The diversity of housing systems throughout Europe, with the various actors at different political levels (central government, federal states, municipalities, cities etc.) make comparison of the different social housing financing methods pretty complicated. But overall, there are two social housing finance instruments:
- Supply side – object subsidies (housing developments) are financial instruments/mechanisms which aim to increase the overall supply of quality and affordable housing through the construction of new housing or the refurbishment of existing stock by reducing investment and operation costs for social housing providers.
- Demand side – individual subsidies (housing benefits) are government subsidies for individuals that are transferred to target group tenants to help them pay their rent.
Overall, in most countries, the primary objective has been to turn away from supply-side financing towards demand-side mechanisms, with governments increasingly relying on private actors/social housing associations to supply housing. (see Council of Europe Development Bank 2018, 35)
Housing benefits might stabilize the living situation, avoid homelessness and reduce poverty momentarily, but they can’t increase the number of social housing stock units, which would be urgently needed. Very often, allowances are eaten up by increasing rents. Critics say: “Housing allowance is a subsidy for landlords.” However, governments have to address the housing shortage with appropriate measures that ensure significant savings on the long term.