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State-owned rental housing

Government-owned subsidized rental houses have been used as a shelter solution for low-income populations in several countries, particularly in the Caribbean, according to a recent IDB study analyzing cases and presenting options to improve existing situations.

Experience has shown that the state is often inefficient when it comes to managing and maintaining its rental units, largely due to fiscal constraints and limited administrative capacity, according to author Nelliana Villoria Siegert. This translates into decaying living conditions in public rental housing developments.

Most countries face the dilemma of preserving the benefits of public rental housing while mitigating its negative impacts, such as management and maintenance. Bearing in mind the political, economic, social, demographic, cultural and spatial context in each country, it is difficult to suggest a universal solution for the problems of government-owned rental properties.

The state has a variety of options, ranging from transferring property and/or responsibilities in part to transferring them in full. Some governments have implemented the public rental housing system effectively, finding formulas to mitigate the adverse effects without eliminating the system. Most have either shared the responsibility of managing public rental housing with other players, or have fully shifted that responsibility to the private sector.

In Chile during the 1970s, for example, local governments managed public rental housing. However, maintenance problems led to the transfer of management to the tenants. In the United States Canada and England, management and maintenance organizations have been created that are tenant-based. In Uruguay and several countries in Europe the state contracts these tasks with private—for profit or not—companies. In Mexico, two agencies built public rental housing units in the late 1940s, but the program failed due to rent collection problems and inflation-driven rent increases. When both agencies began losing revenue, they decided to stop building public rental housing units, and the existing ones were gradually sold.

Overall, according to the IDB study, it has been shown that in both developed and developing countries, the state should not be the only provider and manager of low-income housing. In most cases, public rental housing is excessively costly, in economic and financial as well as social terms. Thus, the trend in more developed countries has been to seek alternatives whereby the state goes from being the direct provider and landlord of public housing to being a purely financial and regulatory entity, relying on the private investment sector and civil society to do the rest. In any case, Villoria recommends that the decision of what to do with the existing public rental units, must not rest solely with the state. “It should involve the affected community in a process of participation, not just ‘consultation,' to ensure the success and political viability of the option chosen.”