The relaunch of social securitisation: private capital for housing policy

The reasons for its limited development appear to be primarily economic. The potential market is, in fact, much smaller than it might seem: not all non-performing loans relate to main residences; not all properties are suitable; and not all debtors have sufficient income to cover a rent. Above all, the investor’s interests do not always align with the public interest in preventing people from losing their homes.

It is here that what we might call the ‘paradox of selection’ comes to the fore. The greater a family’s financial vulnerability, the greater the social interest in keeping them in their home, but the more difficult it becomes to make a sustainable investment. Conversely, when the borrower still has sufficient financial means, the transaction is more attractive to the market, but less necessary from a social perspective.

Experience from the early years therefore suggests that the main limitation of the instrument is not so much legal as economic. The law governs the transaction, but cannot, on its own, create the conditions of cost-effectiveness, risk predictability and incentive alignment necessary for a market to emerge.

This is not just an Italian problem. In Ireland, a similar scheme – the Mortgage-to-Rent scheme, which allows homeowners in financial difficulty to hand over their home and remain there as social tenants, with an option to buy it back – has been in place since 2012 but has seen limited uptake so far, confirming that the obstacle is more financial than regulatory.

However, it is precisely this new European context that could reignite the debate. If the aim is to mobilise private capital in support of housing policies, it may be worth considering how the model might evolve to bring together interests that do not naturally align at present. One possible approach could be to provide investors with a system of guarantees in which public bodies and third-sector organisations with sufficient financial resources help to reduce part of the risk involved in the transaction. Social support organisations, on the other hand, would be responsible for helping families regain their solvency.

The Austrian experience with limited-profit housing shows that private capital and social objectives can coexist when risk, return and the housing function are defined from the outset within a stable framework: today, around a quarter of Austrian homes are managed according to this model (in Vienna, this accounts for over 60 per cent of residents).

It would be premature to conclude that social securitisation is destined to become a central tool of future housing policies. However, it would be equally hasty to dismiss it outright as a marginal experiment. The European housing crisis has profoundly altered the context in which this discipline first emerged. For this reason, it may be useful to revisit the reasons that have so far limited its development and to assess whether, under current conditions, it could serve as a testing ground from which to draw useful insights for reconciling, at least in part, public objectives and economic sustainability.

Senior adviser at P&G Sgr.