Voor Opa
________________________________
Pre-Financing Collective Private Commissioning: How solutions from Berlin can help turn an expensive dream into a feasible reality in Amsterdam.
Abstract
Despite governments’ ambitions to stimulate it, collective private commissioning (CPC) as part of total housing development in the Netherlands has stagnated at around 11 per cent. Since the self-builders form the party that commissions the housing development in CPC, it comes to reason that the low figures are due to impediments for the prospected commissioner. Several have been claimed and one of them is the fact that in the Netherlands costs have to be made before anything tangible to present to a bank is created. Literature on this problem of so-called ‘pre-financing’ is minimal at best and this thesis seeks to complement the existing literature. In Germany, the proportion of CPC is much higher and it was therefor expected that lessons could be learned from German practice. A comparison is drawn between CPC practice in Amsterdam and Berlin, taking into account the contextual differences between the two housing systems. With the use of a policy-transfer analysis framework (Dolowitz & Marsh, 2000), applicability of the German solutions in Dutch practice is hypothesized. One of the conclusions is that banks in the Netherlands could grant personal credits, available only for preparation purposes, which can be incorporated in the mortgage at a later stage, to help overcome the pre-financing problem.
Abbreviations
PC Private Commissioning (of housing)
CPC Collective Private Commissioning (of housing)
NHG Nationale Hypotheek Garantie (National Mortgage Guarantee)
CAQDAS Computer Assisted Qualitative Data Analysis System CHR Comparative Housing Research
FED Front-End Development PD Provisional Design DD Definitive Design EXEC Execution Phase
Table of Contents
1)
INTRODUCTION
... 5
Reader’s guide ... 6
2)
CONTEXT ... 7
Potential impediments for CPC ... 7
CPC in Germany ... 9
3)
THEORETICAL FRAMEWORK
... 11
3.1) Pre-financing CPC ... 11
3.2) Comparative Housing Research & policy transfer ... 12
3.3) Conclusion: conceptual model ... 14
5)
EMPIRICAL PART
... 17
5.1 Two cases up close ... 17
5.1.1 pre-financing aspects ... 17
5.1.2 Informal institutions: culture ... 19
5.1.3 Formal institutions: policies... 22
5.1.4 Pre-financing models ... 26
5.1.5 Conclusion §5.1 ... 28
5.2 Problems and solutions ... 30
5.3 policy transfer ... 33 5.4 Conclusions chapter 5 ... 37
6)
CONCLUSION
... 39
7)
DISCUSSION
... 41
8)
RECOMMENDATIONS
... 42
9)
EPILOGUE
... 42
10)
LITERATURE
... 43
APPENDIX A……….47 APPENDIX B……….541) INTRODUCTION
In the year 2000, the Dutch government stated the ambition to ‘support the citizen’s demand to (co) create their own housing situation’ in the policy document “Nota Wonen” (VROM, 2000). According to the objective in this document, one third of the total housing commissioning in the Netherlands should be done through self-commissioning by 2005 (RIGO, 2010). Although this proportion has been brought down to one fifth in 2005, stimulating campaigns in 2008 and 2012 show the ambitions are alive today. Research on the dwellings market however, shows that between 2000 and 2005 the amount of self-commissioning declined from 17 to 11 per cent and since then stayed at around those numbers (RIGO, 2010). This decline is especially striking when taking into account that 36 per cent of the people that wanted to move in 2006 was at least interested in the self-commissioning of their house (Blije et al., 2009). It shows that though consumers want to, they do not choose to privately commission the building of their home.
When the builder of a dwelling is the end-user itself, it is referred to in this thesis as private commissioning (PC). When two or more builder-end-users collaborate in the self-building or commissioning of their prospected home, it is called collective private commissioning (CPC)1. When initiating a CPC project, it is often an architect that makes a start and recruits participants. Not all of them have experience in project management and most have sufficient resources to initiate a project. In other cases, collectives are formed independently. Since the group of people that conduct the CPC are the initiating party in the project, they can bypass the expensive institutions that traditionally stand between them as an end-user and the construction (Boelens & Visser, 2011). This also means they have to provide the costs and bare the risks themselves. Providing these costs is difficult because for a mortgage, banks demand that the plot is already under reservation and a basic project plan is set up (Noorman, 2006; RIGO, 2010). This costs money and is seen by many as problematic since initiators have to invest a relatively large amount of money, before having a tangible product or a definitive group to work together with. The quick-guide on (C)PC (De Regie, 2004) stipulates difficulties at the point of initiation and offers the future CPC-initiator useful resources for research on the options for each individual (financial) situation. Since this is the only cost-free information and it is still quite brief, it leaves a lot of uncertainty for the decision maker (prospected CPC participant). A quick-scan on prices in CPC projects revealed that the lower middle class would have substantial benefits from conducting a CPC project (Geuting et al., 2006), whilst it is especially difficult for them to finance it, since their access to resources is limited (Boelens & Visser, 2011). Think-tank KEI in one report concludes that existing subsidies are coming to an end and that this will further undermine the possibilities to initiate CPC, especially for those with limited resources (KEI, 2011).
In Germany there is a longer tradition of conducting (C)PC compared to the Netherlands (Dol et al., 2012) and the share of (C)PC in the total housing commissioning is with around 59 per cent (in 2008) much higher then the Dutch 11 per cent (Dol et al., 2012; RIGO, 2010). This shows that CPC and it’s pre-financing do not
1
This definition was derived from Boelens & Visser (2011).
have to be difficult in practice. However, the fact that the quick-guide on (C)PC (De Regie, 2004) and a few websites2 are the only understandable information sources available for possible CPC’ers on this topic, is evidence that the information about pre-financing CPC is insufficient, unclear or both. This thesis will look into the pre-pre-financing aspect of CPC, in order to deepen understanding about the difficulties it brings forth, providing additional information to complement existing information sources on the topic. Given the lack of knowledge, this research aims to provide clarification on which different models for pre-financing exist, what makes the pre-finance aspect an obstruction and how it is overcome in practice. It will provide lessons learned for the future practitioner of CPC in Amsterdam and the following research question will help guide the research process in this regard:
In what way does the pre-financing aspect of collective private commissioning (CPC) form an impediment to initiate it in practice in Amsterdam and what are possible solutions to overcome them?
Because it is argued to be an impediment but not explained why or how, it is in scientific interest to further explore and elaborate on pre-financing as an impediment for CPC. Dutch governmental institutions have the formal ambition to accommodate and stimulate CPC and it is therefor helpful for them to be provided with solutions that are proven in practice. For the relocating citizen it will help assess difficulties in pre-financing CPC and find solutions to overcome them, therewith providing the opportunity to prevent them. All of this contributes to CPC being transformed from an expensive dream into a feasible reality.
Reader’s guide
This thesis is divided into six consecutive stages. First, the context of CPC and its general potential impediments are set up. Here the choice for pre-finance is explained. Second, the theoretical framework of the research is outlined and sub questions are formulated; a conceptual model illustrates the line of thought. The third stage entails the research design and the fourth is the empirical part. In the empirical part, findings are arranged according to the sub questions. The fifth stage is a concluding chapter and is followed by the sixth and final stage: the wrap-up of and reflection on the research. Every chapter starts with a short introduction and the longer paragraphs and chapters end in a concluding summary. In appendices A and B the coding schemes of the thematic analyses are presented in tables. Appendix A contains the case of Amsterdam, Appendix B that of Berlin.
2
2) CONTEXT
In this chapter a brief introduction to the general Dutch housing history will be followed by potential impediments for CPC. Out of those impediments, one is chosen as the main subject of this thesis: pre-financing. The context of CPC in Germany is also briefly described, after which the case selection is argumented.
Housing history in the Netherlands
.
After two world wars devastated much of the housing quantity and quality, the Dutch housing shortage was declared ‘public enemy number one’ during the reconstruction of the nation (Van der Cammen & de Klerk, 2003 p.p. 192). Until the eighties of the twentieth century housing, population and economic growth exploded. The government had been stimulating economic growth through the enforcement of the housing segment. Housing was seen as a societal subject and with the use of housing corporations the aim was to get every member of society a home. By the grants of object subsidies, corporations could maintain a quasi-monopoly (Ekkers & Helderman, 2010). Project developers competed with the corporations by obtaining plot positions and speculating on the municipality making this land available for developments at some point in time, which would increase its value enormously (Ekker & Helderman, 2010). These positions could then be used as leverage in negotiations about permits and new developments in a later stage (Noorman, 2006). Though the housing corporations have formally been privatized, municipalities, corporations and large developers, through exchanges in ground positions, permits and exploitation of plots, have been dominating the housing and ground markets. These large players have let little room for private initiatives such as CPC. This historical path still prevails in todays housing in the Netherlands, where only 11 per cent of total housing commissioning is done privately. Accordingly, several impediments that relate to this have been identified. They will be discussed in the following paragraph.
Potential impediments for CPC
Because formally governments want to stimulate it and it is the consumer that initiates CPC, it comes to reason that the discrepancy between demand and realisation is due to impediments for the consumer-builder. Various studies have found that the knowledge of a self-provider forms a difficulty. Van Loon (2013) found several impediments for the prospected self-provider to conduct a CPC project that relate to the people’s perceptions. Based on that, he recommends a platform for CPC’ers to turn to with questions be set up and this be promoted through pop-up commercials on conventional housing platforms to increase awareness about CPC as an alternative to conventional housing. Herewith he implicitly concludes that CPC is currently not institutionalized enough to gain a bigger proportion in housing commissioning. Besides perceptions of possible self-builders that form obstructions, several other institutional conditions are found to be impeding CPC. The historical path of the government stimulation and support of housing corporations have made the corporations and developers grow into very large players with a lot of power. This makes it difficult for a small group of hardly organised self-builders to get their ambitions realised (Noorman, 2006). Additionally, Noorman (2006) argues, the traditional relationships between municipalities, corporations and developers have made the plot market and the building market untransparent. Plots have been used as exchange for legal damage or
in negations about exploitation of particular areas by municipalities. Besides that the building segment is filled with specific codes and customs between the established organisations, making it very difficult to operate in for an outsider, let alone a self-builder (Noorman, 2006; De Regie, 2006).
In terms of policy, several obstructions for CPC have been identified. Noorman (2006) argues that the obligated amount of social dwellings that corporations and municipalities have to realise, are seen as an impediment for municipalities to cooperate with CPC. The expectation among municipalities is that the legally bound proportion would not get realized when CPC is given the room it needs. Furthermore, strict laws and building regulations are found to be impeding. Boelens and Visser (2011) state that governments are historically set up to view housing as a general social need. As a consequence laws and regulations are set up in a general fashion as well, reaching as far as building specifications being fixed as statutory requirements. These regulations leave little or no room for experimental or creative solutions that self-builders may aspire. The result is that a large amount of permits for deviations from the general regulations need to be applied for. This causes a large amount of uncertainty about whether permits are granted, plans are approved and how long these approvals will take, which is argued to be obstructing the initiation and process of CPC (Boelens & Visser, 2011; De Haan, 2007). Finally, due to the historical path of housing development, there is no common policy among municipalities for CPC. Noorman (2006) finds that one the one hand CPC policy varies from municipality to municipality, so that officials have no rigid reference on the matter. On the other hand, Noorman (2006) states that this means self-builders have to fulfil a pioneer’s role in every CPC project, making it a rather painstaking process.
Noorman (2006) states that plots are either insufficiently available for CPC, or offered against too high prices. Municipalities have insufficient positions on plots, since they have been giving them out to housing developers and corporations (Noorman, 2006). It is further argued that of the available plots, too little are destined for CPC because of the municipalities’ habitual collaboration with large-scale developers (Hogenes et al., 2003; Noorman, 2006; De Regie, 2006). High plot prices make it difficult to build dwellings that will at least return the total investment, which is an impediment to undertake a CPC project. Additionally, Hogenes et al. (2003), De Regie (2006) and Noorman (2006) emphasize that when a group of people decide to conduct CPC some may want to step out in the process. This would leave the residual group of self-builders with an unfinished and ownerless construction. Finishing this construction would generate extra costs for the CPC group and to prevent difficult situations, this possibility should be accounted for. Either a juristic construction to warrant people’s commitment or a financial construction to cope with the consequences (e.g. contingency fund) is needed. This is argued to be an impediment because it makes the commitment either very definite or generates more costs.
Finally, there is the problem of pre-financing. As opposed to traditional housing, homebuyers of CPC projects (i.e. self-commissioners) are involved in the process long before construction has finished or even started. They participate in the preparation and development of the plans, sometimes years before building starts, which generates costs. In traditional housing these costs are incorporated in the price of a
dwelling and thus the mortgage, in CPC these are separated from the construction costs. This causes problems when it comes to the finances. Though some literature marks pre-financing as an impediment for conducting CPC (Hogenes et al., 2003; De Regie, 2006; Noorman, 2006; KEI, 2011), the actual mechanisms behind the pre-financing aspect are relatively scarcely elaborated upon. This thesis seeks to fill that gap of knowledge by conducting an in-depth reconnaissance of the expenses made during the preparation of CPC, the problems they cause and solutions that may overcome these problems in practice. They are marked red in Table 1 to place them in the wider context of general impediments for CPC. In chapter five the pre-financing expenses, culture, policies and models are further discussed.
Type of
impediment
Description of impediment
Informal
institutions
(culture)
CPC is unknown and unorganised and taunted with myths (lack
of information).
CPC requires specialized knowledge and skills
Development sector is dominated by housing corporations and
large-scale developers.
Development sector is insufficiently transparent
Plot market is insufficiently transparent (exchange, etc.)
Building market is full of specific codes and customs
Formal
institutions
(policies)
Municipalities have social housing quotes
Uncertainties about permits, approvals & time
No common policy on CPC:
- Every municipality has different ways of acting
- Every initiator has take the role of a pioneer again
Financial
Too little plots (made) available for CPC and if so, against
unfeasible prices
Risk of bailing out participants: the group is left with an
unfinished and vacant house, which calls for safety or
contingency constructions
Preparation phase entails expenses, whilst mortgage is only
available after this phase is finished.
Table 1: overview of potential impediments for CPC in the Netherlands (source: author) CPC in Germany
In Germany the development of CPC as part of housing commissioning has gone a different path compared to the Netherlands. In the seventies of the twentieth century the first forms of modern collective self-provisioning occurred. These initiatives were mostly the result of friends or associates joining forces to pursue their ideals for living environments and they formed an exception in the German housing commissioning. Banks, which were unfamiliar with these constructions, were sceptic about the
feasibility and did not take CPC seriously. In the mid nineties the cities of Tübingen and Freiburg decided they would let groups of private commissioners fill in the refurbishment of old military bases. This is generally seen as the moment when CPC in Germany started to grow (BMVBS / BBSR, 2009b). In Tübingen a large part of the CPC projects were developed with the help of architects that were hereby able to create work. When the projects in Tübingen and Freiburg had proven to be successes, CPC could shed its image of being exceptional projects and initiatives started to spread through the country. With the growing amount of initiatives, architects and other professionals started to specialize in this kind of housing and banks started to pick up on the positive outcomes. Especially when the Ministry of Economics of the
Bundesland3 Baden-Württenburg developed an informational brochure on CPC, banks let go of their scepticism and sought for constructions to finance it.
The proportion of (C)PC in total housing commissioning from 1985 until 2008, has in Germany been varying between 66 and 56 per cent and was at 59 per cent in 2008 (Dol et al., 2012). (Architectural) journals and blogs from the United States (Grist, 2013), the United Kingdom (The Guardian, 2011) and the Netherlands (Nul20, 2011; Ruimtevolk, 2010) observed the internalization of the housing model in Germany as an example for their own countries. The development of CPC as part of total housing commissioning in Germany has been relatively stable over the past thirty years and it is substantially higher than the rate in the Netherlands (Dol et al., 2012). Graph 1 provides an illustration of these two rates to stipulate the contrast. These notions, articles and opinions illustrate a general consent that Berlin may serve as a best-practice example for CPC. It is therefore chosen as a best-best-practice case in this thesis as well. To improve comparability, the city of Amsterdam is chosen as the ‘counter-case’. Like Berlin, the city of Amsterdam is the capitol and biggest city of it’s nation. Possibly significant differences between the two may exist and these will be elaborated upon in the following paragraphs.
Graph 1: (C)PC as part of total housing commissioning in Germany, the Netherlands and the USA (source: Dol et al., 2012, adjusted by author).
3 0 10 20 30 40 50 60 70 1885 1990 1995 2000 2005 2008 Germany The Netherlands
3) THEORETICAL FRAMEWORK
This chapter entails the theoretical basis for this research. In order to find an answer to the research question, the case is made for three sub questions. The following paragraphs will elaborate on the importance of and possible problems with the preparation phase (§3.1) and comparative housing research and policy transfer analysis (§3.2). The conclusion (§3.3) consists of a short summary and the conceptual model of this thesis.
3.1) Pre-financing CPC
Within the field of project management, projects are typically roughly divided into five phases: identification, selection, definition, execution, and operation. (Bosch-Rekveldt, 2011). This model is also applicable to CPC projects, though in practice the phases are typically called: initiation, provisional design (PD), definitive design (DD), execution and operation. The initiation phase entails the exploration of options that will help attain the goal of the project and some form of organisation will arise. Having accomplished this, the PD phase entails the formulation of one or more rough designs, of which one is worked out in detail into a DD. Hereafter, execution of the plans can start and when execution is completed, operation, which is the end-goal of undertaking a CPC project, will begin. In her work Bosch-Rekveldt (2011) refers to initiation, PD and DD as the front-end development (FED) of a project and she argues this is where the value of a project is identified. With an overlap in the PD, the value of the project is actually realised in the DD, execution and operation. Hutchinson & Wabeke (2006) state that good front-end development will yield more success that bad execution could ever ruin. As illustrated in Figure 1, this describes the importance of thorough front-end development strongly.
Figure 1: illustration of the importance of good FED (source: Hutchinson & Wabeke, 2006 in Bosch-Rekveldt, 2011)
For CPC projects the value of firm and thorough FED has an important consequence. Since participants are mostly not professionals in managing complex projects such as construction, it may be even more important to prepare carefully. However, as noted in the introduction, CPC groups have to provide the costs and bare the risks themselves, whilst neither the group nor the project is definite. Managing a project with a group means many different actors and stakeholders are of influence. Culture, policies and
financial aspects might cause problems in the process, whilst costs continue rising. To find out in what way paying for the preparation (pre-financing) of CPC forms an impediment to initiate it, these problems need to be identified in practice. On the other hand culture, policies and financial aspects may also provide solutions. Looking at the cases of CPC practice in Amsterdam and Berlin, including different actors, will help recognize both problems and solutions regarding pre-financing CPC. The following sub question serves as a guide in this process:
SQ Which problems can be identified with regards to pre-financing CPC in the practice of Amsterdam and how are they overcome culturally, through policies and/or with pre-financing models in CPC practice in Berlin?
3.2) Comparative Housing Research & policy transfer
Oxley (2001) has drawn up a classification of comparative housing research (CHR) in four different levels: zero, low, middle and high. In zero-level comparison, he argues, no actual comparison is made; it withholds a mere description of one particular case to inform an international audience. Low-level comparative analysis goes a step further by describing several cases, yet still without systematically comparing them. Middle-level comparisons are the first actual comparative analyses in the sense that these lay elements of cases next to each other in order to find conclusions about differences, similarities and causalities. At this level it is acknowledged by the author that difficulties in interpretations and different contexts occur and hence their conclusions are typically quite precautious. High-level comparison is reached when there is ‘a systematic
investigation of one issue across several countries using a common theoretical approach’ (Oxley, 2001 p.p. 97). Table 2 gives an overview of Oxley’s (2001)
classification.
Level of comparison
Characteristics Outcome
High Systematic, theory-based (accounting for contextual differences in the) comparison across several countries.
Highly empirical theory based multiple case studies
Middle Comparison across countries, acknowledging and not accounting for contextual difficulties.
Multiple-case studies with comparison (e.g. policy learning, practice learning)
Low Systematic description of housing phenomena across several countries.
Multiple-case studies without comparison
Zero Description or analysis of housing phenomena in a single country.
Single-case studies
Table 2: levels of comparison in studies and their descriptions (adjusted from Oxley, 2001) The objective of this thesis is to see if the CPC practice in Berlin withholds solutions to overcome problems that occur in and might be transferable to the practice of pre-financing CPC in Amsterdam. Stephens (2011) argues that policies, markets, institutions and the historical paths form an interacting system in which housing is
embedded. For example, when looking at CPC in two different countries, the CPC-policies may be different, affecting the rate of CPC in total housing commissioning, which could affect financing possibilities. Stephens (2011) calls the acknowledgement of different system-elements in which housing is embedded a ‘system-embedded approach’ on transnational comparative housing research. Given the complexity of the systems in which housing is embedded, comparative housing research presents difficulties. According to Pickvance (2001) problems of conceptual equivalence and cultural explanation prompt considerations that will influence the outcome of a comparative housing research. Conceptual equivalence means that for comparison cases do not have to be exact copies but rather ‘commensurable’ (Pickvance, 2001). Though the contexts of both cases are different, the practical outcome may be exchangeable. To what extent cultural differences explain differences in the housing systems (cultural explanation), is another choice that has to be made. In this thesis it will be regarded as one of the elements of the system in which CPC is embedded. Together with pre-financing expenses, formal institutions (policies) and financial models of CPC in both cities, cultures will be considered as contextual differences. Since they are acknowledged but not accounted for, this thesis is middle-level comparative housing research according to Oxley’s (2001) classification.
For analysing policy transfers, Dolowitz and Marsh (2000) have build up a conceptual framework in which to classify it. Policy transfer studies are defined as “studies
concerned with a similar process in which knowledge about policies, administrative arrangements, institutions and ideas in one political setting (past or present) is used in the development of policies, administrative arrangements, institutions and ideas in another political setting” (Dolowitz & Marsh, 2000 p.p. 1: 5-9). For the analysis of policy
transfer, the key questions of what is transferred, who transfers, wherefrom is transferred and to what degree is transferred are to be answered (Dolowitz & Marsh, 2000). Additionally, the aspects of comparative housing research (i.e. the ‘system-embedded approach’) are to be considered. Dolowitz and Marsh (2000) identify four different ways of transferring policy: copying, in which exact copies are transferred; emulation, where an effort is made to equal or exceed the underlying ideas; inspiration, where other models may inspire change but there is no actual transfer; and combinations, when several models are mixed. It is further argued that the degree of coerciveness plays a significant role in the implementation of a foreign policy as well. Dolowitz and Marsh (2000) provide a continuum between voluntary lesson drawing and coercive transfer and argue that a more voluntary transfer is more rational, thus more thorough and more successful (Fig. 2).
In the analysis of policy transfer, pitfalls that closely correspond to the difficulties in CHR have to be considered. Dolowitz and Marsh (2000) mention three rough categories of policy transfer failure. Firstly, in order to successfully transfer an institution or policy from one country to another, complete and thorough understanding of how it functions in the lending country is needed. The disregard or lack of essential information leads to wrongful application and is called ‘uninformed transfer’. Secondly, in some cases the policy is transferred but crucial elements that had been the roots of the success in the lending country are left out, causing the transplanted policy or institution to fail in the borrowing country. This is referred to as ‘incomplete transfer’ (Dolowitz and Marsh, 2000). Finally, in cases where the social, economical, political and/or ideological contexts differ too much for the policy transfer to be of success, this is disregarded. Here the case for transfer was just too weak and it is hence referred to as ‘inappropriate transfer’. The following sub questions are formulated to guide respectively identifying contextual differences in the two CPC systems and hypothesizing about possibly transferable solutions form CPC practice in Berlin.
SQ What are contextual differences and similarities between pre-financing CPC in the practices of Amsterdam and Berlin, with regards to expenses, informal institutions (cultural aspects), formal institutions (policies), and pre-financing models?
SQ Taking into account the contextual differences between the two housing systems, which solutions in the practice of pre-financing CPC in Berlin might be transferable to the practice of pre-financing CPC in Amsterdam?
3.3) Conclusion: conceptual model
The main question in this research is in what way the pre-financing aspect of CPC forms an impediment to conduct it in Amsterdam and what are possible solutions to overcome them. To answer this question, research is divided into three steps. First, contextual differences and similarities between the CPC systems, which consist of pre-financing expenses, informal institutions (cultural aspects), formal institutions (policies), and pre-financing models, in Amsterdam and Berlin are explored. The following sub question is formulated to guide this exploration:
SQ1 What are contextual differences and similarities between pre-financing CPC in the practices of Amsterdam and Berlin, with regards to expenses, informal institutions (cultural aspects), formal institutions (policies), and pre-financing models?
Second, there will be a reconnaissance of problems with pre-financing CPC in Amsterdam and their solutions found in practice in Berlin. Sub question number two addresses this issue as follows:
SQ2 Which problems can be identified with regards to pre-financing CPC in the practice of Amsterdam and how are they overcome culturally, through policies and/or with pre-financing models in CPC practice in Berlin?
In the third step, the solutions are then analysed using the policy transfer framework from Dolowitz and Marsh (2000). Important in this analysis are the contextual differences and similarities between the two CPC systems, because a difficulty with comparing and transferring between systems in different countries is that of conceptual equivalence. After all, the two systems are not exactly alike and this needs to be considered. Accordingly, the degree in which is transferred varies between copying, emulation, inspiration and combination. This has lead to the third sub question:
SQ3 Taking into account the contextual differences between the two housing systems, which solutions in the practice of pre-financing CPC in Berlin might be transferable to the practice of pre-financing CPC in Amsterdam?
After these three steps have been taken, contextual differences and similarities, problems and solutions in the practice of Amsterdam and Berlin are established and hypothesizing about their applicability in Amsterdam will lead to answers on the main research question. Figure 3 illustrates the steps discussed in a conceptual model.
4) RESEARCH DESIGN
A comparative case study design is set up for the thematic analysis of two cases: Amsterdam and Berlin. Through conducting semi-structured interviews on predetermined aspects of pre-financing CPC, in-depth knowledge is gained about its background. Simultaneously this manner of interviewing leaves room for unforeseeable themes to emerge, contributing to the depth and context of the knowledge gained. The interviews are conducted in the respondents’ own languages to decrease the chance of linguistic errors. The interviewer (and author of this thesis) is native speaker in Dutch and German but to decrease room for error further, the transcripts are double-checked by secondary native speakers.
In the analysis, contextual differences and similarities are taken into account, implying a constructionistic ontological view that phenomena are in constant state of interaction with social actors. Conducting a thematic analysis through interviews implies an interpretivistic epistemological view that in social science the subjective meanings of social actions need to be distilled, in order to gain insights in the mechanism at work.
Choice of respondents
To ensure maximum objectivity in the findings, data source triangulation is applied. Four different types of actors in CPC projects are interviewed in each city: a CPC-conductor, a CPC-guide, someone active in a CPC related institution and one in a CPC financing company. This allows for the cross-referencing of data, limiting subjective statements and thus improving the internal validity of this research. Several writings used for the desk research of this thesis were conducted by the same organisation. After contact with them, one of the researchers was used as the first key-informant in Amsterdam. An acquaintance of him, an educated urban planner active in the field of CPC in Berlin, served as the second key-informant. Through the key-informants, contacts were made with all four types of actors needed for this research. After the interviews were conducted, a recapitulating conversation was held with either key-informant to ensure correct and unbiased interpretations.
Data analysis
A thematic analysis is conducted on both cases, deriving themes from literature, complemented by themes that emerge in the interviews. It follows the ‘framework approach’ (Ritchie & Spencer, 1993) and entails five consecutive steps: familiarisation; identifying; indexing; charting and interpreting. Familiarisation with the body of data occurred through transcribing the audio recordings, which was done in the language the interviews were conducted in. Next the interview questions were translated to English, identifying a thematic framework. The data from the transcripts were then translated to English and sections were indexed according to the themes. In the fourth step, the themes, questions and sections were charted in a table, which can be found in Appendices A and B. The fifth and final step entailed the interpretation of the data as arranged in the table. Since the research entails only eight different interviews, conducted in two languages other than English, the use of CAQDAS was deemed unbeneficial and hence, all analyses were done manually.
5) EMPIRICAL PART
5.1 Two cases up close
In this paragraph contextual differences and similarities between pre-financing CPC in the practices of Amsterdam and Berlin are explored. Consecutively the pre-financing expenses, informal institutions (cultural aspects), formal institutions (policies), and pre-financing models are discussed. Discussion of these subjects will follow an ‘A-B-C arrangement’ (Amsterdam – Berlin – Comparison). The conclusion withholds the most important findings of the comparisons and therewith answers the sub question, which is the following:
SQ1 What are contextual differences and similarities between pre-financing CPC in the practices of Amsterdam and Berlin, with regards to expenses, informal institutions (cultural aspects), formal institutions (policies), and pre-financing models?
5.1.1 pre-financing aspects
Amsterdam
The first step towards initiating CPC in Amsterdam is the emergence of a motive. A plot comes available, friends have similar aspirations or an organisation initiates a project. In this stage costs, the rent for meeting places and catering during meetings for example, can be kept low by using ties in the participants’ circles of acquaintances.
“We started with a few evenings to get ambitions aligned and inspire each other. We could use the location of someone’s friend and everyone brought coffee or cookies. In the end this helps people with committing to the project enormously” (respondent #6).
When the decision to initiate a project is made, a legal organisation is to be formed in order for the group to act as a single party. For this formality, administration fees have to be paid and this is the first expense for the collective, albeit small. A down payment is required if the group is to continue pursuing their aspirations.
When the group’s ambitions are aligned and a plot is found, the next steps have to be taken. The plot has to be put under reservation but for this negotiation the municipality demands a rough plan with specific elements. For making these plans professionals are essential because if the municipality’s demands are not met, the plot will be awarded to another group. Additionally, the municipality demands a deposit to enter the plot negotiations to cover the administrative costs. “It is also to show the intentions
of buying a plot are serious” (respondent #7). Hiring a professional and paying for the
deposit are expenses for which a second, larger payment is required from the participants. “At this point a planning is to be made and though the most of the total
amount was postponed, a small deposit was required” (respondent #6).
When the plot is granted, a provisional design is made and permits are to be applied for. The provisional design has to be worked out by a professional and applying for permits costs administrative fees. The participants start periodic payments to cover these on-going expenses. “It is difficult to say but in general one should count on
around 10 per cent of the building costs for this part” (respondent #7). In some cases
expert guides are hired and those expenses raise the periodic payments. The complete set of plans and plot reservation can then be presented to a bank to apply for a mortgage. The mortgage in turn is used for the acquisition of the plot and the construction of the project.
Berlin
In Berlin the first step towards initiating a project is similar to CPC in Amsterdam. However, when the group is to be made a legal organisation, a simple agreement could suffice, meaning limited costs. A more thorough explanation hereof is given in the following paragraph. When a plot is found, the first notable differences occur: the plot is often offered by a private party that does not demand any plan to be prepared and awards the plot to the highest bid. This makes it essential for the group to act quickly, even if they are not yet complete. In some cases, the seller accepts postponed payments with a down payment, which makes the immediate investment bearable with private capital. In other cases the complete sum is to be paid directly and hence a large amount of capital is required. When the plot is bought, the CPC timelines in the two cities realign. The fact that plot acquisitions in Berlin are part of the pre-financing expenses means that these are much higher than in Amsterdam. ”In general, around
20 per cent of the total costs are pre-financing expenses. Mostly this includes plot acquisition although in some cases extra credit is needed” (respondent #1).
Comparison
The first deposit required for CPC projects in Amsterdam are to cover costs made when registering the organisation legally, which is free of charge in Berlin. The second payment is used for the creation of a provisional design (PD) and fees for applying for a plot. This is a relatively small amount of money whilst in Berlin the large expense of plot acquisition is due, for which generally 20 per cent of the total costs have to be paid by the participants. Thirdly, in Amsterdam the provisional design needs to get worked out into a definitive design through a process of interactions between permit applications, denials and adjustments to the design. Periodic payments cover these costs in Amsterdam and the initial deposit of 20 per cent is used in Berlin. When the definitive design and biding procedures are finished, in both cities the mortgage becomes available and construction starts.
5.1.2 Informal institutions: culture
The Netherlands
In the Netherlands, the national government’s effort to stimulate housing mobility has yielded an external effect with big impacts on the market. With making the interest on mortgages deductible from the income used to calculate taxes, it had made taking high mortgages attractive. Though the economic crisis in 2008 led to stricter rules for banks, it is still not uncommon for people in the Netherlands to have mortgages for the complete value of their home. In other words, people are not used to investing a lot of private capital in their houses.
Amsterdam
The city of Amsterdam is considered one of the more politically left-wing oriented cities in the Netherlands. For housing this translates into a fair amount of social dwellings, a relatively high rent-rate and a strong housing corporations lobby. “We have seen
corporations frustrating CPC projects whenever they could because they saw them as competition” (respondent #7). Similar to the national scale the municipality of
Amsterdam has long controlled spatial development and provided ‘housing-consumers’ with dwellings through large projects on grounds of spatial scarcity and a growing demand for housing. Accordingly, today the majority of the plots in Amsterdam are still offered by the municipality. “In Amsterdam, at least 95 per cent of the CPC plots are
offered by the municipality, if not more” (respondent #7). This has also led to the
people of Amsterdam getting used to seek for houses that (somewhat) fit their needs, instead of taking matters in own hands. Besides that, the citizens of Amsterdam have become more individualistic over the past decades. A recent loss of votes by left wing in the municipal elections underlines this development.
CPC in Amsterdam
When it comes to CPC in Amsterdam, a few advocates of CPC have initiated several projects over the past two decades, though they remained relatively low in numbers. However, success stories from other cities and the more active attitude of the municipality of Amsterdam have led to an increase. In the last five years especially the more assertive citizens with access to sufficient resources have played a bigger role in CPC and: “(…) people are starting to see CPC can offer more quality for the same
price” (respondent #8).
Organisation models of CPC in Amsterdam
Collectively operating can be organised in several different ways in Amsterdam. When a group decides every member should have equal saying in decisions, through voting for instance, the choice to operate as an association is made. If a group is too large to effectively make decisions this way, the alternative is to establish a foundation with an executive board, which is elected or nominated by the members. “To be able to make
decisions effectively, we are officially a foundation, although in practice almost every decision is made together anyways” (respondent #6). Either of these organisations is
able to have a bank account through which they can cooperate with the actors in their project. However, these constructions have limited options with regards to settling obligations for members: it is a relatively informal organisational structure.
Germany
In Germany, a different housing culture prevails. Living longer with their parents and renting longer after that, Germans are more used to saving up for the purchase of their homes. A common saving construction called Bausparen (building-saving), leads to people having a substantial amount of private capital to start the finance of their purchase. Accordingly banks demand higher rates of private capital before granting a mortgage. “Normally, people pay around 20 per cent with their private savings for a
house in Germany, of course also because banks demand it before financing” (respondent #3). The government’s spatial planning is different in Germany as well.
When intervening in developments, governments can claim plots from private owners to make them develop on it. After the plot is prepared for building, the owners receive back their land and are obligated to build on it themselves, sell it, or have a construction commissioned (Dol et al.,2012). The result is that though governments can intervene, Germans are used to developing on land themselves.
Berlin
Traditionally a city of immigrants, predominantly from eastern European countries, the culture of Berlin is known among Germans as none existent. “When people say they
are from Berlin, they are often asked again where they are from” (respondent #5). With
influences from Eastern European cultures, socialistic views are dominant in Berlin. Possibly partly as a residue of the DDR, ownership and capitalism have a negative image. “In Berlin 80 per cent of all housing is rented. Ownership has always been seen
as undesirable and even today newly built houses have their windows shattered because people suspect money and accuse owners of greed” (respondent #5).
CPC in Berlin
Regarding the view on homeownership there is a tendency of change in Berlin. Especially younger professionals start to realise that the money they spend on rent over the years, could also lead to ownership in the end. Simultaneously, with capitalism growing, nostalgic aspirations to more solidarity pave the way for collective initiatives.
“With CPC people can live how they desire both materialistically and socially, these cultural-historical developments have certainly contributed to the growing popularity of CPC in Berlin” (respondent #5).
Organisation models of CPC in Berlin
When in Germany people agree on undertaking something (anything) together and payments are included (e.g. agreeing upon who pays the bill in a restaurant), this is called a ‘Gesellshaft des Bürgerlichen Rechts’ (GBR, in English: partnership under civil law). Most CPC-groups maintain this legal form of organisation because founding it is unsupervised and for free. Another possibility is the ‘Gesellschaft mit beschränkter
Haftung’ (GmbH, English: partnership with limited liability). The difference is that
officially in the GBR every partner is liable to each other, meaning that if one fails to meet his obligations, the others have to cover him, whilst this liability is limited in the GmbH. However, very often the GBR is favoured over a GmbH, respondent #2 explains why: “A judge once found that participants were not liable for one of their
group member’s damage and so, through jurisprudence, the GBR is more attractive since it is easier and cost-free to establish.” Thus the organisation of CPC in Berlin is a
lawful commitment with limited liability, which provides security for the participants whilst limiting their risks.
Comparison
In comparison, Dutch housing consumers are used to getting the complete price of a house financed with a mortgage, in some cases even more, whilst in Germany it is common to provide at least 20 per cent of the transaction privately. Where the Dutch government has pacified the home-seeker with far stretching interventions in spatial development, the German governments have always left the developments up to private parties, keeping the self-providing culture more active. Additionally, where CPC in Amsterdam is organised as an informal association or foundation, the counterpart in Berlin establishes a lawful commitment for its participants, which limits their risks. The result is less uncertainty about fellow group members in Berlin, making a CPC project less frightening to step into than in Amsterdam. The people from Amsterdam are (becoming) more reluctant to be dependent on others. In Berlin however, the nostalgic aspirations for social coherence and the realisation that buying a house provides ownership in the end, have caused people to want to build together more. Table 3 provides an overview of these cultural differences.
Amsterdam
Berlin
100% external finance
80% external finance
Pacified housing consumers
Active housing builders
Individualistic aspirations
Aspirations of social coherence
Increasing CPC due to qualitative
benefits
Increasing CPC due to it’s social and
qualitative characteristics
Informal organisational structure
Legal limited liability commitment
5.1.3 Formal institutions: policies Amsterdam
CPC-specific policies
The Dutch national government provides the provinces with a budget to further execute the stimulation of CPC. The province of North-Holland, of which Amsterdam is part, has drawn up a package of tools for that stimulation in 2012. The so-called execution settlement CPC North-Holland 2012 (in Dutch: Uitvoeringsregeling Collectief Particulier Opdrachtgeverschap Noord-Holland 2012 or UvR CPO 2012) containes two lines along which CPC is to be stimulated. One is the financial route: subsidizing the front-end development and handing out cheap loans to CPC initiators. “The province of
North-Holland offers a subsidy with a maximum €15,000 per project for the preparation. The group has to fill it up with the last 25% private capital” (respondent #7). The other
line of stimulation is the promotional route: acting as a “knowledge broker” through organizing informing activities and clearing up the governments’ roles in CPC. “The
municipality provides information and clarity about the parts of the process they are involved in” (respondent #8). “(…) This is very helpful for people that are unfamiliar with these aspects” (respondent #6). As part of the execution settlement, the new policy
was evaluated a year later in 2013. Though CPC numbers have increased since the start of the program, the correlation between the increase and the policy is un- (sufficiently) proven.
Permits
Dutch regulations with regards to building can be very complex. They can roughly be divided into three main tracks: technical, aesthetical and democratic. Foremost, the plans for a building have to be assessed on their technical integrity before permits are granted. The second test of the plans entails aesthetical values. Whether or not the planned developments fit into the bigger picture with regards to their looks is to be assessed before a permit can be granted. Finally, a democratic aspect is part of the permit procedure. Direct stakeholders such as neighbours have the right to see the plans, share their views on them and, if sufficiently founded on arguments, obstruct to them. According to both experts and practitioners, these aspects of spatial policies make obtaining permits a long and painstaking process. When investments, for instance in the development of the plans, have already been made, time generates costs (interest). Moreover, if the plans themselves have to be altered, this extra work causes costs to rise even higher. In this way, the meticulous spatial policies in Amsterdam drive up the costs of the FED. An example is given by respondent #6 when elaborating on an issue in the process: “The mere fact we called a wooden jetty a
‘swimming-jetty’ in the permit application, caused it to get denied. The water is not guarded swimming water and the description ‘swimming-jetty’ was found inappropriate. After we altered the name to ‘canoe-jetty’, the permit was granted, but this had cost both time and money.”
Plots
In Amsterdam most of the plots on the market are offered by the municipality, which maintains a ground-lease policy. ‘Buying land’ is either done with a small initial investment and paying a yearly canon or by buying off the yearly canon for fifty years in advance. “When it comes to CPC plots, around 95% is given out in ground lease by the
from the plots for ever but it also gives the municipality a lot of control about what is to be built and when. “With awarding us the plot, the municipality had us committed to our
initiative as well. We were given a year to formulate the provisional design and had to present our progress every couple of months” (respondent #6).
Process guides
In Amsterdam plots are sold with reservation settlements. These settlements are contracts in which the agreement about the ownership exchange between municipality and CPC’er is settled and contain a clause that warrants the development of a detailed plan within a certain time. A down payment is required to cover administrative costs of someone bailing out. “These are around €1,000, which is very low really” (respondent #
7). For the further development of the detailed design, the supply, contracting and
project management, the CPC group is free to choose their partners, if any. Berlin
CPC-specific policies
Officially stated by the city of Berlin, their way of stimulating CPC is also twofold. On the one hand stimulation occurs through active knowledge brokering. Internet platforms providing vital information for CPC initiators are maintained. The municipal government initiated the set up of an organisation, specialized in guiding CPC over twenty years ago. “Originally it was set up to help squatters with finding work and redevelop or
gentrify the buildings they were in. Over the years CPC became a great tool for such activities as banks started to become familiar with it and were able to finance it more” (respondent #5). It is a self-sustaining organisation and since their founding was
requested by the city, it is officially recognized as an institution. On the other hand the city claims their stimulation is material. The city of Berlin states the ambition to grant plots against attractive, fixed prices to CPC initiators through organizing competitions. However, when asked about the competitions the answers were all alike: “The city has
done this for two consecutive years, each year awarding five plots. Only three out of ten have been realised because the city could not afford giving out fixed prices” (respondent #5). Respondent #3 added: “The awarded plots were all situated rather unattractively, causing the turn-up to be very low.”
Permits
The spatial policies with regards to building permits in Berlin are less detailed than in Amsterdam. With regards to technical integrity, and democratic procedures the process is rather similar. However, the aesthetical aspect is formulated in one statement: no new development may deviate all too much from its surroundings. Included is the height of the building (not too much higher or lower than neighbouring constructions), the façade design (similar to neighbouring constructions) etc. “You can recognize that
in the ‘face of the street’. Every building looks kind of similar because of this rule but on the other hand, due to the freedom, facades have many different colours as well” (respondent #2). Though the respondents in Berlin do not view the subject of applying
for permits as an easy or quick task, generally this process was judged fairly transparent. When told about the ‘swimming-jetty case’ respondent #2 laughed and said: “Well that’s typical for Dutch bureaucracy isn’t it?”
Plots
In Berlin the division of the plot market is almost the opposite of that in Amsterdam.
“Around 85% of the plots in Berlin are offered by private owners” (respondent #5). This
makes plot prices subject to a free market mechanism and drives up costs for CPC more and more. “In some areas prices per square meter have more than doubled over
the past two years and so we are only just before the tipping point were the CPC models have to change to keep attractive. You can see this for instance in the emerging of large scale professionals that initiate projects” (respondent #3). On the
other hand it provides relative freedom with regards to what is built in what timespan.
“Who is to say I have to build on a privately owned plot that has been left empty since the war?” (respondent #5).
Process guides
In Germany, everyone who (self) builds a dwelling is by law obligated to hire an architect (Dol et al., 2012). The German architect, also by law, has four responsibilities: in the preparation phase a temporary design is made and regulations and permits are looked into; in the design phase the design is made and the application of permits is prepared; in the next phase, a cost estimation is established and the participant is helped in finding a contractor; finally, during execution, the architect supervises the building process, thus acting like a project manager (Dol et al., 2012). This package of tasks is particularly interesting when taking into account that German architects have their salary regulated by law as well. A fixed honorarium is paid for each delivered service, meaning they compete only on quality, not on price. “If an architect feels
unconfident in certain activities or he just doesn’t like them, he can commission them out to another” (respondent #1). This provides security against failures and hence
bailouts before building. With the trust in the architect, procedural expert, project manager and team spokesman in one person, the step of paying up front for results that have yet to be achieved is perceived to be of relative low risk.
Comparison
With regards to CPC-specific policies, both municipalities have an institution or task force providing information on the aspects of CPC. Additionally the municipality of Amsterdam grants subsidies covering 75 per cent of the pre-financing expenses with a maximum of €15,000 per project and offers plots exclusively for CPC initiatives. In Berlin, no such support is available. In terms of guidance, the municipality of Amsterdam has no policies but it can offer useful information on it’s own role in the process. In this aspect the municipality of Berlin is more active, obligating every (self) builder to hire an architect, which by law has specific tasks and honoraria. Finally, the municipality of Amsterdam is more intervening through stringent permit assessment and obligations that come with land acquisition. In Berlin the building specifications are less specific and assessed more loosely. Moreover, the municipality hardly determines if and when there is to be built on the newly acquired land, since it is mostly bought from private owners.
Amsterdam
Berlin
CPC-specific
Knowledge broker
Request for set-up knowledge
broker.
Subsidies
No subsidies
Exclusive CPC-plots
No exclusive plots
Process
guides
Freedom of architects, guides,
contractors, suppliers, etc.
Law that obligates use of architect
for specific tasks and with fixed
honorarium.
Goodwill from municipality
(providing useful insights).
No specific extra help
Permits
& plots
Not allowed to pay off personal
loans with mortgage.
No problem with paying off
personal loans with mortgage.
Stringent permit assessment
Loosely formulated demands
(more freedom thus less delays &
adjustments).
Ground lease & municipal
determination
Private ownership & free market
determination
Table 4: comparison between policies as a CPC-context in Amsterdam & Berlin (source: author)
5.1.4 Pre-financing models
In Amsterdam, roughly four models through which CPC is pre-financed can be identified: the ‘CPC initiative-subsidy model’; the ‘initiating company model’; the ‘architect model’ and the ‘independent-group model’. The latter two are also found in Berlin, complemented by the ‘initiating company model’ and the ‘bank initiation-credit model’. They will be elaborated consecutively in this paragraph.
CPC initiative subsidy model (Amsterdam)
The province of North-Holland has a budget for the stimulation of CPC and uses this to financially support initiators in the preparation of their project. 75 per cent of the preparation costs, with a maximum of €15,000, is provided for each project with the demand that the last 25 per cent is covered with private capital. Though a large part of the costs are covered, it still demands private capital to be invested during preparation.
Initiating company model (Amsterdam)
In Amsterdam, project developers have recognized the homebuyer’s demand for more say in the construction of their dwelling. These companies often already possess plots or plot positions and initiate CPC projects, albeit with demands regarding contractors and architects. The pre-financing expenses are paid in advance by the initiating company and included in the total price when participants have a mortgage available. This model is referred to as co-housing rather than CPC, since “When working with
commercial parties you should be careful to keep the balance. (…) It limits what true CPC stands for: taking matters in your own hands” (respondent #7).
Architect model (Amsterdam & Berlin)
Architects have picked up on CPC in both cities. When plots are offered, some initiate their own CPC groups by creating a formula within which the participants can further design their homes. The group sets up a legal organisation and contracting is further done collectively. “The architect’s benefit here is that he creates work for himself in the
process” (respondent #2). Though the honoraria of the initiating architect can be
postponed, the permit fees and other pre-financing costs still have to be paid. In other words: the pre-financing expenses are reduced but not completely covered. Private capital or a credit is still needed.
Independent group model (Amsterdam & Berlin)
In some cases, initiators have sufficient resources to cover the pre-financing privately. The participants of these groups are often acquaintances of each other, since it requires a certain level of mutual trust. The finance of the further construction can be done with mortgages or private capital, which differs from project to project and from participant to participant.
Initiating company model (Berlin)
When an organisation initiates the CPC project it bridges the gap between pre-financing costs and the start of the mortgage or, in the words of respondent #1: “It is
the initiator’s risk to make plans without knowing if they will ever happen, and some of them won’t, but this is an investment with both high financial and moral satisfaction in the end”. The difference with the company-model from Amsterdam is that these
They are self-initiating project-guides. Their honoraria can be incorporated in bills that are paid during construction, so they can help bridging the pre-finance gap. Permit fees and architect honoraria still have to be paid however; the solution is hence only partial.
“Bank initiation credit model” (Berlin)
Several banks have developed frameworks that are used to assess whether a CPC project can be financed, in what way this can be done and which demands are necessary to keep the risks for both the bank and the group at a minimum. As noted before, German banks demand 20% of private capital for any kind of mortgage and this is no different for CPC. When the group is still incomplete and the 20% of each participant combined does not suffice to buy the prospected plot and cover the FED, the bank can help out with a mid-way construction between a personal and collective credit. The group (though incomplete) gets a credit to collectively use for the project’s purposes only. However, up to four of the initiators are held accountable for it and therewith for the success of the project. Every new participant’s mandatory deposit of 20% of the value of their prospected home, is used to pay back the bank for this “mid-way credit”, until the group is complete and the construction (and mortgage) can begin. The bank’s demand for starting the mortgage is the group is complete and every participant gets his long-term finance from that same bank. All German interviewees stated that 20% of the end value should cover the FED, including buying the plot, completely. If this is somehow not the case, the remaining sum can be incorporated in the mortgage. To account for the risk of someone stepping out “…banks do a thorough
solvency check and legally warrant stepping out in the preparation phase. They can get out of the project when building and mortgage have started if they find a new participant or the group agrees to another construction” (respondent #3).
Comparison
In both Amsterdam and Berlin models have been found with which the gap of pre-financing CPC can be bridged to some extent. Though none of them actually completely take the costs away, some constructions make the costs more bearable than others. In both cities architects, companies and independently acting CPC groups can be recognized. Two other models stand out: the CPC initiative subsidy model and the bank initiation credit model. The former occurs in Amsterdam and provides a 75 per cent bridge over the pre-financing gap, leaving 25 per cent to be financed still. The bank initiation credit stands out the most because it is the only model that solves the pre-financing expenses for a 100 per cent. Although it does not make the expenses disappear, it makes them payable for everyone by incorporating them in the mortgage if needed.
Pre-financing
Construction
Who pays
What is paid
What is the
trade-off
NL CPC Initiative
subsidy
Province of
North-Holland
75% of preparation
costs (initiating
project, max.
€15,000)
A firm group and
25% private
capital is
demanded
Initiating
company
model
Company (e.g.
project
developer)
Pre-financing
against low interest
&
unsold/unfinished
dwellings (incl.
bail-outs)
Company is
involved in the
building process
(though the
extent varies)
NL
&
GER
Private capital
Participants
All pre-financing
Complete
freedom & large
risks
Architect
model
Architect &
participants
Pre-financing (by
postponing
honoraria),
obtaining plot
Architect is
project manager:
the quality
depends on
architect
GER Initiating
company
model
Company (e.g.
professional
project
managers)
Pre-financing (by
postponing their
honoraria),
occasionally
obtaining plot
Company
formulates
concept: limited
freedom
Bank
initiation
support
model
Participants
(20%) + Bank
(short-term
initiation
credit)
Pre-financing,
obtaining plot
Mortgage from
same bank.
20% own capital
needed: not
accessible for
low incomes
Table 5: comparison between pre-financing models of CPC in Amsterdam & Berlin (source: author)5.1.5 Conclusion §5.1
This paragraph entails a sum-up of the concluding comparisons from the preceding paragraphs. It serves as an overview of a large amount of findings.
Pre-financing aspects
The first deposit required for CPC projects in Amsterdam are to cover costs made when registering the organisation legally, which is free of charge in Berlin. The second payment is used for the creation of a provisional design (PD) and fees for applying for a plot. This is a relatively small amount of money whilst in Berlin the large expense of plot acquisition is due, for which generally 20 per cent of the total costs have to be paid by the participants. Thirdly, in Amsterdam the provisional design needs to get worked out into a definitive design through a process of interactions between permit applications, denials and adjustments to the design. Periodic payments cover these costs in Amsterdam and the initial deposit of 20 per cent is used in Berlin. When the
