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"AFFORDABLE HOUSING" APPROACH AND ECONOMIC POLICIES

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ADMINISTRATIVE AND
ECONOMICS SCIENCES
Theory, Current Researches and New Trends
ADMINISTRATIVE AND ECONOMICS SCIENCES
Assoc. Prof. Dr. Yüksel Akay Unvan
IVPE 2020
IVPE 2020
ıSBN: 978-9940-46-037-2
ADMINISTRATIVE
AND
ECONOMICS SCIENCES
Theory, Current Researches and New Trends
Editor
Assoc. Prof. Dr. Yüksel Akay UNVAN
Editor
Assoc. Prof. Dr. Yüksel Akay UNVAN
First Edition •© October 2020 /Cetinje-Montenegro
ISBN • 978-9940-46-037-2
© copyright All Rights Reserved
web: www.ivpe.me
Tel. +382 41 234 709
e-mail: office@ivpe.me
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I
PREFACE
Dear academicians, we continue to produce during this delicate period.
We would also like to thank the authors and readers who made this book
possible during the Covid-19 process. This epidemic has shown that it is
important that the economy is as strong as the immune system. In order to
achieve this, we need different approaches and solutions related to the
financial sector. These works also serve this purpose as a result. Whether
theoretical or practical studies are very valuable in this sense. The works
in the book have different titles, but they are fragments of a whole. The
economy is at the point of determining the fate of the countries. These
studies are almost an early warning system for what needs to be done
before a crisis environment occurs. We hope to contribute to the literature
and our readers to the extent we want.
Best regards.
II
CONTENTS
PREFACE…………………………………………..……………………I
CONTENTS……………………………………...……………………..II
REFEREES…………………………………………………………….V
CHAPTER I
Ayşegül GÜNGÖR
RED FLAGS IN IDENTIFYING PURCHASING FRAUD AND
CASE EXAMPLES ………………………………….………….…1
CHAPTER II
Duygu ŞENGÜL ÇELİKAY
THE EFFECT OF NEW REGULATIONS ON
PARTICIPATION BANKS’ ACCOUNTING AND AUDITING
PRACTICES IN TURKEY …...…………………………………17
CHAPTER III
Leyla İŞBİLEN YÜCEL
BASICS OF CONJOINT ANALYSIS…..………………..….….33
CHAPTER IV
M. Burak ERTURAN
FORECASTING AIRLINE PASSENGER AND FREIGHT
FLOW: A COMPARISON OF HIERARCHICAL TIME
SERIES APPROACHES …………………………………….…..53
CHAPTER V
Yüksel Akay UNVAN
A SENTIMENT ANALYSIS OF TWITTER DATA FOR
PREDICTING STOCK MARKET PRICE ………………….…65
CHAPTER VI
H. Işıl ALKAN
MOST WOMEN AT (EQUALITARIAN) WORK: WHAT IS
THE SECRET OF NORDIC SUCCESS? LESSONS FOR
DEVELOPING WORLD ………………………….………….77
III
CHAPTER VII
Neslihan ÇELİK
“AFFORDABLE HOUSING” APPROACH AND ECONOMIC
POLICIES ……………………………………………………..…91
CHAPTER VIII
Pınar KARAHAN-DURSUN
DOES FOREIGN DIRECT INVESTMENT CONTRIBUTE CO2
EMISSIONS? REVISITING THE POLLUTION HAVEN
HYPOTHESIS FOR TURKEY ……………………………...…111
CHAPTER IX
Yasemin DUMRUL
OPTIMAL SIZE OF GOVERNMENT AND ECONOMIC
GROWTH: AN EMPIRICAL ANALYSIS OF THE ARMEY
CURVE IN TURKEY…………… ……….…………………….130
CHAPTER X
Kutay MUTDOĞAN
THE ROLE OF THE DESIGN CONCEPT WITHIN DESIGN
INNOVATION: A CASE STUDY FROM TURKISH
CONSUMER ELECTRONICS MARKET……………………150
CHAPTER XI
Osman EROĞLU
THE FINANCIAL EFFECTS OF COVID-19 ON BUSINESSES
IN TURKEY ……………………………….……………………164
CHAPTER XII
Emrah Sitki YILMAZ
A REVIEW OF THE RELATIONSHIP OF SOCIAL MEDIA
WITH EDUCATION AND ACADEMIC PERFORMANCE
……………………………………………………………………180
CHAPTER XIII
Gülsen Serap ÇEKEROL& Özer COŞMAN
BASIC ARTIFICIAL INTELLIGENCE APPLICATIONS IN
SUPPLY CHAIN MANAGEMENT ………………………...…192
IV
CHAPTER XIV
Vesile OZCİFCİ
GREEN IRONY: GREENWASHING ………………….……..203
CHAPTER XV
Nesrin DEMİR & Nezih Metin ÖZMUTAF
INTERNATIONALNON-GOVERNMENTAL
ORGANIZATIONS AND HUMAN RIGHTS A RESEARCH IN
THE CITY OF IZMIR ……………………………………….…216
CHAPTER XVI
Burcu AKDENIZ
CAN CULTURE EFFECT SAFETY BEHAVIOR? AN
EMPIRICAL STUDY ON THE RELATIONSHIP BETWEEN
ORGANIZATIONAL CULTURE AND SAFETY CULTURE
……………………………………………………………………237
CHAPTER XVII
Ahmet Niyazi ÖZKER
SYSTEMIC FINANCIAL RISK COMPONENTS IN MACRO-
PRUDENTIAL POLICIES AND STRUCTURAL
DISCREPANCY IMPACTS IN THE EU …………………...…256
CHAPTER XVIII
Fatih AKÇAY& Sevinç YARAŞIR TÜLÜMCE
THE CASUAL LINK BETWEEN INFLATION AND BUDGET
DEFICIT IN THE G7 COUNTRIES …………………….….…276
CHAPTER XIX
Hakan İNANKUL
ANTIDOTE TO CORRUPTION IN TURKISH PUBLIC
ADMINISTRATION: ETHICAL VALUES ………………..…291
V
REFEREES
Prof. Dr. Abdullah Yılmaz, Anadolu University, Turkey
Prof. Dr. Kemal Öktem, Hacettepe University, Turkey
Prof. Dr. Levent Aytemiz, Bandırma Onyedi Eylül University, Turkey
Prof. Dr. Necdet Sağlam, Anadolu University, Turkey
Prof. Dr. Niyazi Kurnaz, Kütahya Dumlupınar University, Turkey
Assoc. Prof. Dr. Fahriye Merdivenci, Akdeniz University, Turkey
Assoc. Prof. Dr. Hanifi Murat Mutlu, Gaziantep University, Turkey
Assoc. Prof. Dr. Kübra Önder, Burdur Mehmet Akif Ersoy University,
Turkey
Assoc. Prof. Dr. Zerrin Kılıçarslan, Kayseri University, Turkey
Assoc. Prof. Dr. Yüksel Akay Unvan, Ankara Yıldırım Beyazıt University,
Turkey
Asst. Prof. Dr. Taha Emre Çiftçi, Necmettin Erbakan University, Turkey
AFFORDABLE HOUSING APPROACH AND
ECONOMIC POLICIES
Asst. Prof. Dr. Neslihan ÇELİK
Marmara University, İstanbul, Turkey
e-mail: neslihan.celik@marmara.edu.tr, Orcid ID: 0000-0002-2329-1782
Introduction
Housing that offers a living space for people and is also a financial asset
and an element of wealth is not a consumer good that is equally accessible
by all income segments. It can be difficult for low-income and poor
households to meet their housing needs with adequate, healthy, safe and
decent housing due to high housing prices and rents compared to their
disposable earnings.
The fact that housing is relatively expensive and that the households
have started to allocate more and more of their income for housing costs
have increased the importance of housing policies in most countries, and
today's economic policies involve satisfaction of the housing needs of low-
income groups with adequate and affordable housing.
According to their respective socio-economic conditions, urban
development perspectives and experiences, national economies develop
and implement models to facilitate and ensure low-income groups' access
to housing. This study generally discussed the affordable housing approach
and application examples and economic policy instruments from selected
countries and territories around the world within the framework of this
approach.
1.Real Estate Market and Housing
Real estate (Harvey,1981: 14-15), which can be expressed as land and
constructions located on the land, indicates immovable that do not have
physical mobility features, unlike other consumer goods. The Turkish Civil
Code (Article 704) defines the subject of real property as land, independent
and permanent rights registered on a separate page in the land registry,
independent sections registered in the property ownership register.
Real estate has become an attractive financial asset, and the useful
features of its physical presence, and has grown to be a part of wealth.
Among the advantages that cause real estate assets to be included in the
investment portfolio, features, such as the potential to generate returns,
protect against unexpected inflation, provide alternative diversity against
stocks and bonds, and provide regular cash inflows can be counted (Garay,
2016).
Real estate varieties can be classified as
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Housing,
Commercial property: offices, service buildings, industrial
buildings, hotels, sports and entertainment facilities, etc.
Land: plot, vineyard, garden, field, etc. (Klimczak, 2010).
Real estate is not only a consumer good but also contributes to the
production of goods and services with varieties, such as agricultural lands,
industrial buildings, offices, and shops. Immovable properties are
commodities of the real estate market, including buyers and sellers, and
this market comprises all real estate transactions (Harvey, 1981.p.15).
In this market where supply and demand changes happen, and resource
allocation takes place, demand is affected by factors, such as the price of
the good, income, taste and preferences, prices of substitutes, market size,
expectations, taxation, transfer costs of assets and loan costs (Harvey,
1981).
In the real estate market, supply is a concept that represents the supply
offered to the market at varying prices and is influenced by factors, such
as price, labor and capital costs, construction costs, and land costs.
Among the factors influencing housing demand, which is one of the
principal components of the real estate market
price, current income,
expected revenue,
proximity to work,
proximity to social and environmental opportunities,
cost of transportation (such as monetary and waste of time),
residential properties (size, the floor it is located, etc.),
age of the building,
interest rates and other loan conditions,
the maintenance cost of housing,
the expected price increase,
demographic factors
the non-residential wealth of households,
social characteristics of households (education level, etc.),
savings deposit interest rates,
capital gain tax,
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and property taxes can be counted (Pirounakis, 2013).
Factors affecting housing supply can generally be expressed as
(Pirounakis, 2013).
expected price at completion,
rate of return,
national or regional zoning legislation, regulations, etc.,
land use,
construction cost (labor and materials; current borrowing cost;
insurance, etc.),
cost of land,
construction technology,
taxes,
long-term real interest rates
2. Housing Policies
Housing is a complex good with its asset, investment, and consumption
dimensions (O’Sullivan, & Gibb, 2003:1-3). It is one of the most expensive
consumption and investment goods for households (Tu, 2003). Many
factors, such as location, structural features, income levels of buyers/users,
and socioeconomic expectations, influence housing buying decisions.
While housing is a commodity used through purchasing or rental in
terms of demand, it is an asset that provides returns through sale or renting
in terms of supply. The housing market involves residential and rental
properties (Monroy et al., 2020).
Housing is a living space that affects people’s social and economic
comfort and provides shelter, security, and privacy. The relatively
expensive housing prices worldwide and the difficulty of meeting the need
for adequate but affordable housing have brought up housing policies to
the agenda in most countries. In this sense, economic tools have also been
applied to meet the need for housing, which directly affects people’s
comfort of life, and monetary and fiscal policy instruments have been
introduced.
Housing policy is briefly governments’ interventions in the housing
sector with different instruments, such as social housing, supports, market
controls, tax incentives, and demand-side and supply-side interventions.
Maclennan (1982: as cited in (O’Sullivan, & Gibb, 2003) refers to
housing policy objectives generally as
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eliminating market failures by taxation, subsidies or regulations,
replacing unstable market conditions with the distribution
mechanisms applied, and
utilizing housing to achieve goals, such as income redistribution
and regional growth.
In a joint study of the OECD with the Coalition for Urban Transitions
(Monroy et al., 2020);
development of financial incentives to promote compact and
inclusive cities, (through methods, such as rearrangement of property taxes
for more efficient land use by producing higher-density housing),
disclosure of the potential of the rental housing market, (by
developing arrangements for a balanced tenant-landlord relationship,
supporting social rental housing, etc.),
developing institutional capacity and establishing consistent
policies (through methods, such as developing mechanisms that ensure
inter-municipal cooperation for supply-side and demand-side housing
policies, strengthening national systems that determine taxable properties
and property values) are recommended to national governments to provide
adequate and affordable housing that will also encourage compact urban
development.
As of 2017, total housing expenditures, including rent or mortgage
payments, maintenance, and utility costs, constitute the highest household
expenditure item in OECD countries with 22.3% of final household
consumption expenditures (Monroy et al., 2020).
The relatively expensive housing, the average spending of 15-20% of
income in Europe, has brought housing policies to the agenda of most
European countries in the last century.. In this context, traditionally in
housing policies;
access to adequate housing for low-income households,
affordability, which includes limiting the burden of housing costs
of low-income households,
and increasing the quality of new buildings and supporting
maintenance and repair to afford adequate housing for low-income families
has come to the fore (European Parliament -EP, 1996).
Many countries help households to live in houses that are safe and
human in dignity without a heavy financial burden. This assistance can be
on the demand-side or supply-side. Demand-side policies aim to increase
the household’s financial capacity with subsidies to ensure that households
can live in adequate housing. Some examples are the housing allowance,
94
rental allowance, project-based assistance, which are also used in Canada,
Europe, and the USA. In supply-side policies, low-income earners are
provided by subsidizing construction, maintenance, repair, or building
operating costs. In this strategy, subsidies are provided to structures and
buildings, and they may belong to private property, public institutions,
profit, or non-profit property owners. This approach has applications, such
as social housing, public housing, non-profit housing (Galster, 1997). In
other words, housing policies can be designed as supply-side through
social housing construction or subsidizing producers in general, and as
demand-side in the form of assistance and funds that support the
household’s renting, purchasing, repair, and maintenance. Supply-side
instruments, such as tax incentives, government guarantees for loans,
capital assistance for projects, facilitation of access to land, regulations,
planning, and demand-side tools such as tax exemptions, tax credits, rent
grants (Asian Development Bank, 2009: 3-4), mortgaged-low-interest
housing loans instruments are included.
Demand-side policies may generate inflationary pressure in situations
where the amount of housing is insufficient, such as in the short term, when
the housing stock does not increase. Due to reasons related to country
conditions and economic conjuncture, in most cases, countries generally
apply two models at once or consecutively. Factors, such as sectoral
revival, contributing to employment, and positive externality for other
relevant sectors affect the way and duration of implementation of supply
and demand-side policies. Though the focus of housing policies is to meet
the need for housing, housing policies have a symbiotic relationship with
economic parameters.
2.1. “Affordable Housing” , Adequate Housing” Approach and
Applications
Affordable housing can be defined as housing for which households
allocate at most 30% of their income for all expenses related to housing
(Mullin & Lonergan Associates, 2015).
Another definition refers to adequate housing (Milligan et al., 2007:90),
which allows households with low and moderate-income to become
homeowners or tenants.
In short, affordable housing refers to adequate housing where the cost
required to purchase or lease can be met, that is, accessible housing.
On the other hand, adequate housing is a house that is not exposed to
diseases and dangers, is liveable, has the features and legal rights to afford
essential services, such as water, lighting, and sanitary installations
(Habitat III, 2016).
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The affordability of the housing, in other words, the cost and purchasing
conditions that can be paid, may vary from one country to another. For
example, in Germany, when the cost of housing is considered based on
household income, the affordability of housing is close to the OECD
average. The median mortgage load (principal repayment and interest
payments) is 19% of disposable income (OECD average 18%), while the
rent load is 20% (OECD average 21%) (OECD, 2018).
In the EU, housing affordability is calculated using a housing cost
overburden rate. According to the Eurostat (2020) definition, the housing
cost overburden rate is percentage of the population living in a household
where total housing costs represent more than 40% of the total disposable
household income
Concepts, such as affordable housing, social housing, public housing,
non-profit housing, are now critical components of housing policies for
low and middle-income households in the world today. Habitat III (2016)
invites member countries to provide adequate, safe, and affordable housing
with the New Urban Agenda within the scope of The Sustainable
Development Goals and recommends providing;
integrated housing policies with investments in areas, such as
urban plans, land use, transportation, environmental sustainability,
inclusive housing that includes elements, such as fair housing
policies for special needs groups
affordable housing that can be improved through policies that
facilitate homeownership, subsidies that allow low-income households to
rent and have an adequate home, and mechanisms that limit ownership
speculation
adequate housing that protects against dangers, diseases, factors,
such as the natural environment, livability, access to essential services, and
legal rights and improving informal slum settlements (HABITAT III,
2016:4) global housing policy objectives.
The housing policy tools investigated by the OECD through the
Questionnaire on Affordable and Social Housing in 2016 and 2019 applied
to 46 countries are briefly classified as follows (OECD, 2019):
Support for homeownership and homeowners:
Subsidies for those who are generally under a certain income
level and who will buy a house for the first time covering all or
part of the value of the property to facilitate homeownership
with assistance, such as one-off grants,
Government-subsidized mortgage and mortgage guarantee for
buyers when buying a residential dwelling
Mortgage relief with measures such subsidy of the mortgage
payment, postponement of payments, refinancing mortgages,
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and mortgage-to-rent schemes to prevent foreclosure of homes
owned by financially distressed homeowners..
For first time home buyers, tax relief for expenses such as land
transfer taxes, legal fees, etc. or mortage tax relief
Financing support for the regeneration of the residential
dwelling with tax reduction, tax credits, grant-style measures
for the renovation (regeneration) of the residential house.
Support for householders and tenants:
Housing allowances through methods, such as rent payments,
mortgage payments, interest payments, utility fees, and insurance
payments
Subsidies to develop new affordable housing with models, such as
grants, tax reductions, shared ownership, rent to buy.
Support for the rental market:
Support for social rental housing development through methods
such as support for construction, renovation, and financing
Tax relief for rental costs
Publicly provided rent guarantees and deposits
Rent controls in the rental market by methods, such as restrictions
on the first rent or rent increases.
Regulations concerning the minimum quality standards that can
meet the essential needs of rented houses, including security,
health, and livability.
Arrangements for short-term holiday rentals
Among the countries surveyed, the most common housing policy
models support homeowners and buyers; housing allowances, and social
housing. According to the survey, 34 states provide tax assistance to
homeowners when purchasing housing, usually by methods, such as one-
off tax relief, mortgage payments, or tax relief for mortgage interest
payments. Twenty-nine countries offer subsidized mortgage or mortgage
guarantee to households. Twenty-four states provide subsidies to facilitate
homeownership, usually with grants or loans to first-time home buyers,
and 18 countries give mortgage assistance to financially distressed
homeowners. Forty-one countries declared that they provide financial
support for the renovation of the residence. Among the countries surveyed
for support for tenants, the most common tool is the subsidized rental
housing. Governments either directly supply social housing or support
social housing providers through grants, loans, and tax credits. According
to the survey, 14 countries provide tax benefits to homeowners for rental
housing or tenants in some countries for rental costs, and 11 countries offer
rent guarantees. Twenty-one countries stated that minimum quality
97
standards are a legal requirement for rental housing. Nineteen countries
have noted the existence of arrangements for short-term holiday rentals.
According to the survey, 24 countries apply rent controls (OECD, 2019).
The table below gives the ratio of government expenditures to GDP in
selected countries for housing assistance. According to the table, public
expenditure on housing aid in the UK is 1.06% of the GDP.
Table 1: Total Housing Allowances Spending by Governments as
Percent of GDP in Selected Countries
% of GDP
Year
United Kingdom
1,06%
2018
Finland
0,89%
2018
Germany
0,73%
2017
France
0,72%
2018
Denmark
0,72%
2017
Netherlands
0,52%
2018
New Zealand
0,51%
2018
Sweden
0,29%
2018
Australia
0,23%
2018
Greece
0,21%
2018
Iceland
0,21%
2018
Austria
0,20%
2017
Czech Republic
0,18%
2018
Israel
0,15%
2018
United States
0,12%
2018
Norway
0,08%
2018
Estonia
0,07%
2018
Lithuania
0,05%
2018
Latvia
0,05%
2018
Poland
0,04%
2017
Luxembourg
0,02%
2018
Costa Rica
0,001%
2018
Source: OECD (2020). Public policies towards affordable housing
http://www.oecd.org/social/affordable-housing-database/housing-
policies/ (Access date:01.08.2020)
Table 2 gives the share of social rental housing in the total housing
stock in selected countries. Social rental housing constitutes about 38% of
the total housing stock in the Netherlands. This ratio is around 21% in
Denmark and 20% in Austria.
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Table 2. Share of Social Rental Housing in Total Housing in Selected
Countries
Year
Netherlands
2018
Denmark
2018
Austria
2018
United Kingdom
(England)
2018
France
2018
Ireland
2016
Iceland
2018
Finland
2017
Poland
2017
Slovenia
2015
Korea
2015
Malta
2013
Australia
2017
Norway
2018
Canada
2011
Spain
2017
New Zealand
2018
United States
2017
Japan
2018
Germany
2017
Portugal
2011
Luxembourg
2013
South Africa
2016
Source: OECD (2020). Public policies towards affordable housing
http://www.oecd.org/social/affordable-housing-database/housing-
policies/ (Access date:01.08.2020)
Targets predicted in housing policies and the economic tools chosen
may vary according to the socio-economic climate and structure of the
countries, experiences. In the context of affordable housing approach, it
will be beneficial to consider the current housing policies for low-income
people with its general outlines in selected samples.
99
2.1.1 Housing Policies and Affordable Housing for Low-Income
Group in the USA
In the USA, the federal government has provided housing allowance
for low-income people since the 1930s. It has supported the mortgage
market and promoted the construction of low-rent public housing for low-
income households through local authorities. Over time, the federal
government stopped providing construction-based rent subsidies, and then,
private developers and property owners began to play a bigger role. Today,
some federal housing programs include rental housing benefits, support for
state and local governments, support for becoming a homeowner, and
support for homeowners. Most of these programs are managed by HUD
(Department of Housing and Urban Development), and the available
housing support programs include models such as public housing,
vouchers, project-based rental assistance, housing for elderly people,
housing for the disabled, low-income housing tax credit (LIHTC),
homeless assistance programs, and mortgage interest reduction. A
significant part of federal housing allowance programs provide affordable
housing for low-income families, and affordability refers to housing cost
that does not exceed 30% of family income (Congressional Research
Service -CRS, 2019a).
Public housing refers to affordable houses and apartments for rent
designed for low-income group, disabled and the elderly. HUD manages
the public housing program which involves houses with different shapes
and sizes from detached houses to multi-storey buildings. Local public
housing agencies (PHAs) decide on the eligibility of those who will benefit
from public housing according to the level of annual gross income, old age,
disability, U.S. citizenship, eligible immigration status, and other local
factors ( Find Affordable Rental Housing, 2020)
Local public housing agencies use HUD's income criteria. Accordingly,
low-income families are those whose income is not above 80% of the
median family income in the area. Families whose income is up to 50% of
the median family income in the area are defined as very low-income
families. Families whose income is up to 30% of the median family income
in the area are expressed as extremely low-income families (PD&R,2016).
Public housing involves low-rent units owned by local public housing
agencies and subsidized by the federal government (CRS, 2019a). HUD
pays local housing units for the costs of operating, operating and
developing these residences, which have lower rents than the market.
Public housing is project-based, and low-income families pay 30% of their
income for rent (Eggers,2020).
The housing choice vouchers system is a tenant-based rental assistance
method managed by local public housing agencies and funded by the
100
federal government. Voucher holding families (low-income families
meeting the program criteria) rent the houses of the landlords who fulfill
the program requirements and want to participate in the program, and the
vouchers pay the difference between the rent and the family's contribution
to the rent (CRS, 2019a). The share of the tenant household in the rent is
based on their monthly income. The household pays rent by 30% of its
monthly adjusted income or 10% of its gross income. The remaining
amount is subsidized by a housing choice voucher (Cooper & Sloane,2016)
Housing tax credit which is another housing allowance program for
low-income groups is based on the tax reform law of 1986 and it has
emerged to encourage the development and improvement of affordable
rental housing. Tax credits are given by housing finance authorities (HFAs)
to housing developers who agree to build, develop or improve affordable
housing for low-income groups and these loans provide a deduction from
income tax for 10 years (CRS, 2019 b).
Low-income housing tax credit is one of the main tools for expanding
the supply of affordable rental housing. In the period of 1987-2015, this
program realized 45,905 projects and 2,97 million housing units. In this
program, investors receive federal income tax credit as an incentive to
develop affordable rental housing. The program includes two different tax
credits, namely 9% tax credit and 4% tax credit, and tax credits are
allocated to states by the Internal Revenue Service (IRS) (Scally,.Gold,
DuBois, 2018).
LIHTC is a federal program that funds housing development and
rehabilitation for low-income families (United States General Accounting
Office -GAO, 1997), where taxpayers agree to provide low-income groups
with housing for at least 30 years and receive credits for ten years in return
(Internal Revenue Service -IRS, 2015). Annual credit requested by the
taxpayer is equal to the multiplication of credit percentage by the qualified
basis of the project, and the qualified basis refers to the amount of money
spent on the construction or rehabilitation of housing developed for low-
income group. (Tax Policy Center,2020).
Another program for affordable housing is that the Federal Housing
Administration (FHA) in HUD insures private lenders against potential
mortgage losses. FHA credit is designed for low- and middle-income
debtors, and the FHA insures the credit provided by approved creditors.
FHA-insured mortgage system requires lower collateral and lower credit
points compared to traditional loans. FHA-insured loans are used in
processes such as buying a house, improving houses, or models such as
reverse mortgages that elderly people aged 62 and over continue to live in
their homes. Borrowers pay their premiums to the FHA ( Federal Housing
Administration (FHA) Loan, 2020)
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Furthermore, The United States Department of Agriculture
(USDA)(2019) provides low-interest, fixed-rate loans to households and
individuals or give guarantees to private credit institutions for buying
affordable houses, or building, repairing, or renovating houses in rural
areas.
In the U.S., as of the second quarter of 2020, the national median single-
family home price was USD 291,300, and a household with a median
family income level at USD 82,471 spent 14.8% of its income on mortgage
payments (The National Association of Realtors -NAR, 2020). In the
United States, which annually allocates an average of 40 billion dollars for
housing policy spending and 6 billion dollars for low-income housing tax
credit (Collinson,R., Ellen, I.G and Ludwig,J., 2015), HUD subsidized
4,540,000 households at a cost of more than 38 billion dollars under
various programs as of 2017 (Eggers,2020).
2.1.2. Housing Policies and Affordable Housing for Low-Income
Group in the EU
Housing prices increase faster than income, and lack of housing also
increases in most EU countries. 44% of the houses were built before 1980
and need renovation. In major European cities such as London and Paris,
80% of people have difficulty in finding affordable housing (European
Commission -EC, 2018a)
Costs of housing in Europe have increasingly become a significant
spending item for households. The effects of the housing problem on
different income groups vary. In 2015, 11.3% of the population were living
in households that allocated at least 40% of their disposable income to
housing spending (EC, 2018b).Rising housing costs and the difficulty of
acquiring affordable housing for low-income group are effective factors in
determining current housing policies.
It can be said that the general trend in housing policies in Europe in the
last century was towards (EP, 1996) ;
regulations on minimum housing standards
rent controls (decreased in north-west Europe after 1960)
providing social housing for rent, especially in the period of
1950-80 (excluding Mediterranean countries and Belgium)
increased emphasis on housing quality and individual
subsidies.
Today, developing affordable housing and ensuring its sustainability
has become a key component of housing policy in the EU. With this
approach, the policies used by member states can be generally classified as
follows (EC, 2019);
102
policies that support the purchase of affordable housing
policies that support affordable rental housing
policies to increase housing supply by investing in the construction
of social housing
housing allowances and subsidies to low-income households or
groups such as the elderly, homeless, immigrants.
Affordable housing in the European Union is understood in association
with social housing, affordable rental housing and affordable home
ownership concepts and comes up for the low-income segment of the
population (EC, 2019).
The affordable housing approach focuses on the supply of public
housing, social housing, municipal housing, affordable rental housing, and
ownership of affordable housing (EC, 2018b).
To develop affordable and adequate housing and make it sustainable,
instruments such as tax incentives, credits, grants, guarantees, capital
investments, regulations are used. The majority of the EU-28 has mortgage
criteria such as loan-to-value ratio, debt-to-income ratio, and borrower's
debt payment capacity. The instruments used include tax incentives,
financial measures to increase the energy efficiency of buildings in housing
affordable by subsidies, tax exemptions for investors who finance
renovation or construction of housing, and a certain percentage of the value
of the purchased property given by government below-market interest and
without paying interest for the first 5 years (EC, 2019).
The Netherlands, Sweden and former EU member UK have the largest
social rental sectors in the European Union, and their governments spend
more than 3 percent of their respective GDP on housing policy. Other
countries have smaller social rental sectors. Public spending on housing
policy in Austria, Denmark, France and Germany is in the range of 1-2
percent of GDP. In Ireland, Italy, Belgium, Finland and Luxembourg, the
government's spending in the context of housing policies is usually limited
to about 1% of GDP. Government spending on housing policy in Portugal,
Spain and Greece is less than 1% of GDP (EP, 1996).
In the EU, social housing is perceived as part of an affordable housing
approach. There is no single model for social housing. The content of the
model varies according to the usage life of the houses, service providers,
users and financing methods. However, there are common tendencies such
as the aim of increasing the supply of affordable housing, public interest,
targets determined according to socio-economic conditions (EP, 2013).
Social housing refers to housing that is directly or indirectly supported
by means of tax reductions, subsidies, provision of public services at a
103
price below cost, and social benefits. State-subsidized social rental housing
is the most common form (EP, 2013).
In the EU, it is seen that social rental houses are mainly owned by
municipal companies, municipalities or non-profit housing associations.
For example, in the UK, municipal housing is used in the meaning of social
housing. While social houses are owned by housing associations in
Denmark, social houses are owned by municipalities in the Czech
Republic. In Germany, state-subsidized landlords provide social housing
(Scanlon, Arrigoitia, and Christine, 2015).
Social rent and affordable rent levels are available in social housing in
the UK, a former EU member. Social rental houses are owned and managed
by local authorities, and the amount of rent is determined according to the
national rent regime. Affordable houses are not subject to the national rent
regime, but to rent controls, and should not exceed 80% of the rent level in
the local market (Department for Communities and Local
Government,2014).
Rents in social housing mainly include income-based/social rents (as in
Lisbon) or cost-based rents including maintenance and renovation (Vienna,
etc.) (EC,2018a).
Although the financing models of social housing differ from country to
country, the most frequently used methods include instruments such as a
supply of affordable lands by local authorities, tax incentives, credits,
grants, subsidized interests, and public guarantees.
The table below shows the characteristics of social housing policy in
selected countries such as financing models, rent varieties.
Table 3. Social Housing Policies in Selected Countries
Country
Type of
providers
Type of
public
support to
financial
social housing
Sale of
social rental
dwellings
Social
housing rents
and social
allowance
Finland
Independent
public
body/public
owned
company,
Other private
non-profit
Interest rates
subsidies and
public
guarantees from
ARA
Sale to
sitting
tenants
allowed
Cost based
rent
+ housing
allowances
France
Independent
public
body/public
owned
company,
Cooperative,
Grants from
state
and/or local
authorities;
Public loans
from
Sale to
sitting
tenants
allowed
Cost based
rent/ Fixed
rent
ceiling(s)
+ housing
allowances
104
Source: CECODHAS (2007 and 2012) data as cited in EP (2013). Social
Housing In the EU, IP / A / EMPL / NT / 2012-07
2.1.3. Housing Policies for Low-Income Group in Turkey and
TOKİ
The Mass Housing Law (1984) in Turkey is a framework law that
defines the basic principles governing the solution of the housing problem
and aims to provide the public support needed to meet the housing
requirements. The Housing Development Administration (TOKİ), whose
duties are described and became effective by this law, has created an
interesting experience in terms of the policies of providing affordable and
adequate housing for low-income households.
TOKI aims to provide families of the low and middle-income group,
who cannot own housing in the current market conditions, with adequate
social housing through public housing projects produced on the land in
their ownership. The administration carries on its activities with the aim of
making the non-homeowner households homeowners on the basis of low
down-payment, low installments and long terms, as if they pay rents. In the
projects, care is taken to ensure that the houses offer integrated living
spaces with social facilities. Sales prices of houses are determined
according to the monthly payment capacities of target groups without
seeking profit (TOKİ, 2019).
Those who are in the lowest 20%-40% income bracket are allowed to
benefit from TOKI projects realized for the low-income group and the
poor. 65 - 87 houses are offered to the low-income group with 12%
down-payment and 15-year installments starting at the delivery, and 87-
146 m² houses are offered to the low- and middle-income group with 10%-
Other private
non-profit
CDC through
Livret A
Germany
Private for -profit
Interest rates
subsidies by
federal state
and/or the
Lander
Sale to
sitting
tenants
allowed
Incomebased
rent
(in part of
Germany)/
Fixed rent
ceiling(s)
+ housing
allowances
United
Kingdom
*
Local authority,
Independent
public
body/public
owned
company,
Cooperative,
Other private
non-profit,
Private forprofit
Grants from
government
Right to
Buy
Valuebased
Rent,
housing
allowances
105
25% down-payment and 8-10-year installments. Besides, disadvantaged
groups are given priority in the administration's social housing projects
(TOKİ, 2019).
Between 1984 and 2002, TOKI completed 43,145 houses and provided
loan support to 940,000 houses. The administration delivered 500,000
houses between 2002 and 2011, and the number of social housing produced
as of 2018 reached approximately 717,000 (TOKİ, 2018).
Furthermore, the Social Assistance Programs of the Ministry of Family,
Labor and Social Services (2020) provide the needy households who live
in old, neglected and unhealthy houses with housing aids for maintenance
& repair of their houses, construction of prefabricated houses, construction
of reinforced concrete houses, etc. These housing assistance can be in the
form of goods and service assistance or cash assistance The housing
allowances include rent allowance provided by the Ministry of
Environment and Urbanization (2020) to the beneficiaries for those who
reside in risky areas and/or risky structures in urban transformation
application areas.
Conclusion
Housing has been a center of interest not only for its ability to meet the
housing need as a consumer product but also as a financial asset and a part
of wealth. Since housing that affects people's social and economic well-
being and provides shelter, security and privacy is relatively expensive,
housing policies have become a current issue in most countries.
Today's economic policies are interested in the satisfaction of the need
for shelter with adequate and affordable housing for low-income group.
Many countries help households to stay in safe, adequate and healthy
housing without undertaking a heavy financial burden. Demand-side and /
or supply-side programs are implemented to provide affordable housing to
low-income households that they can buy or rent. In this context, according
to the unique economic conditions of the countries, different instruments
are employed for increasing the financial capacity of low-income
households in order to meet their housing needs. On the other hand,
different aids and programs are available for the construction of affordable
housing and maintenance, repair and renovation of the existing ones.
According to their socio-economic conditions, urban development
perspectives and historical background; countries implement many
methods of affordable housing policy for the low-income group (low-
income and moderate-income people in some countries), such as housing
allowance, rental housing assistance, rent subsidies, social housing,
subsidies, facilitating access to land, tax incentives, tax relief, state
106
guarantee for loans, project-based capital assistance, government-
subsidized mortgage.
Besides, national economies are still in search of developing and
implementing more effective and inclusive models integrated with
sustainable urban development plans to help reducing the problems caused
by the inequality in income distribution, meet the housing needs of the low-
income group with adequate and liveable houses, and contribute to
economic development.
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Low-Income Housing Policies: Lessons from International Experience, ADB Papers and Briefs, Observations and Suggestions
  • Asian Development Bank
Asian Development Bank (2009). Low-Income Housing Policies: Lessons from International Experience, ADB Papers and Briefs, Observations and Suggestions, 17 February.
Overview of Federal Housing Assistance Programs and Policy
Congressional Research Service (CRS) Report (2019a), Overview of Federal Housing Assistance Programs and Policy, RL34591, Updated March 27.
An Introduction to the Low-Income Housing Tax Credit, RS22389
Congressional Research Service (CRS) Report (2019b), An Introduction to the Low-Income Housing Tax Credit, RS22389, Updated February