion, as a response to the recession caused by the pandemic at a European Union level has been an impressive injection of resources to Member States and a great opportunity to redefine national priorities and address structural issues.
The Greek plan involves a total of €30.5 billion (€17.8 billion in grants and €12.7 billion in loans).
Of these, only €1.3 million is allocated to measures relevant to affordable housing, an impressively small percentage of the total package, indicating that either until the summer of 2021, when the Greek plan was approved, the housing issue was not on the government’s priority agenda, or that for some reason the Recovery Fund was not considered a strategic opportunity to address the housing issue.
The Greek plan provides that said €1.3 million will finance the renovation of 100 flats (70 in Athens and 30 in Thessaloniki), which the landlords will then opt to rent out to vulnerable households at a low cost, in cooperation with local authorities.
In order to be able to compare similar programmes in other European countries, we present below the way that eight other European countries have chosen to use the funds from the RFF in order to boost affordable housing:
From the above, the conclusion we draw is that countries facing serious housing issues choose to use the Recovery Fund as a strategic tool for financing their national housing programmes, which is not the case in Greece. The comparison of the Recovery Fund resources allocated to affordable housing schemes becomes even more unfavourable for our country, when compared to others with a similar population in terms of numbers.
4.Additional regulations regarding Golden Visas
One of the measures announced by the government in order to address housing-related issues, was the increase of the investment threshold for granting residence permits to third country citizens from €250,000 to €500,000.
This investment program, apart from the moral criticism that it has justifiably received, since it enables the sale of residence permits to wealthy residents of third countries while a tough – and in many cases illegal – immigration policy is being enforced, also runs the risk of being a huge window of opportunity for the legalisation of illegal revenues.
At the same time, the Golden Visa program has an adverse effect on the housing market since property acquisitions in Greece through this scheme increase property prices, while, in most cases, said properties don’t enter in the rental housing market. They therefore reduce the supply of properties that are available for rent, thus increasing rental costs.
It is worth noting that, according to a published study, while in most European countries where the Golden Visa investment scheme is applied, the impact on the real estate market is insignificant, Greece is an extreme exception, since the real estate market in our country, according to the data, is significantly influenced by investments related to the granting of those “golden” residence permits. According to this study, in 2018, golden visa transactions in Greece accounted for 35.9% of total transactions that took place in the Greek real estate market, with all that this implies in terms of pressures on the latter. In the same year, transactions for golden visas in Portugal constituted only 2.9% of the transactions in the country’s real estate market.
At first glance, the measure to increase the investment threshold for obtaining a Golden Visa, shows that there is an acknowledgement of the adverse impact of these investment schemes on the housing market.
However, increasing the threshold without applying any other criteria may prove to be insufficient. The reason is that given the considerable cash flow of third country citizens and the constant need to legalise income, raising the threshold may simply increase real estate purchases in our country, since the threshold functions cumulatively for such investments. This way, instead of buying one property worth 250,000 euros, one can buy two properties worth 250,000 euros each, thus aggravating the existing dysfunction of the real estate. In other words, if the demand for property purchases that can grant third-country nationals a golden visa turns out to be inflexible (there are good reasons to believe that this is a possibility), the measure might cause results that will be the exact opposite of the desired one.
What can be done?
In any case, the measure to increase the golden visa threshold should be accompanied by additional regulations that would ensure that it stops reinforcing the upward trends in the housing market.
Some of the possible ways for the above to be achieved are:
A major structural deficiency in the government’s housing policy proposals that could effectively reduce rents and create a new paradigm, is the complete absence of social economy, the so-called “third sector”, according to European standards.
Let’s take for example the government’s announcement of the so-called “social antiparochi” 2) (i.e. land for flats). This will involve the granting of state-owned properties to private developers who will construct, at their own expense, modern residential buildings, of which they will be obliged to lease 50% at a low cost to new beneficiaries and can then commercially exploit the rest.
The effectiveness of this particular measure -besides any other criticism one could make- is questionable, since the final determination of the so-called “low” rental cost rent that would apply to 50% of the apartments, will be the product of negotiations between construction and real estate companies and the state institutions. Entrusting the construction and management of these dwellings to the for-profit sector reduces the social effectiveness of this measure. At the same time, the exploitation of the remaining 50% of the new apartments based on commercial, for-profit criteria acts as an incentive for the construction companies to make up for any lost profit from the “low” rent, on the remaining 50%, thereby reducing the overall impact of the measure.
What can be done?
In this case, the existence of an institutionalised limited or even non-profit housing sector, which would be integrated into the existing institutional Social Solidarity Economy framework, would provide the necessary guarantees that all the new apartments could be made available at a really low rent, reflecting the real costs of construction, maintenance and management of the new apartments. Moreover, at the core of such an option would be that access to decent housing is a social good and a human right, rather than an investment product and a vehicle for speculation and enrichment.
Such an approach would benefit the rental housing market in many ways, as it could put downward pressure on rents in certain areas and operate “competitively” towards those who gain significant surpluses from high rents to the expense of tenants. This would be a breakthrough in the rental housing market that would encourage a new housing policy paradigm.
There are two main advantages that render this proposal entirely realistic.
First of all, the limited or even non-profit housing sector is a reality in many European countries and operate in a way that ensures socially affordable housing and a more equitable income distribution. Austria’s case is perhaps the most striking in this particular field, with very significant positive effects for society and the economy. The Austrian Institute for Economic Research’s survey on this topic in March 2021 is highly illustrative.
Secondly, the development of the Social and Solidarity Economy in our country in recent years is becoming a reality. More and more social enterprises and cooperatives are becoming active in various sectors, they network, find funding tools and develop within the context of what’s called social entrepreneurship. Given the existing legal framework and the experience gained, supporting this sector in the field of affordable housing could create multiplier benefits in Greece. If this support were linked to the Recovery Fund and other financial instruments with the assistance of the relevant authorities, we could have a paradigm shift in housing policy in Greece.
6.Institutional support/ coordination
A significant concern regarding the housing policy measures announced by the government is the absence of well-organised institutions that will coordinate the relevant actions and programs, collect data, produce analyses and forecasts that will help to evaluate the policies followed and redirect actions in line with social reality, when needed.
Today, this role is to be filled by the Public Employment Service (DYPA), which falls under the Ministry of Labour. Historically in Greece, this particular Ministry has had in its mandate issues related to social protection and social policies. However, there is cause for reasonable doubt as to whether a public organisation such as DYPA can, along with its other responsibilities, play a key role in the design, implementation and evaluation of housing policy.
The impression that the government announcements are made without first being based on studies that take into account price developments in the housing market for each region, trends regarding rents in different areas of the country, the impact of recent changes in the housing market due to short term rentals or golden visas, the impact of spatial changes on city plans, the economic and social parameters that determine the household disposable income, raise doubts about the effectiveness of the announced housing policy.
What can be done?
It is necessary to establish a competent body (in the form of a research organisation) that would collect and analyse data and evaluate housing policies, in cooperation with higher education institutions and local governments.
It is also important to have a single institutional centre that is responsible for housing policy, not as a mere side-task, but as a central focus for the development of a national housing policy that is specific to each geographical area and each social category, while at the same time it will be able to gather resources from different funding schemes that are currently scattered. The establishment of a Ministry responsible for housing policy that the Prime Minister announced a few months ago would be an important step in such a direction, but such a step was absent from the recent measures package that was finally announced.
It should be common ground by now that the housing issue in Greece, especially in what concerns the rental sector, requires policies that will set rules and requirements in a long-standing unregulated market, will give the state and society tools that will enable a more rounded monitoring of relevant developments, will act as a protection for the ever-expanding array of vulnerable social groups and will create a framework that will allow social economy actors to be active in the construction and management of housing properties. Unfortunately, however, the government’s measures are more likely to take the very same path that has led society into conditions of severe housing insecurity. The market remains largely unregulated, while the proposed measures once more focus on owner-occupation, construction activity and mortgages. At the same time, the public sector remains essentially uninvolved, as the government seems to be conspicuously ignoring the role that public bodies could and should play in the implementation and management of its proposals. In this context, and given the complete absence of any reference to the role of the social economy, it is impossible to believe that these measures will change everything that is wrong with housing in Greece.
By Alkis Kafetzis, project coordinator “Sky-high Rents | Housing insecurity today”