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Area: Policy and financing

Window guidance is a credit policy allowing central banks to steer bank lending toward certain economic activities. In the post-war period, it was common for both developed and emerging economies to employ various forms of credit control and allocation. However, these policies were virtually discontinued by the 1980s and the mandate of the central banks was reduced to controlling inflation through interest rates. Housing affordability and sustainability are strongly interlinked with monetary policies, particularly because housing prices and supply rely on debt for financing (Muellbauer, 2018). This link is embodied in inflation-adapted interest rates, which are used by central banks to “cool down” the economy and control prices. Currently, high inflation has pushed central banks all over the world to increase interest rates. Increases in interest rates impact the interbank lending rates such as the Euribor or the Libor and ultimately affect the price of credit in an economy. This then influences in particular capital-intensive industries such as housing development and renovation.

Social housing organisations (SHOs) which provide social -thus affordable- rental housing, particularly in North-Western Europe, are dependent on credit to finance not only the provision of housing, but also the energy-efficient renovation of their stock. The rise in interest rates resulting from central banks’ monetary policy aimed at curbing inflation puts the financial viability of renovation and new construction in jeopardy. This insight is not new, as the dependence on credit for renovation and maintenance was already foreseen as an issue in the late 90s by the British housing economist Christine Whitehead (1999). Traditionally, governments support social housing providers through grants, subsidies and through the guaranteeing of their debt (Lawson, 2013). For example, publicly owned social housing providers in Germany have their debt rated equally to that of their main owners: municipalities and regions. As a result, their financing costs also benefit from a high rating implying low-interest rates for their debt. This is also the case in France and the Netherlands where ultimately it is public institutions that guarantee SHO debt. For instance, a Dutch social housing provider raises debt at a triple AAA rating, that of the Dutch state. This lowers their interest costs in comparison to that of other companies which may be rated lower, hence have a higher risk premium and pay more for their debt (Fernández et al., forthcoming). In an inflationary environment, where interest rates rise across the board, this means higher financing costs for SHOs despite their risk premium remaining constant.

Window guidance is relevant in this context because it would allow central banks to set a lower interest rate for lending to certain activities, thus creating a window. During the period between 1945-1980, advanced and emerging economies alike implemented interventions on credit and capital markets. Central banks would align lending with industries, exports and manufacturing while increasing interest rates for less desirable sectors (Bezemer et al., 2023; Hodgman, 1973). According to Bezemer et al., (2023) based on Hodgman (1973) and Goodhart (1989 pp. 156–158), ‘credit guidance’, ‘credit controls’, ‘credit ceilings’, ‘directed credit’, and ‘moral suasion’ are also common names for these types of policy. More recently, organisations such as Positive Money have been advocating for a sovereign money proposal where banks would obtain funds from their national central bank with limitations on their usage (Youel, 2022). This enhanced control over bank lending opens up the possibility of earmarking private capital for investment in decarbonisation activities. For example, lending for speculative purposes or for highly polluting activities could be curtailed while the financial viability of environmentally friendly activities could be expanded. Ultimately, credit controls offer the possibility to guide credit toward the provision of affordable and sustainable housing and away from sectors such as fossil fuels or speculative bubbles.




Bezemer, D., Ryan-Collins, J., van Lerven, F., & Zhang, L. (2023). Credit policy and the ‘debt shift’ in advanced economies. Socio-Economic Review, 21(1), 437–478.

Fernandez, A., Haffner, M., Elsinga, M. Forthcoming Three contradictions between ESG finance and the decarbonisation of the social rental housing stock in Europe: A comparison of six countries.

Goodhart, C. A. E. (1989). Money, Information and Uncertainty. Macmillan Education UK.

Hodgman, D. R. (1973). Credit Controls in Western Europe: An Evaluative Review.

Lawson, J. (2013). The use of guarantees in affordable housing investment—A selective international review. Australian Housing and Urban Research Institute.

Muellbauer, J. (2018). Housing, debt and the economy: A tale of two countries. National Institute Economic Review, 245, R20–R33.

Whitehead, C. M. E. (1999). The Provision of Finance for Social Housing: The UK Experience. Urban Studies, 36(4), 657–672.

Youel, S. (2022). To tackle the cost of living we need to align banks with public purpose.


Created on 24-04-2023 | Update on 22-05-2023

Related definitions

Area: Design, planning and building

Environmental Retrofit Buildings are responsible for approximately 40% of energy consumption and 36% of carbon emissions in the EU (European Commission, 2021). Environmental retrofit, green retrofit or low carbon retrofits of existing homes ais to upgrade housing infrastructure, increase energy efficiency, reduce carbon emissions, tackle fuel poverty, and improve comfort, convenience and aesthetics (Karvonen, 2013). It is widely acknowledged that environmental retrofit should result in a reduction of carbon emissions by at least 60% in order to stabilise atmospheric carbon concentration and mitigate climate change (Fawcett, 2014; Johnston et al., 2005). Worldwide retrofit schemes such as RetrofitWorks, EnerPHit and the EU’s Renovation Wave, use varying metrics to define low carbon retrofit, but their universally adopted focus has been on end-point performance targets (Fawcett, 2014). This fabric-first approach to retrofit prioritises improvements to the building fabric through: increased thermal insulation and airtightness; improving the efficiency of systems such as heating, lighting and electrical appliances; and the installation of renewables such as photovoltaics (Institute for Sustainability & UCL Energy Institute, 2012). The whole-house systems approach to retrofit further considers the interaction between the occupant, the building site, climate, and other elements or components of a building (Institute for Sustainability & UCL Energy Institute, 2012). In this way, the building becomes an energy system with interdependent parts that strongly affect one another, and energy performance is considered a result of the whole system activity. Economic Retrofit From an economic perspective, retrofit costs are one-off expenses that negatively impact homeowners and landlords, but reduce energy costs for occupants over the long run. Investment in housing retrofit, ultimately a form of asset enhancing, produces an energy premium attached to the property. In the case of the rental market, retrofit expenses create a split incentive whereby the landlord incurs the costs but the energy savings are enjoyed by the tenant (Fuerst et al., 2020). The existence of energy premiums has been widely researched across various housing markets following Rosen’s hedonic pricing model. In the UK, the findings of Fuerst et al. (2015) showed the positive effect of energy efficiency over price among home-buyers, with a price increase of about 5% for dwellings rated A/B compared to those rated D. Cerin et al. (2014) offered similar results for Sweden. In the Netherlands, Brounen and Kok (2011), also identified a 3.7% premium for dwellings with A, B or C ratings using a similar technique. Property premiums offer landlords and owners the possibility to capitalise on their  retrofit investment through rent increases or the sale of the property. While property premiums are a way to reconcile          split incentives between landlord and renter, value increases pose questions about long-term affordability of retrofitted units, particularly, as real an expected energy savings post-retrofit have been challenging to reconcile (van den Brom et al., 2019). Social Retrofit A socio-technical approach to retrofit elaborates on the importance of the occupant. To meet the current needs of inhabitants, retrofit must be socially contextualized and comprehended as a result of cultural practices, collective evolution of know-how, regulations, institutionalized procedures, social norms, technologies and products (Bartiaux et al., 2014). This perspective argues that housing is not a technical construction that can be improved in an economically profitable manner without acknowledging that it’s an entity intertwined in people’s lives, in which social and personal meaning are embedded. Consequently, energy efficiency and carbon reduction cannot be seen as a merely technical issue. We should understand and consider the relationship that people have developed in their dwellings, through their everyday routines and habits and their long-term domestic activities (Tjørring & Gausset, 2018). Retrofit strategies and initiatives tend to adhere to a ‘rational choice’ consultation model that encourages individuals to reduce their energy consumption by focusing on the economic savings and environmental benefits through incentive programs, voluntary action and market mechanisms (Karvonen, 2013). This is often criticized as an insufficient and individualist approach, which fails to achieve more widespread systemic changes needed to address the environmental and social challenges of our times (Maller et al., 2012). However, it is important to acknowledge the housing stock as a cultural asset that is embedded in the fabric of everyday lifestyles, communities, and livelihoods (Ravetz, 2008). The rational choice perspective does not consider the different ways that occupants inhabit their homes, how they perceive their consumption, in what ways they interact with the built environment, for what reasons they want to retrofit their houses and which ways make more sense for them, concerning the local context. A community-based approach to domestic retrofit emphasizes the importance of a recursive learning process among experts and occupants to facilitate the co-evolution of the built environment and the communities (Karvonen, 2013). Involving the occupants in the retrofit process and understanding them as “carriers” of social norms, of established routines and know-how, new forms of intervention  can emerge that are experimental, flexible and customized to particular locales (Bartiaux et al., 2014). There is an understanding that reconfiguring socio-technical systems on a broad scale will require the participation of occupants to foment empowerment, ownership, and the collective control of the domestic retrofit (Moloney et al., 2010).

Created on 16-02-2022 | Update on 07-10-2022

Housing Regime

Author: A.Martin (ESR7), C.Verrier (ESR)

Area: Policy and financing

The discussion on housing regimes dates back to e neo-institutional turn in policy research which occurred during the 1980s. This literature viewed institutions not so much as “formal” entities but more as the culmination of conflicting power relations, market dynamics, and ideology. The study of these dynamics could, in turn, be used to understand the variegated development of post-war welfare states, as exemplified by Esping-Andersen’s seminal Three worlds of welfare capitalism (1990). Kemeny defined the housing regime as “the social, political, and economic system of housing supply, distribution, and consumption, which determines the housing market opportunities of a certain period” (1981, p. 13). His framework follows the logic of the historical and institutional structure of society. Kemeny (2006) argues that, due to the central role of real estate in modern capitalism, housing systems follow similar paths, albeit with  different logics. Studying the emergence of regimes of a different nature between countries, he distinguished between unitary and dualized housing regimes, based on their rental-market systems, that is: (a) countries with an open private sector but with a firmly regulated public sector are characterized by a dual rental market; and (b) societies where the private and public sectors are strictly regulated have a unitary rental market. In dualist countries (primarily the Anglo-Saxon ones), homeownership is commonplace, while in countries with an integrated/unitary system (such as Germany, Netherlands, and Scandinavian countries) renting is a realistic and even competitive alternative to ownership. Kemeny highlighted that the dominance of homeownership is not organically developed but is socially and politically constructed. The above conceptualization of housing regime based on the functioning of rental market systems does not mirror the (Foucaultian) political and conflictual approach of Clapham, for whom a housing regime stands for a “set of discourses and social, economic and political practices that influence the provision, allocation, consumption [of housing] and housing outcomes in a given country” (2019, p. 24). He views policy as an arena where actors “negotiate and bargain” through discursive processes (Ruonavaara, 2020b). Clapham clearly distinguishes regime types from housing regimes. Regime types are useful for categorization since they can function as a baseline for comparative studies. However, “every housing regime is unique”(Ruonavaara, 2020b). Because of the complexity of the concept, Clapham (2019, p.17) proposes a three-stage analysis for housing policy (Figure 1). Ruonavaara (2020b) finds Clapham’s approach nuanced but too general and broad, which – according to him - makes it less applicable. On the other hand, Hegedüs (2020) considers Clapham’s (2002) housing pathway reasonable, as it describes housing provision forms as a result of interactions. In line with Clapham, he argues that “interventions within the housing system can only be understood in the context of interactions between different housing market actors” (Hegedüs, 2020, p. 569). Consequently, an analysis that only focuses on the rental sector would lead to narrowed interpretations with low explanatory power. More recently, Ruonavaara provided a new definition of housing regimes, which combines the elements of previous theories. He defined housing regime as a “set of fundamental principles according to which housing provision operates in some defined area (municipality, region, state) at a particular point in time” (2020a, p. 10). These principles are present in discourses, institutional arrangements, and political interventions. All actors have certain principles when operating in the system of housing provision at a given time and place. Housing regimes can be considered as the “principles of operation” (Ruonavaara, 2020a). In this sense, the housing regime concept faces challenges in its ability to represent an effective analytical tool for today’s housing systems. For Stephens (2020), it is necessary to rethink housing regime as a way to find middle-range theories given that current accounts of neoliberal convergence (Aalbers, 2016; Clapham, 2019) barely manage to explain the role of regime path-dependences in continuing to shape variegated housing outcomes.

Created on 24-02-2022 | Update on 08-03-2022

Just Transition

Author: T.Croon (ESR11)

Area: Policy and financing

Justice theory is as old as philosophical thought itself, but the contemporary debate often departs from the Rawlsian understanding of justice (Velasquez, Andre, Shanks, & Meyer, 1990). Rawls (1971) argued that societal harmony depends on the extent to which community members believe their political institutions treat them justly. His First Principle of ‘justice as fairness’ relates to equal provision of ‘basic liberties’ to the population. His Second Principle, later referred to as the ‘Difference Principle’, comprises unequal distribution of social and economic goods to the extent that it benefits “the least advantaged” (Rawls, 1971, p. 266).1[1] As this notion added an egalitarian perspective to Rawlsian justice theory, it turned out to be the most controversial element of his work (Estlund, 1996). The idea of a ‘just transition’ was built on these foundations by McCauley and Heffron (2018), who developed an integrated framework overarching the ‘environmental justice’, ‘climate justice’ and ‘energy justice’ scholarships. The term was first used by trade unions warning for mass redundancies in carbon-intensive industries due to climate policies (Hennebert & Bourque, 2011), but has acquired numerous interpretations since. This is because the major transition of the 21st century, the shift towards a low-carbon society, will be accompanied by large disturbances in the existing social order. In this context, a just transition would ensure equity and justice for those whose livelihoods are most affected (Newell & Mulvaney, 2013). A just transition implies that the ‘least advantaged’ in society are seen, heard, and compensated, which corresponds with three key dimensions conceptualised by Schlosberg (2004): distributive, recognitional, and procedural justice. Distributive justice corresponds with Rawls’ Difference Principle and comprehends the just allocation of burdens and benefits among stakeholders, ranging from money to risks to capabilities. Recognitional justice is both a condition of justice, as distributive injustice mainly emanates from lacking recognition of different starting positions, as well as a stand-alone component of justice, which includes culturally or symbolically rooted patterns of inequity in representation, interpretation, and communication (Young, 1990). Fraser (1997) stressed the distinction between three forms: cultural domination, nonrecognition (or ‘invisibility’), and disrespect (or ‘stereotyping’). Procedural justice emphasises the importance of engaging various stakeholders – especially the ‘least advantaged’ – in governance, as diversity of perspectives allows for equitable policymaking. Three elements are at the core of this procedural justice (Gillard, Snell, & Bevan, 2017): easily accessible processes, transparent decision-making with possibilities to contest and complete impartiality. A critique of the just transition discourse is that it preserves an underlying capitalist structure of power imbalance and inequality. Bouzarovski (2022) points to the extensive top- down nature of retrofit programmes such as the Green New Deal, and notes that this may collide with bottom-up forms of housing repair and material intervention. A consensus on the just transition mechanism without debate on its implementation could perpetuate the status quo, and thus neglect ‘diverse knowledges’, ‘plural pathways’ and the ‘inherently political nature of transformations’ (Scoones et al., 2020). However, as Healy and Barry (2017) note, understanding how just transition principles work in practice could benefit the act of ‘equality- proofing’ and ‘democracy-proofing’ decarbonisation decisions. Essentially, an ‘unjust transition’ in the context of affordable and sustainable housing would refer to low-income households in poorly insulated housing without the means or the autonomy to substantially improve energy efficiency. If fossil fuel prices – either by market forces or regulatory incentives – go up, it aggravates their already difficult financial situation and could even lead to severe health problems (Santamouris et al., 2014). At the same time, grants for renovations and home improvements are poorly targeted and often end up in the hands of higher income ‘free-riding’ households, having regressive distributional impacts across Europe (Schleich, 2019). But even when the strive towards a just transition is omnipresent, practice will come with dilemmas. Von Platten, Mangold, and Mjörnell (2020) argue for instance that while prioritising energy efficiency improvements among low-income households is a commendable policy objective, putting them on ‘the frontline’ of retrofit experiments may also burden them with start-up problems and economic risks. These challenges only accentuate that shaping a just transition is not an easy task. Therefore, both researchers and policymakers need to enhance their understanding of the social consequences that the transition towards low-carbon housing encompasses. Walker and Day (2012) applied Schlosberg’s dimensions to this context. They conclude that distributive injustice relates to inequality in terms of income, housing and pricing, recognitional justice to unidentified energy needs and vulnerabilities, and procedural injustice to inadequate access to policymaking. Ensuring that the European Renovation Wave is made into a just transition towards affordable and sustainable housing therefore requires an in-depth study into distributive, recognitional and procedural justice. Only then can those intertwining dimensions be addressed in policies.   [1] To illustrate his thesis, he introduces the ‘veil of ignorance’: what if we may redefine the social scheme, but without knowing our own place? Rawls believes that most people, whether from self-interest or not, would envision a society with political rights for all and limited economic and social inequality.  

Created on 03-06-2022 | Update on 06-06-2022

Asset-based Welfare

Author: M.Horvat (ESR6)

Area: Policy and financing

In Europe, increasingly longevity is driving the trend towards an ageing population . Furthermore, at a global level, average life expectancy has increased over the last fifty years from 58.6 years in 1970 to 72.7 years in 2019 (World Bank, 2021), and could reach 76,6 years by 2050 (Statista, 2021). In the literature reviewed, “older people“ are described as the population aged 65 and over (Harper et al., 2016; Johnson, 2015). A recent UK study (Harper et al., 2016) found that the average age of the UK population exceeds 40 years for the first time in history. The same study predicts the working age group of older people, which makes up the population aged 50-66, will increase from 26% in 2012 to 34% in 2050, an increase of 5.5 million people.   However, longevity is not usually accompanied by an understanding of the quality of living. The increase in the elderly population is overwhelming the health care system of the modern welfare state. The elderly are becoming more dependent on health services, while the support of younger generations is decreasing due to their increased occupational mobility and different lifestyles (Bađun & Krišto, 2021).   Asset-based welfare could be defined as a set of policies and measures that address and promote individual wealth accumulation over the course of our lives in order to reduce an individual's dependence on the pension system through the consumption of that asset (Lennartz & Ronald, 2016). There could be many forms of asset-based welfare, and it should be oriented toward the local context. For example, asset-based welfare is embedded in the housing market in Japan, Singapore and South Korea (Doling et al., 2013); (Oh & Yoon, 2019). Retirees in the US or the UK are more likely to finance a reverse mortgage, while retirees in post-socialist countries are more likely to enter into care exchange contracts or an intergenerational transfer.   In the post-socialist countries of Eastern Europe, most pensioners are homeowners who have high assets and low monthly income (Kunovac, 2020). For pensioners who became homeowners during their working years, there are a few ways to use their homes in order to secure a higher standard of living in retirement. There are two main scenarios for using your assets to increase the standard of living: one is to move out of the current home, either by downsizing or selling it; the other does not require moving and usually involves renting part of the home or entering into a financial transaction such as a reverse mortgage or insurance contract (Bađun & Krišto, 2021). Both scenarios represent asset-based welfare, as assets (rather than income) are used to increase well-being. In the past, asset-based welfare used to be practised in traditional rural communities when elderly people without successors contracted with their neighbours to provide for them in exchange for their family assets.   The European financial market for asset-based welfare is at an early stage of development and is only available to a limited extent in the UK, Spain, France and Germany (Bađun & Krišto, 2021). In other countries, there are different forms of transaction in play. For example, according to a survey carried out by the European Commission, 86% of the Croatians prefer to take care of their parents, rather than having their parents sell their property to increase their income (Bađun & Krišto, 2021).  Similar results could be found in other post-socialist countries with a high level of “familialism”, i.e., intergenerational living with strong family ties (Eggers et al., 2020; Sendi et al., 2019; Stephens et al., 2015) , and homeownership, where the idea of “consuming” the equity to pay for old-age care is unpopular. According to (Kerbler & Kolar, 2018), the Slovenian pensioner, even if starving, would rather not sell or mortgage their homes, while according to Sendi et al., (2019) pensioners in Slovenia “strongly reject all equity release products”.   A potential model of asset-based welfare that could be implemented in Croatia was presented in 2015 in the policy document “Social picture of the City of Zagreb” (CERANEO, 2016). This model would represent an innovation in social welfare by creating an institutional support for a contract through which the assets would be transferred to the city after the death of the person and in return the city would provide care for the elderly. This contract would ensure adequate care for the elderly and provide the city with a housing stock for public or social rental. In addition, this type of contract would be a viable alternative to the current practise of doing business under a "lifetime support contract" or a "support contract until death". In 2021, 1,300 such contracts were concluded, but in practice this is not well regulated (Annual report of the Ombudswoman of the Republic of Croatia, 2021). There have been cases of contracts between only one individual providing services to tens of benefactors. Many of these contracts end up contested by the surviving family in court, making this type of transaction risky (CERANEO, 2016).

Created on 03-06-2022 | Update on 04-10-2023


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