7.1. Short description: context

Institutional arrangement for housing policy at the local level, after the political turmoil in 1990, has been changed profoundly. Housing policy as a clear responsibility of different levels of state administration helping people to meet housing needs has disappeared. In that time, they were responsibility of local administration to sell public housing stock to setting tenants. From that privatisation of public housing stock, part of fund should be used for investment in social housing. City of Varaždin was one of the first in the country with the professional capacity to implement this policy measure of social housing construction.

From that time, the city has been recognised as active stakeholder in housing policy looking for innovative solutions and being open to learn from foreign experience. The Housing cooperative, as a non-profit organisation, existed in Varaždin in the beginning of 1990s with the remit of helping people to buy their first homes. A stable partnership with the city was of crucial importance for the success of this housing cooperative. In 1993, the government stopped tax incentives for housing cooperatives as non-profit organisations and it was the last part of the dismantling process in the field of housing.

During the 1990s, technical assistance offered in the development of non-profit housing organisations from western countries has been seen as a direction of modernisation of housing policy. Lack of political will and expectations that the market will resolve all housing problems were big obstacles to accept offered modernisation of institutional arrangement in the field of housing. However, also important for this innovation was that several professionals in the country learned about the importance of non-profit organisations and that concept has been part of the professional knowledge on housing policy.

The department of city administration in Varaždin, which deals with urbanisation and housing issues, was very responsive, active and open for the implementation of new initiatives. In the 1990s, they developed and implemented housing programmes for victims of the war. Also, from the very beginning, they became one of the best partners in the implementation of the POS housing programme, which started as a top-down and centralised programme helping people from younger generations to buy their first flat under favourable conditions. The programme is open for social rental programmes, but initiative should come from local authorities.

From the very beginning, the centralised POS programme has been exposed to serious criticism in terms of efficiency, effectiveness and requests for implementation of subsidiarity principle (Bežovan 2008; Tepuš 2005). The government, faced with operational issues on the local level, changed the legislation for implementation of the POS housing programme and recommended the concept of setting up of local non-profit housing organisations at the city level. As a result of professional legacy from previous times, one of the first such organisations in the country was been created in the city of Varaždin 2004 under the name “Gradski stanovi”¹¹ (City flats). Here, in fact, circumstances of crisis of top-down programme implementation provided the opportunity for innovation and mobilisation of local resources and for putting housing on the local agenda. A non-profit organisation is in position to assess housing needs of different populations and to make a plan for housing investment.

The recent financial crisis also influenced the implementation of this programme, and there were more housing units waiting for the first buyers but the obstacles for them were financial capacity to get loans from the banks. In such situations local government, being aware of crisis of local housing market, with about 200 newly built housing units unsold, provided legislation and created the programme of public housing renting. Therefore, unsold housing units from the POS programme are available for renting. In this case, crisis on the housing market opened the space and provide legitimacy for social innovation.

From other side, the supply of private rental flats, mostly “black” market, are in hands of local politicians and well-off families. These owners were very strong opposition to the programme of public rental housing construction.

Related to the context, the crucial fact for emergence and development of this innovation is the level of local social capital, visible level of trust of the professional capacity of people in non-profit organisations, which contributed to the creation of fertile soil for social change.

7.2. Conceptions and ways of addressing users

Three types of user are evident here and they have benefits from non-profit organisation. The largest numbers are homeowners, the majority of them are first buyers from young generation, and their benefits are evident in favourable condition: control level of housing prices, decent housing with good location and affordable housing loans.

Groups of vulnerable families from social renting programmes received decent housing through competing procedures on the waiting list. As it was started before in the assessment of social housing needs, more and more families are forced to look for this solution because of the economic crisis. This part of the programme inside the non-profit organisation is a real challenge in different ways. These housing units are owned by the city and the non-profit organisation is responsible for management and maintenance. Also, there is a problem regarding segregation of these social housing blocks. The non-profit organisation here is in charge to control tenants as users than to help their integration in the community. The low level of rent in social renting housing is under the control of the government, and is critical for the sustainability of this tenure; thus, for the larger impact of this innovation.

The new group of users, and this is the core part of the social innovation in this organisation, are tenants in the public rental programme. This programme is entitled to young households, with more children and who are sub-tenants on the non-regulated private rental market or living together with wider family but in unfavourable housing conditions. These families, because of unviable housing situations, are in fact prototype socially excluded peoples. They cannot afford housing loans to buy decent housing and are not eligible for social rental housing. In this innovation, users selected via public calls for application, receive a contract for 3 years with the possibility to extend it. They pay less for the rent than on the private rental market and they have very decent, sufficiently large enough flats in newly built neighbourhoods. The intention of this programme is to sell flats to tenants and in cases where they decide to buy these units, 80 per cent of the rent paid in the first year, 60 per cent in the second and 40 per cent in the third year will be calculated against the price of the flat.

In the concept of development of this non-profit organisation, tenants in the pubic rental programme are much more respected and they are stakeholders with a vested interest to contribute social capital for future development of this organisation. It should be a benefit of this innovation and firm basis for future development.

An interviewed user of this programme has a family of three members and before they were sub-tenants with in an old, badly maintained flat on the eighth floor. Housing costs were very high, more than 30 per cent of the family’s income, and because of district heating provision, they were not in a position to control the costs of heating. Rent was 200 euros per month. Problems repairing the elevator frequently forced them to walk to eighth floor. Now, being a tenant in public rental housing, their quality of life is much better, as a family they are happier and finally, they are in position to plan their future, to invite friends and guests and to enjoy their lives. What is important is that they reduced their housing costs by almost 50 per cent and they can control their heating costs. The flat is 78 m2, they have a garage and space for hobbies in part of the yard and it costs 243 euros per month.

This one family has already developed a strategy to buy a flat in the near future. According to the opinion of this tenant, other neighbours from public renting programmes are very satisfied and are also looking to buy flats.

7.3. Internal organisation and mode of working

The internal organisation of the innovation, in fact, is a response of the non-profit organisation or more appropriately, the leader of the organisation and knowledgeable and skilful person well connected with all respective stakeholders. The process of obtaining the status of users in one of the three programmes is very transparent and all families who are eligible according to the mentioned criteria can apply.

Tenants in public rental programmes agree a contract and make a down payment of two monthly rents as a guaranty to pay rents regularly and to keep the flat in good condition. Such a down payment, as pedagogical measure, is a type of innovation in the local social welfare system¹².

Here social innovation involves different social groups and the practice of the non-profit organisation welfare system is reoriented towards the needs of a diverse and pluralistic population. Empirical evidence on social return, separately in the public rental programme, is clear and it contributes to social integration and social cohesion.

Activities of non-profit organisations are very visible on the local level and organisations receive public recognition. The board of the organisation is composed of local politicians, mainly members of city council, is not so competent and invention on this level is needed. It should be important to involve users in the board and also professionals how are not in politics.

The unstable political situation in the city, resignation of the mayor and recent local elections prevented social marketing and national promotion this innovation.

7.4. Interaction with the local welfare system

This innovation arose in synergy with top-down offer and bottom-up initiatives and with the clear vision and entrepreneur spirit were definitely a very new style of governance for local welfare systems in the country. Innovation is embedded in the local system and, as they serve a more diverse population than other welfare organisations, they have a stronger position in the local welfare system.

Innovation raised the issue of the role and composition of the board of non-profit organisations. Also, at the city level, they recognised increasing needs for housing of the elderly and opened a debate on that topic, offering some new solutions.

In this social innovation, there is evidence of social investment programmes with very viable return and strategic plans of development.

This non-profit organisation is a case of path breaking in fragmented housing policy and it is putting a new style of management on the local agenda, which influences other departments. Non-profit housing organisation here appears as a key stakeholder in the housing market with the mission of mediation between housing needs of certain vulnerable social groups and housing supply made through governmental housing programmes.

In addition, this innovation shows the capacity to become the model for other cities with diffusion capacity. From other side, the economic crisis has influenced the fiscal capacities of Croatian cities and there is less capacity to spread out this innovation.