Measuring the social value of public housing

Tension is running high in the context of public housing, and in big cities criticism of public housing companies is a common refrain.  They’re accused of doing a sloppy job in assigning and maintaining the properties in their portfolios.  But this representation doesn’t account for the change they’ve been subject to: an abrupt halt in the construction of new housing in the face of growing housing pressure, combined with new tenants who are poorer than ever. Rents are indexed to the ability to pay, but today’s tenants have little income and multiple vulnerabilities, very different from the typical workers who moved into public housing in the 1990s. As a result, rent is far lower than market value ​​and management costs.

So companies are finding themselves having to maintain a huge, dilapidated portfolio of properties, relying almost exclusively on below-market rental income, which actually only partially covers expenses. Our 2021 survey of ten major public home companies located throughout Italy found that rents only pay for 45% of property management expenses.

With a system designed like this, any number of controversial effects emerge. Here are just a few:

• Many apartments remain empty when tenants move out (for whatever the reason), because the public housing companies don’t have the money to refurbish these units.

• Some apartments are sold to generate income and balance the books, which means fewer homes are available for rent.

• Rent arrears is becoming more common among tenants, because newcomers are typically destitute and socially vulnerable in various ways; this further compromises the economic and social sustainability of the public housing companies.

• For public housing companies, it’s better to offer incentives for families that are higher-income earners, because with the rent they pay, they cover part of the management costs for units assigned to more vulnerable residents.

For these reasons, if we expect these companies to become financially self-sufficient, clearly that’s never going to happen. But is this the value that we expect from management companies? How can we capture a notion of value that isn’t solely economic? Value which also encompasses the welfare that a public housing service can produce for people who are disadvantaged in various ways, above all from an economic standpoint.

Our study is detailed in the book La gestione strategica dei servizi abitativi (Strategic Management of Housing Services), curated with Massimo Bricocoli from the Milan Polytechnic). It describes the latest leg in a research path that lasted more than seven years. Much of our work was inspired by a years’ long collaboration with Federcasa (the Italian association of public housing companies) and many other participating organizations, beginning with several based in the region of Lombardy.

In 2019, with the help of heads of public housing companies, we finalized the first phase of our study by describing and underscoring the strategic change that was underway in these organizations, from entities that manage the stock of public housing to welfare-related service providers.  We published our findings in a book curated with Giovanni Fosti, entitled Valore pubblico delle Aziende Casa (Public Value of Housing Companies).

Here’s an excerpt: “Public housing is the place where the most urgent social issues of the day converge. Many residents embody more than one aspect of vulnerability, in addition to being low-income earners… Inevitably, this complexity and social hardship shape the production processes for public housing companies, putting tremendous pressure on housing allocation systems, complicating how squatters are dealt with, generating diverse forms of rent arrears, and disheartening personnel who have the closest contact with tenants.”

In 2021, we presented Management dei servizi abitativi pubblici (Public Housing Services Management), a collection of ten case studies on as many public housing companies. In our report, we drew comparisons on business parameters - governance, budget, market relationship, and service models - illustrating the main managerial challenges these organizations face.

With our recent La gestione strategica dei servizi abitativi, which we mentioned above, we went into the field with a team of researchers from SDA Bocconi (Vittoria Baglieri, along with the two authors) and the School of Architecture and Urban Studies from the Milan Polytechnic (Massimo Bricocoli, Emanuele Belotti, Marco Peverini, and Constanze Wolfgring), seven of us in all. We interviewed tenants who live in a public housing complex in Milan managed by ALER (one of the city’s public housing companies). Our aim was to investigate how different housing service management models can boost the capacity of the service to generate more social inclusion in neighborhoods.

What emerged from our interviews is that for tenants, the primary value of living in public housing is social protection and inclusion. This public patrimony can represent a haven for individuals and families who are struggling, contributing to social cohesion and economic stability in a city like Milan, which is in the midst of a housing crisis.

By comparing the variety of experiences in public housing management that we found in the same portfolio of ALER properties, we were able to tease out the elements of the model that are most effective in generating value for residents. What we found is that a model works when it’s based on proximate services and overseers (in addition to custodians), who serve as social antennas, and ensure that tenants respect the rules of community life, helping reduce conflict.

We refer to this management model “strategic” because it integrates technical, administrative and social aspects. In fact, the solution to administrative problems can alleviate social ones and vice versa. This approach fosters an integrated, proactive vision of public housing services management, which paves the way for patrimony of public housing to become a bastion of social cohesion and inclusion.

Currently we’re working to piece together the qualitative insights we’ve gleaned on the value of public housing with the data on housing companies in central Italy. For the first time, we want to get “the big picture” of the economic and non-economic value generated by public housing services.

In the meantime, SDA Bocconi has joined a European consortium and together, since February 2024, we’ve been working on the Horizon project HouseInc - Inclusive, affordable and sustainable housing for marginalised communities. Our ambition with this project is to look at the question of housing and shine a light on inequalities, even beyond public housing, to come up with possible solutions that can mitigate housing inequality in the most vulnerable communities in Europe. We’ll be studying the most interesting business models, the most promising initiatives in social innovation, and the most convincing technical solutions that can reduce housing inequalities (like energy efficiency, for instance). Stay tuned!