The EU, housing policy and the post-1991 US hegemony+

First Published in jimsresearchnotes 20 Sept 2009 just as the Eurozone Crisis was about to explode. See this Encyclopaedia Britannia timeline. which starts in October 2009. The crisis continues as the European Debt Crisis Contagion spreads.

The EU and the post-1991 US hegemony

The impact of the EU on the housing policy of member states takes the discussion back to Research Note # 5 (of 16 June 2009) “1991 – the year the world changed”.

Just as the end of the Cold War signalled major changes in the political alignments of countries with unitary rental markets, so it was with the EU, which underwent changes of seismic proportion in terms of its composition and so also with its political alignment and that have caused huge problems for countries trying to maintain and keep their unitary rental markets.

1. As a direct result of the disintegration of the USSR, by 2004 all but two of Central Europe’s former Warsaw Pact countries had joined both the EU and NATO (Czech Republic, Hungary and Poland had already joined NATO in 1999). The last two, Bulgaria and Romania, joined the EU and Nato in 2007. For details see http://en.wikipedia.org/wiki/Warsaw_Pact

2. The three Soviet Socialist Republics (SSRs) of Estonia, Latvia and Lithuania declared unilateral independence from the USSR in 1991 just prior to its final collapse and joined both the EU and NATO in 2004.

3. Yugoslavia, which from the time of Tito was a nonaligned socialist state, disintegrated in 1991. At time of writing only one of the successor states, Slovenia, had joined the EU, though several others had applications pending.

In 1991 everything to do with the USSR was anathema to its former satellites and the three Baltic former SSRs. Across the board of policy-making from gender equality (much to the dismay of Swedish gender researchers) to housing.

Housing was a particular target of wrath, as that hated physical symbol of Soviet domination – state public housing – was sold into owner occupation in the former satellites and SSRs, often at give-away prices. Many countries had no legal description of what “non-profit” rental housing was. The legal concept of a trust was also alien, there being no such equivalent in Soviet law.

The accession of so many central European states, to the EU radically transformed its political complexion. It is a much more conservative union and extremely cumbersome with so many members, all demanding a voice in decision-making.

Doling (2006) describes how the new love-hate relationship with the USA, was from the start coloured by both EU mimicry and young sibling rivalry. His analysis makes sobering reading.

The EU’s “implicit” Housing Policy

Doling (2006, p. 337) cites the Kook Report (European Commission, 2004) as recommending that the EU was falling behind the USA [it should be born in mind that this Report was drawn up and published during the frenzy years of the housing mortgage bubble – JK] and that to catch up, the EU should also be “unleashing…the dynamism of financial markets” and reducing the lending restrictions on mortgages so that the EU can narrow the worrying gap that was widening between EU and US economic growth. The report further argues that “reducing restrictions on refinancing mortgage debt and offering improved possibilities to finance a larger proportion of the purchase price of property via more generous and cheaper mortgage loans could extend home ownership and also boost consumption.” (European Commission, 2004 pp.25-26).

Doling (2006) concludes that the newly expanded EU, while formally not pursuing a housing policy, pursues “a sort of housing policy by stealth” (Doling, 2006 p. 338). Doling even speculates as to how this stealth policy might be implemented in detail. Should, for example, the EU aim to reproduce a carbon copy of US tenure patterns? And if so, what should EU do about countries with home ownership that are higher than the US has? Should the EU strive to reduce home ownership in those countries? (p. 339)

The Dutch struggle with the EU over its unitary rental market

Elsinga et al. (2008) examine the threat posed specifically to the Dutch unitary rental market by the EU (see also Scanlon and Whitehead, 2008 for a similar view more generally expressed), as can be seen in the abstract to the article:

“Social rental housing has once again captured a strong position on the Dutch political agenda. This has happened especially since the European Commission sent a letter to the Dutch government indicating that the Dutch social rental sector was not considered EU-proof from the viewpoint of the European Union’s competition policy. The letter coincided with criticisms from Dutch politicians that housing associations had not been performing well enough for some time, given their abundant resources. However, in an international context, the Dutch social rental sector is often regarded as a good system for providing affordable housing to those who need it, without the sector being marginalized and stigmatized. Jim Kemeny has classified this market as one in which the social rental sector in due course competes with the private rental sector on equal or almost equal terms as a unitary rental market.

The starting point of this paper is whether the achievement of a unitary rental sector is threatened by the EU’s competition policy. It will also discuss two other possible threats to the future of the Dutch unitary rental market: the threat to take surplus capital away from housing associations and have government decide on what to invest; and the attractiveness of homeownership to households. We conclude that the character of the Dutch unitary rental sector is indeed under threat, although mostly by stealth.” (Elsinga et al, 2008 p. 21)

Conclusions

(1) Housing Policy

EU is hostile towards the existence of unitary rental markets, which should receive no public subsidies, unless and until it is restricted to the poor. Only then are subsidies acceptable. Yet, paradoxically, tax deductions for owner occupiers are not counted as subsidies. There is an interesting discourse analysis of this to be done.

(2) Power Politics: The EU has a curious relationship to the USA, in part a rival, increasingly looking to expand eastwards, and measuring itself against US economy and power, in part the USA’s first line of defence on the European continent against Russia and China.

It is little wonder that President Bush Jr wanted to station missiles on EU’s eastern borders (in Poland and the Czech Republic) and also wanted the EU to admit Turkey, a country with the largest army in NATO besides the USA, and strategically located in Asia near to the oil fields of the Middle East http://en.wikipedia.org/wiki/Turkish_Armed_Forces. The EU will, it now seems, comply with the former president’s second wish. President Obama cancelled the deal to plant missiles in Poland and the Czech Republic – to the dismay and anger of both countries.

References

Doling, John (2006) “A European Housing Policy?” European Journal of Housing PolicyVol. 6, No. 3, pp. 335–349 (December)

Elsinga, Marja, Marietta Haffner & Harry van der Heijden (2008) “Threats to the Dutch Unitary Rental Market” European Journal of Housing Policy Vol.8 No.1, pp. 21-37 (March)

European Commission (2004) Facing the Challenge: The Lisbon Strategy for Growth and Employment Report From the High Level Group Chaired by Wim Kok, (Luxembourg: Office for Official Publications of the European Communities).

Scanlon, Kathleen and Christine Whitehead (2008) Social Housing in Europe II: a review of policies and outcomes London School of Economics and Political Science (December)

Each Post is a freestanding short paper that has not been peer-reviewed before publishing. Notes may combine into the equivalent of a working paper for seminar purposes.

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