Urban renewal—paying for housing improvement

Abstract

Until recently the inner urban housing areas of Oslo, Bergen and Trondheim were neglected, both in terms of planning interest and public investment. In 1980, there were a total of 75 000 pre‐war dwellings needing improvement. At least 30 000 of these did not have their own we. Nearly 2/3 of the dwellings were rented, mostly in private tenancies. In the last few years the local authorities have started fairly extensive urban renewal programmes. The legal and economic framework for urban renewal is laid down by the state. The urban renewal legislation makes it possible for the local authorities, or their urban renewal agencies, either to use powers of compulsory purchase to change the structure of ownership and carry out improvements, or to rely on the initiative of the owners to undertake this. The State Housing Bank finances about 80 percent of the improvement costas for both public and private housing improvement projects. The bank will also finance 75 percent of the purchase if the properties are transferred to the tenants, or public bodies. The costs of housing improvement are in principle carried by the occupier of the dwelling, whether the occupiers are tenants or corporate or individual owners. Housing expenditure after improvement will be far too high for many households at present living in these areas. Tenants have higher housing expenditures than owner‐occupiers and do not get the benefit from tax relief and accumulation of property value. Housing support grants from the state are not sufficient to bring the expenditure down to a “reasonable” level compared to income, and tenants get less state support despite higher expenditure. In Oslo, the local authority has established additional economic support for urban renewal “victims”. The local authority has to pay far more support to keep a reasonable rent for a tenant than if the same household were owner‐occupiers. This can be seen as an indirect subsidy to the landlords. Are there sufficient benefits in the system of private tenancies in urban renewal to justify this subsidy?