Every hurricane that blows across the world is given a name. What is stopping us from naming the new wind that is blowing over the Brussels housing market? I suggest we call it YIMBY.
In this blog (8 min read), I explain how I came to this proposal. Curious what you think of it...
Ps. The numbers in brackets in the text refer to my sources of inspiration and information. You will find them at the end of the blog.
You may have experienced it before: someone says something, and it is exactly what you were waiting for… This happened to me on 22 November 2018. I was taking a Postgraduate Course in "Cooperative Entrepreneurship" (1) at KU Leuven, and the topic of the day was Strategic management and Innovation. Professor Bart Van Looy (2) talked about the innovative business model of the Aravind organisation in India, and more specifically about its policy of price differentiation. With great enthusiasm, he encouraged us students to read the book by Seelos and Mair (3). Not an easy read, but very inspiring...
Aravind's mission is to prevent needless blindness in people suffering from cataract. There is enough general knowledge and skill in the medical world to ensure that cataracts do not lead to blindness. However, in the 1970s, the treatment of this condition was a lengthy process and came with a very high price tag. In India, this meant that the vast majority of the population, especially those living in rural areas, had no access to medical treatment. Aravind wanted to set up a service where the patient was at the centre. Today, the organisation is one of the largest eye care service providers in the world (4). From its inception to the present day, it has adopted a differentiated pricing policy. A minority of patients are charged the normal price for quality treatment. The majority enjoy the same high quality, but pay nothing or almost nothing. Nevertheless, Aravind manages to remain financially autonomous. Its business model is based on 6 pillars: financial sustainability, quality, efficiency, high volume, value creation, reaching the target group.
The link between Aravind and Whatt
What does Aravind have to do with the shortage of qualitative, affordable rental housing in the Brussels Capital Region? At first glance, there is no connection between eye care and housing. And India is very far from Brussels. But if you look closely, from a different perspective, with a little more distance, you can see the connection. The business concept and objectives of the Aravind model are all applicable to the Whatt model (= the cooperative project presented on the Whatt.eu website).
Targeted focus: the tenants of the Brussels Region
At Aravind they strive to treat a maximum number of cataract patients. In this way, they prevent people from going blind and significantly reducing their quality of life.
The Whatt model is all about the well-being of the tenant. I assume that there is a connection between a person's living situation and their well-being. In general, tenants' wishes with regard to their home can be divided into three categories: affordability, quality and accessibility. These three factors together determine a person's housing situation. If one or more desires are not met, living becomes worrisome and a person's overall well-being deteriorates. And as more people feel bad about their living situation, you get a general decrease in well-being in society. It is therefore important to be able to provide a maximum number of tenants with access to affordable, quality housing.
That will keep us busy for a while! In the capital of Europe, the group of tenants is very large and quite heterogeneous. How many people are we talking about? On 1 January 2020, the Brussels Region had 586,090 housing units (5). Based on a population of 1.2 million inhabitants, it is easy to calculate that, on average, 2 people occupy a home. Approximately 60% of housing in Brussels is rented, while the rest is owned by its residents. Depending on the assumptions made about the average number of people per rental, we can conclude that there are between 600,000 and 800,000 people living in rented accommodation in the Brussels Region.
The Aravind model applies a differentiated pricing policy. It deliberately lowers the entry threshold for patients who cannot afford the regular cataract operation fee. They are helped free of charge or pay a greatly reduced rate.
In Belgium, we enjoy a well-developed social security system. Each of the country's three regions has a housing policy. Through numerous regulations, the government ensures that all inhabitants can exercise their right to housing. Statistics on social housing in the Brussels Region (6) show that there are 40,000 social housing units. These represent 7% of the total number of dwellings in the region and 11% of the total number of rented dwellings. This is a relatively small share. In any case, it is too small to be able to determine the general price level of rental housing in Brussels. It is in the private sector that prices are set. We are currently dealing with a real "landlord market" (where the demand for rental housing is greater than the supply), and this leads to a rise in rental prices. Sometimes these price increases are justified, sometimes not.
Housing is precious
Everyone wants an affordable home. Nobody wants to spend more on their home than necessary. After all, the greater the amount that housing costs take out of a household's disposable income, the less there is left over for other household expenses. The media often refer to the 50,000 families or 100,000 people in the Brussels Region who are on a waiting list for social housing. While waiting, which can sometimes take up to 10 years, these families have to turn to the private rental market. They struggle to make ends meet, month after month. However, they are not the only ones affected. One only has to read the Brussels Region Poverty Report (7) to find out about the many other households with financial worries: single-person households, families with low business incomes, single-parent families, people on replacement incomes, pensioners, etc.
Different rental rates for the same quality
The proposal in the Whatt model is to apply a system of price differentiation, as with Aravind. Some tenants in a building are charged a lower rent than the majority of tenants in the same building, for the same quality of housing.
Is this realistic?
In my opinion, it is possible at this time, without too much persuasion, to create support for a differentiated pricing policy. After all, many people are prepared to cooperate in finding solutions to social problems.
- Tenants who enjoy the lower rate will welcome the concept. They will find it easier to make ends meet. A burden is lifted from their shoulders.
- The other tenants in the building pay the regular rate. As long as they themselves experience good value for money for the accommodation they rent in the building, it need not bother them that some enjoy a reduced rent. Compare it to a visit to a museum: some people pay the full price of admission, others pay less or nothing, but all get to see and experience the same beauty. In the Whatt-model, the applied concept of price differentiation is openly communicated. Tenants who do not agree with the price policy remain free to rent elsewhere.
- The government has no problem with this. After all, it is itself looking for rental models that take account of tenants with more limited financial resources. Public authorities know better than anyone that everything is connected with everything else. A person whose rent is too high in relation to his income runs a greater risk of poverty and all the problems associated with it. And then he/she turns to the public authorities for help. When this vicious circle is broken, the government's tasks lighten. It can proceed with the elimination of its waiting lists for social housing.
- Last but not least, the social sector, the care professionals. They will be able to become more productive as soon as a large part of their "available time per patient" no longer needs to be spent on finding solutions for the high housing costs of their target group.
In the Aravind model, the underprivileged local population enjoys the same quality of eye care as the eye patient who, attracted by the particularly good reputation of Aravind medical centres, flies in from another continent for treatment.
Why couldn't the landlords of the Brussels Region have such an inclusive policy towards tenants?
YIMBY: preferential access for specific target groups
Let's face it, the rental market is rife with prejudice, discrimination and stigmatisation. The result of all this is that a large group of potential tenants is excluded, denied or even abused. There is also the so-called NIMBY (Not In My Backyard) effect that comes into play: people agree with proposals to solve problems, as long as it doesn't come too close or threatens to affect them personally.
Yet these are all cliché expressions. The majority of people do care about their other citizens, wherever they come from, whatever their past is, whatever they look like. They see it as a personal enrichment, some even as a personal challenge, to give the other, the stranger, a chance, to step into the breach, or simply to hang out with him/her.
Why not consider reserving some homes in a building for people who have difficulty accessing housing? Why not deliberately create a YIMBY (Yes in My Backyard) effect?
As with price differentiation (see earlier in this blog), finding support for the YIMBY concept need not be so difficult.
- The tenants who gain preferential access will be delighted with the opportunity;
- The other tenants in the building will have the concept explained to them beforehand. Those who enter into the lease are open to diversity. They strive for an inclusive society and consciously put their prejudices aside. They want to give YIMBY a chance.
- The public authorities and organisations working on well being and equal opportunities will feel supported. If landlords take initiatives themselves to improve the accessibility of rental housing, the government does not need to oblige them to do so. The government will see its expenditure on law enforcement and sanctions for non-compliance fall.
- For the social sector and for care professionals, it is easier to work if their patients feel welcome in the building where they live. For their target group, the road to recovery, to regaining self-esteem, is considerably shortened.
Sustainability at the centre
In the Aravind model, quality is paramount, right down to the smallest detail of the service offered. In this way, they stay one step ahead of the competition. And they continue to attract customers from all over the world.
The same quality philosophy will be applied in the Whatt real estate cooperative. And more. It's not just the service of renting that has to be top-notch. The construction and renovation of the buildings must be done in a sustainable way. The overall continuity must be assured. A subject too important to discuss in this blog. A separate blog will be devoted to this.
Reaction and interaction requested
I admit it. I am rather enthusiastic about Aravind and Whatt. What the heart is full of, the mouth is full of. And as long as it remains theoretical, there is no risk involved.
But, if all the stakeholders agree on the concept, what is stopping us from putting words into action? What are we waiting for to concretise a real estate project?
In short, I am eager to receive your reactions. To read your reflections and counter-proposals. Don't hold back. Please remain polite though.
This blog was mainly about standing up for the tenants of Brussels. The next blog by Whatt will be about the desired profile of Brussels' landlords.
Want to stay up to date?
At the start of my new blogging career, I still need to find the right rhythm. The right frequency of the blogs is unclear at this moment. If you want to be informed of the publication of new blogs by email, be sure to register. The larger the blog audience, the more fun!
Inspiration and information sources
(1) More info about this postgraduate program: https://feb.kuleuven.be/levenslang-leren/cooperatief_ondernemen
(2) Professor Bart Van Looy/ KU Leuven: https://www.kuleuven.be/wieiswie/en/person/00014261
(3) Innovation and Scaling for Impact. How Effective Social Enterprises Do It. Christian Seelos and Johanna Mair, Stanford University Press, 2017.
(4) Learn more about the Aravind organisation? See here: https://aravind.org/our-story/
(5) BISA = Brussels Institute for Statistics and Analysis. https://bisa.brussels/themas/ruimtelijke-ordening-en-vastgoed/residentiele-en-niet-residentiele-gebouwenparken
(7) Well-being Barometer, Brussels Poverty Report 2020, publication of the Brussels Observatory for Health and Well-being.