Integration via Affordable Housing: A Look at the Similarities and Differences Between Copenhagen and the San Francisco Bay Area (part 3)
Copenhagen is a city of cyclists and mass transit aficionados. There are 560,000 bicycles in a city with 570,000 inhabitants. It is considered very bad form to ring your bicycle bell. Apparently that is because everybody in Denmark knows each other within 3 degrees of separation. Copenhagen’s ambition is to become the first carbon neutral capital in the world by 2025. To accomplish this, the percent of cyclists must increase from 50% to at least 65%. This explains the 180% tax (not a typo) on new cars.
While I anticipated the bike culture, I did not expect the preponderance of hot dog advertisements. For some reason, hot dog ads in Copenhagen are everywhere. The hot dog advertisements belie the expensive nature of Copenhagen – even the hot dogs at the 7-11 franchise cost the equivalent of $4 US.
Copenhagen’s desire for a healthy city that actively works to prevent problems before they arise is conveyed with fresh fruit deliveries in baskets waiting in corridors outside city staff offices. I am more used to seeing candy at the reception areas I visit in the US.
From a building perspective I am struck by the lack of buildings with elevators. Walking up five stories is common. The only elevators I have seen are beautifully retrofitted old school style elevators complete with manual doors and glass encasements. The general housing stock conveys an enormous commitment to balconies. Anecdotal evidence (through constant surveillance by me on my unofficial housing walking and bike tours) suggests that the programmatic magic number of units that share a single entry without supervision by a desk clerk or doorperson is 8-10 units sharing a single entry. The building may be attached and take an entire block but that seemingly huge building is subdivided into 8-10 units per shared entryway and designed on a very human scale.
Observations aside, I am in Copenhagen to understand its affordable housing and special needs housing and see if there are efficiencies that could be useful back home in the San Francisco Bay Area.
By Federal Law each municipality is allowed to require that up to 25% of its housing stock be Common Housing. In Copenhagen the requirement is 20% but this commitment can be revaluated at the end of each cycle. The municipality happened to vote on this issue during my stay in Copenhagen and the relief that the law was continued in Copenhagen brought about a palpable sigh of relief with everyone whom I interviewed. The 20% Common Housing requirement is critical and the primary tool available to the City to keep land values down and facilitate an integrated City.
Common Housing is defined as housing that is available to all regardless of income. It is developed by non-profit affordable housing developers. Once developed, it is owned by the tenants. The non-profit developers manage the properties. The board of the non-profit is comprised of tenants and occasionally a member of the municipality. Units are distributed via waitlist. Waitlists can be very long but in disadvantaged areas it may be possible to get into housing sooner if a prospective tenant also meets an approved preference, such as being employed. Waitlists for special needs households that are distributed by the municipality are approximately one-year long. City staff are appalled by the length of the waitlist for special needs households.
Financing for the development of Common Housing is remarkably simple.
- 2% stems from tenants.
- 88% from a government backed bank real estate loan with a very low fixed rate interest for a 30-year term. (After 30 years, payments continue to be made to the Landsbyggefonden (LBF) (the National Building Fund) which is a critical institution at the heart of Common Housing in Denmark).
- 10% is a soft no interest loan from the municipality with a 50-year term.
The City of Copenhagen has the opportunity to distribute 30% of Common Housing to special needs households (federal law allows for 25% but the rate is higher in Copenhagen through special agreement). While the city may have access to 30% of all units for special needs households, only tenants that can afford the rent may occupy the unit. This results in approximately 50% of units getting returned to the housing development corporation for use by the general waitlist. Returning units to which it has access due to high rent is one of the greatest impediments for Copenhagen to house its special needs populations.
The new government has recently created an overall cap on the total amount of subsidy from any government source that can be collected by any household to 6,000 kroner per month (approximately $889) and just over half of it (3,200 kroner) may be used for rent. There are very few units available at this price and the City is having an increasingly difficult time finding units that its special needs households can afford.
One of the most striking differences between the US system of affordable housing and that of the Danish is that rent is tied to actual costs. This cost based rent is comprised of: contribution to the LBF, repayment of permanent mortgage, and actual operating costs. Tenants approve the operating budget every year. They can decide to lower maintenance costs by choosing to conduct operations themselves or to go without certain services. The only flexibility in the rent is the share going to operating costs. In contrast, in the US, rent is regulated based on Regulatory Agreements and are tied to budget that were created prior to the building’s development with little room for flexibility. The Danish system is a self funded sustaining operating structure that is held accountable on an ongoing basis since the land is owned by tenants and the vast majority of the board are tenants.
The fact that the vast majority of capital and operating funds for Common Housing is self funded and that reliance on public sector financing is minimal is significant and will be explored further explored in future posts. Likewise, the City of Copenhagen’s active role in neighborhood vitality for distressed neighborhoods will also be explored.
The views expressed in GMF publications and commentary are the views of the author alone.