Vouchers for Ukraine: Accelerating Affordable Housing Development

An estimated 1.4 million residential units have been damaged or destroyed during the war in Ukraine. Kyiv-based think tank CEDOS calls this “the biggest housing crisis in Ukraine’s history”. The need for short-, medium-, and long-term affordable housing is immense. As the country explores various options for building housing on a massive scale, Ukrainian cities are looking to European models such as Vienna, Zürich, and Tübingen.

Affordable housing has been an urgent issue for some time in cities across Europe and North America. Many European cities offer excellent examples and have valuable lessons for Ukraine on how to build and manage large volumes of affordable housing. However, while these cases are inspirational and aspirational for the long-term, they represent policies and systems that take a long time to develop and consolidate. They require a a great deal of capacity, and under current wartime conditions, lack of capacity at the local level is a key challenge for Ukraine.

Given the urgency and the level of need, Ukrainian housing authorities, researchers, and policymakers might also want to look at other places and policies, such as the Section 8 voucher program in the United States, to augment their toolbox for building, maintaining, and managing affordable housing.

US Housing Vouchers

While the United States provides limited funding for the construction of public and affordable housing, the nation’s largest investments in it come in the forms of vouchers and tax credits designed to leverage private market investment. Vouchers cover the difference between a low- to moderate-income individual’s capacity to pay (estimated at 30% of income) and the fair-market rent according to government estimates.

Vouchers can take a variety of forms, including housing choice, veterans’, or project-based vouchers. They are tied to quality standards, tenant protections, non-discrimination provisions, and fair-market rental limitations, among other regulatory provisions. They are intended to stimulate the private rental market to produce housing that generates market rents for the owner but are still affordable for individuals.

Project-based vouchers can be an especially powerful financing tool, as they are attached to specific units and buildings for 30+ years or in perpetuity, and represent a line of credit that can back financing for construction or redevelopment projects. In the United States, these vouchers are funded by the federal government and typically administered and distributed by local housing authorities.

US affordable housing policy is not necessarily an example to be adopted for the long term. Specifically, the US program is limited by insufficient funding and sporadic enforcement. Without sufficient funding, voucher programs generate long waiting lists, enable abusive practices, and create numerous obstacles for people who need housing.

Benefits

A voucher program reliant on the private market is vulnerable, and Ukraine should continue to expand its investment into social and public housing models. This, however, will take time, and given Ukraine’s need to quickly develop a significant amount of affordable housing, there are several aspects of a voucher program that might make it a good fit for Ukraine’s practical operational needs and cultural policy preferences.

• Decentralization. The Section 8 voucher program in the United States is funded at the national level but administered locally. Local governments could tailor voucher programs according to specific local needs, capacities, and context.
• Pace. Rather than wait for public authorities to acquire land and build housing, a voucher program activates all existing privately-owned housing stock.
• Spurring private enterprise. A voucher program would activate owners with multiple units (approximately 90 percent of units are privately owned in Ukraine). Moreover, project-based programs can be used to help finance new construction, since a new housing project with a number of vouchers attached to it provides a guaranteed line of credit and facilitates further financing at lower interest rates.

Potential Application in Ukraine

For a voucher program to work, it must be fully funded and well regulated. In light of Ukraine’s budgetary and capacity constraints, we suggest that Kyiv explore one or more pilot voucher programs that can be feasibly funded and regulated.

Specifically, Ukraine could establish a voucher program targeted at internally-displaced persons (IDPs), veterans, spouses of fallen soldiers, or other groups who are particularly vulnerable and in need of affordable housing. This would expand the demand for housing and encourage individual owners of multiple housing units to invest in bringing them online.

A second pilot could take the form of project-based vouchers for buildings and units destroyed by Russian aggression, and could serve as a source of financing to rehabilitate these.

Regulations introduced must be comprehensive, and local and—ideally—central authorities must monitor them. Regulators would need to set maximum rents to avoid abuse and extortion, set policies to ensure that there is no discrimination in the allocation of housing units or vouchers, and set minimum quality standards for space, among other important aspects.

A voucher program could provide an opportunity to support capacity-building at the local level in Ukraine and serve as a mechanism that would model the local-national cooperation that is needed for an effectively decentralized governance system. It could also be deployed as part of Ukraine’s extensive digital infrastructure, which is a huge asset in the recovery and reconstruction efforts, as well as in anti-corruption and transparency efforts such as DREAM.

Conclusion

The World Bank’s recovery and reconstruction needs assessment shows that while most internally displaced persons have secured private accommodation, there is still an enormous need for affordable housing options, particularly for vulnerable groups such as veterans and spouses of fallen soldiers. The Prague Charter, a set of expert recommendations for the postwar urban renewal of Ukraine, also argues for the creation of institutional frameworks that quickly deliver long-term housing solutions. The charter lists “securing the supply of affordable housing” as one of ten key priorities for Ukraine’s postwar recovery. All opportunities and ideas to rapidly increase availability of and access to affordable housing for the short, medium, and long term should be considered. National and local governments in the United States and Ukraine should together explore ways to adapt and adopt effective models.