Urgent and time-limited measures
- Supporting – financially and fiscally – the functioning of the housing market supply chain in Europe
Building affordable housing requires companies involved in building, promoting and planning housing. SMEs are the bedrock of Europe’s economy. They are being seriously and adversely affected by the economic shock caused by Covid-19. They require significant and urgent injections of liquidity to avoid bankruptcy, and to prevent existing and prospective housebuilding projects also toppling into administration or bankruptcy. In view of the unprecedented circumstances we face, we believe the EU institutions should:
- Consider a temporary suspension of budgetary restrictions and financial constraints on the Member States: this would enable Member State governments to offer low or zero interest rate loans to companies in need.
- Encourage EU Member states to deduct taxes applicable to companies to mitigate the financial losses of developers and homebuilders resulting from their inability to generate income from sales and rents.
These measures should be implemented urgently, on a time-limited basis, to prevent European Union countries being exposed to the risk of a dramatic and irrecoverable escalation in their sovereign debt levels, which would weaken significantly further the economies of those Member States that are already registering critical deficit-to-GDP ratios. Nevertheless, similarly to what it is being done in the US by the Federal Reserve´s Main Street Lending Program (MSNLF), the EU financial authorities need to support banks and financial institutions lending to SMEs which were in good financial conditions before the Covid-19 pandemic.
- Incentivising and supporting public and private investment funds to buy private sector apartment blocks in order to increase affordable rental options for EU citizens
The EU institutions should incentivise, through favourable legislation, regulation and economic incentives, the creation of (eventually mixed) public and private investment funds that can be deployed to acquire apartment blocks from manufacturers and developers and ensure the continuation of a flourishing market in the provision of affordable renting for EU citizens. According to Build Europe, there will be significantly enhanced demand for this kind of housing option in the short term, in view of lower consumer income resulting from the post-Covid-19 economic crisis and the significantly increased unmet demand for this type of housing.
This type of liquidity measure would encourage planned building work for new developments to go ahead and provide much needed support to SMEs and family businesses working in the sector. This would enable them to continue operating and would be beneficial to local and national economies.
This measure would also help to resolve a wider range of longer-term, strategic housing challenges: the coexistence of public and private investment funds would provide effective and sustainable solutions in respect of EU-wide social housing, by lowering prices, curbing speculative incentives, and increasing the supply of rental solutions within this segment of the market.
These incentives could in turn be conditioned by investments in energy-efficient buildings and could as such contribute in the realisation of the Green Deal.
- Introducing a moratorium on new building regulations and reviewing European environmental goals
The introduction of all recently approved new building regulations should be put into abeyance for a period of not less than five years. A moratorium would give developers, and in particular SMEs, time to comply with regulations already in force and optimise standards accordingly.
This policy recommendation includes within its ambit current emissions from new buildings and dwellings: independent studies have found that new build properties produce the equivalent of only 25% of the CO2 emissions that older housing stock generates. Incentives for the construction of new build would contribute significantly and positively to the delivery of the EU’s overall emissions targets, which would be in line with the environmental ambitions of the European Commission and would contribute powerfully to lowering costs of housing to first-time buyers and tenants.
- Restoring freedom of movement within the EU to enable cross-border workers to return to work
Cross-border workers are facing unprecedented personal difficulties during the lockdown, as are their employers, as many EU States have closed their national borders or imposed draconian controls that militate against these workers being able to reach or access the construction sites in which they are contracted to work. Re-opening the EU’s external border, including EEA borders, in a timely and effective way, would be a cost-effective measure that would bring immediate economic and social benefits and relief.
In order to prevent a further increase in unemployment among posted workers, borders in Europe – the closure of which runs entirely contrary to the founding principles of the EU – should be immediately re-opened in order to enable cross-border workers to return to work and allow housebuilders and developers to complete their projects, generate housing supply for their immediate customers and provide a much needed economic stimulus for EU/EEA Citizens and businesses to help kick-start Europe’s stalled economy.
- Providing tax and financial incentives to support the demand side of the market
Exceptional situations require exceptional policies. EU Member States should be encouraged to:
- to reduce residential and commercial property transfer taxes, and
- lower VAT rates for first-time buyers and tenants of new dwellings, and
- provide loans at 0% interest rate (or very low) to people who buy their main home, including first-time buyers.
The EU’s retail banks must not be permitted to repeat the mistakes made in 2008: namely, that they declined a majority of mortgage applications to prospective homeowners and increased the percentage of the asking price required for the deposit, which consequently reduced the supply of mortgages and critically impaired consumer demand which, in turn, worsened the effects of the economic crisis. The consequences of this structural failure have been unnecessarily serious and long-lasting.
We therefore urge the EU Institutions and Member States to work closely together to facilitate the sustainable provision of affordable loans and ensure retail banks continue to inject liquidity into the system in order to support sustained demand during this challenging period.
Strategic and long-term measures
- Reforming the EU’s planning systems to expand the supply of land and promote policies to create more environmentally appropriate and sustainable land development
There is a continued need to generate a sustainable pipeline of new build homes: the EU and Member State governments need quickly to stimulate supply in order to prevent existing levels of available housing stock from reducing further and, consequently, driving up prices to prospective consumers (homeowners and tenants). We therefore encourage the EU institutions actively to promote positive new policies on land use to encourage national and regional regulatory authorities to reform their planning systems in a progressive, supply-developing way.
Land designated for new planning development would meet the EU’s existing environmental requirements and take adequately into account the fact that all new buildings now possess a significantly reduced emissions footprint.
- Speeding up the process of digitalisation
National administrations have, as a consequence of the Covid-19 crisis, halted their normal peacetime administrative processes, or very significantly slowed them down. Europe’s housing sector has been seriously and adversely affected by this phenomenon, particularly in regard to the granting of new building permits, which has not only slowed housebuilding but has also reduced the pipeline of future supply. This means a return to a more normalised economy will take much longer; and Europe’s prospective homeowners, including first-time buyers, will be penalised as a consequence.
This crisis has demonstrated how digital technologies have reached a degree of sophistication that enables business and people to use them across a wide range of sectors, from finance to the construction industry. It is high time for developers and homebuilders to benefit from these technologies and, for this reason, all the social and political impediments to their implementation need urgently to be removed. It is imperative that the digitalisation process is sped up in all stages and procedures of the business chain, from the request and granting of building permits through to the notaries’ intervention during the sale agreement. The benefits of digitalisation will have an immediate and positive impact on the sector: it will ensure the delivery of faster and more efficient and accountable public services; improve production; cut costs; lower prices; and save time.
Swifter, more efficient delivery of public services will, in turn, play a decisive role in helping the EU recover from the economic headwinds caused by Covid-19. Fostering the use of digital technologies would be a timely and cost-efficient measure whose benefits would have long term benefits for economies and communities. We expect from the European Commission and the national governments to set out the framework for replacing the old systems with digital ones.
- Reducing supply side production costs by eliminating, simplifying, and standardising regulations
The EU institutions must initiate and promote a comprehensive package of deregulation measures whilst keeping key environmental requirements in place. The EU’s home building and developer sector is currently exposed to growing and accumulating levels of regulations, at all stages in the development and construction process. This massively increases the cost of bringing new housing supply to market.
In the last 15 years, the time required to design and build a dwelling has doubled. It should come as no surprise that we are not in a position to develop an offer in line with the population’s needs. In this period of extraordinary and unprecedented economic challenge and weakness, a structured and sustained programme of deregulation would play a pivotal role in helping the construction sector recover from the economic shock of 2020 and prevent a further reduction in housing supply, and, therefore, avert a further constraining of housing affordability.
These kinds of measures would help to kick-start the recovery and stimulate much needed consumer demand. They would also take a significant step toward reducing construction costs, with a positive net impact on the final price of new housing stock, enhancing its affordability and attractiveness to prospective EU homebuyers.
- Supporting ‘help-to-buy’ schemes across Europe
Many EU Member States have already put in place programmes designed to support families, young people and those on low incomes. We must not allow the medium-term economic effects of Covid-19 to extinguish the legitimate hopes and aspirations of first-time buyers and families and prevent them from benefiting from the long-term security that home ownership affords. We therefore call on the EU Institutions, working together with the Member States governments, to do everything in their power to build market confidence and implement thoughtful, practical policies at European, national, regional, and local levels in order to maximise open access to the housing market, especially for first-time buyers and low-income households.