Optimal Use of Private Finance for Social and Affordable Housing

This publication, created by the European Responsible Housing Finance Working Group and authored by Johanne Philippe, aims to explore the optimal use of private finance in social and affordable housing. It reflects the growing need for innovative financing schemes for sustainable housing ecosystems across Europe. The initiative is part of a larger effort to build capacity for delivering long-term housing solutions that meet public interest goals.

The document discusses the common misconception that private finance in social housing primarily refers to equity funds and investment trusts. In reality, many so-called “private” funds are significantly supported by public institutions. For instance, the Caisse des Dépôts (CDC) in France manages €610 billion in private funds, primarily sourced from household savings, and provides a substantial portion of financing for social housing.

In France, regulated savings accounts like Livret A enable households to save securely, with the CDC converting these savings into long-term loans for social housing projects. The CDC finances around 70-75% of the social housing sector, allowing for the construction of approximately 100,000 new units annually. Its countercyclical role ensures consistent funding, even during economic downturns.

MuniFin serves as Finland’s primary financier of social housing, providing 95% of the funding needed for new developments. It raises capital through international markets and is guaranteed by the Municipal Guarantee Board, ensuring low-interest loans for housing providers. This model aligns closely with Finland’s welfare state objectives, offering sustainable solutions for various demographics.

The Nederlandse Waterschapsbank (NWB Bank) supports the Dutch public sector by financing housing associations through low-cost loans sourced from international capital markets. The Social Housing Guarantee Fund reduces credit risk, thus maintaining affordable borrowing conditions. In 2024, NWB Bank provided €6.8 billion in loans, which constitutes over one-third of the financing needs for housing associations.

The Danish National Building Fund operates as a revolving fund for the non-profit housing sector. It redistributes tenant contributions to finance renovations and stabilize rents. The fund has played a crucial role in sustaining housing investment even during economic challenges, supporting around 600,000 dwellings across Denmark.

Germany's Bausparkassen are specialized institutions that accept deposits to provide loans for housing finance. Their system ensures predictable financing conditions through fixed, below-market rates. The Bausparkassen have proven to be resilient during financial crises, remaining central to housing finance in Germany.

The publication concludes that successful models for leveraging private finance in social housing rely on strong public mechanisms rather than on profit-driven investments. The examples from France, Finland, the Netherlands, Denmark, and Germany illustrate how public oversight and guarantees can stabilize financial flows, promote affordability, and align investments with social goals. Adapting these frameworks across Europe can address the increasing need for affordable housing, ensuring long-term sustainability and social equity.