The Affordable Housing Act is about to be introduced. How can a social investment framework help address housing supply needs? […]
The Affordable Housing Act is about to be introduced. How can a social investment framework help address housing supply needs?
In this episode of the Liberal Europe Podcast, Ricardo Silvestre (Movimento Liberal Social) starts a two-part conversation about the upcoming Affordable Housing Act, this time with Marcel Roy, the Secretary General European Association of Public Banks (EAPB), a Brussels-based non-profit organization representing public banks and financial institutions across Europe.
This podcast, as well as previous episodes, is available on SoundCloud, Apple Podcast, Stitcher and Spotify.
The position paper on the need for a social investment framework from EAPB, with the title “Europe needs to mobilize capital for social investments” can be found here.
As mentioned during the conversation, you should also get to know the EAPB Toolbox on Financial Instruments, and the work done by the European Long-Term Investors Association.
You can also follow Marcel on LinkedIn.
This podcast is produced by the European Liberal Forum in collaboration with Movimento Liberal Social and Fundacja Liberté!, with the financial support of the European Parliament. Neither the European Parliament nor the European Liberal Forum are responsible for the content or for any use that be made of.
Ricardo: I’m here with Marcel Roy. Marcel, thank you so much for coming to the podcast.
Marcel: Thank you so much for having us.
Ricardo: It’s great to have you here. Please tell us a little bit what the role of EAPB is, and also the role of public banks in the European economy. For the layperson, sometimes it’s hard to distinguish between commercial banks and public banks.
Marcel: Yes, thank you so much. EAPB is the European Association of Public Banks, federating the interests of public financial institutions throughout Europe. So we represent their interests towards European Parliament, European Commission, Council, but also towards the ECB and other institutions. We have a membership in a total of 30 member organisations, in 17 European member states and two non-EU countries. All in all, we federate about 90 financial institutions. We also have some national associations, like in Germany or in Italy, which federate the public institutions at the national level. All in all, we have roughly a balance sheet total of about 3.4 trillion euros and represent about 15% of the European budget. Now, what is the role of public banks? Mostly public promotional banks. We also have some commercial banks, but we’re mostly federating public promotional institutions. These are quite different from commercial banks that are profit-oriented. Our members, promotional institutions, have a public mission objective. So they really pursue investments that are in the public interest, that are not profit-driven. They have to be profitable, of course, because they’re subject to banking regulations, but they are not maximising profit. Therefore, they are subject to state aid legislation, because everything they do is supported by a public guarantee, and it has to be clearly defined what they can do and what is in the public interest. Because they have the public guarantee, they also have a capacity to go for higher-risk or more long-term investments that private commercial banks would not be able to go for — due to banking regulatory reasons, capital requirements, and other constraints. So here, we can play a constructive role in the European economy, providing funding where the commercial sector would not be able to go.
Ricardo: So how does this connect with the housing sector specifically?
Marcel: We have been the primary channel specifically for the housing sector. This is a very good example. Housing is a long-term, low-return, and high social impact investment field. And that is precisely where private capital, in principle, has more difficulties getting invested. For decades, national and regional promotional banks have been the primary channel through which European financial instruments for housing have actually reached the ground and helped funding at the local, regional, and national level. All in all, this has been recognised by the European Parliament in the resolution of the 10th of March, 2026. In 2023 alone, our members mobilised over 75 billion euros for housing financing. Together with our sister association, ELTI — the Long-Term Investors Association — we have the ambition to provide 375 billion euros in affordable housing all the way to 2029. This shows our commitment and the impact we can have, particularly in the housing sector.
Ricardo: So this is a very interesting explanation. I’m just going to take my advantage here as a podcast host, and please answer this question for me because I was really curious. What is the decision-making? What is the mechanism for the association to know this kind of investment and all this money that has been allocated? How does this work?
Marcel: The decisions for investment, of course, are made at the level of the member organisations — our different national and regional banks. There’s a simple reason for that. The need for housing is very different from one member state to another, even from one region to another. So we have completely different frameworks in terms of national regulation, but also different market realities that have to be addressed very flexibly and adapted to local needs. So the decisions and the analysis of investments are in the hands of our members. What we do as an association is federate — we have an expert working group on housing in which we consult our members and give them a platform to cooperate, exchange best practices, and raise policy issues that we need to bring forward to the European Commission, Parliament and Council. And via this expert working group, our association is involved in the newly created platform and the Housing Alliance. So we have very active involvement of our members in everything being discussed at the European level in order to support affordable housing throughout the EU.
Ricardo: Thank you so much for that explanation. Let’s go a little bit into not only the work you do, but also the report you so kindly sent me — and then I’m going to put it in the show links. That report says that EAPB argues that Europe isn’t primarily having a housing financing problem, but rather a housing finance architecture problem. So there’s a little nuance here. If you had to choose just one reform that would unlock the greatest amount of investment over the next, let’s say, five years, what would it be?
Marcel: Clearly there are many different aspects to a framework. In order to mobilise the funding we need for affordable housing, all different aspects of the regulatory framework have to be addressed. However, there is one very specific one: our members receive a public guarantee. We pursue public mission objectives, which tend to be longer-term, perceived as more risky over the long term. And therefore, that’s where the public guarantee comes in. Public guarantee is a state aid element. The one single most important element in order to be able to structurally support affordable housing going forward is to have the right state aid framework. If you don’t have an exemption option available on how to deal with these guarantees, you would have to make notifications. And notification to DG Competition is a lengthy process — having to wait pending the decision on individual investments or programmes will postpone any investment. Now, we have exemption regulations at European level precisely for that reason. You have the de minimis on one side, but you also have the General Block Exemption Regulation. The General Block Exemption Regulation gives you different sectors for which, under very clearly specified conditions, state support can be considered as non-distorting in the internal market. That’s a very simple rulebook, which is very helpful for our members. It’s very much used in practice already for different sectors. What we’re asking for is to have a clear section on affordable housing under the General Block Exemption Regulation, so that in practice, we can use that to facilitate the rollout of our support for affordable housing. The Commission has been very forthcoming and very fast on the Service of General Interest decision, where we now have the possibility of dealing with state aid and losses for housing companies. But we need, in addition, the General Block Exemption Regulation, because that addresses a different point — the upfront investment and the state aid involved. Once we have that, it’s going to make investments into affordable housing a lot more agile.
Ricardo: Continuing on the same topic, which is how to structurally change the European Union for better results. For decades, housing has been largely treated as a national social policy. However, EAPB frames it also as a competitiveness issue, which is naturally very important and subject of a large discussion in the Brussels bubble. So Marcel, tell us how the housing crisis fundamentally changed the way European economic policy should think about housing. What can we do that is different?
Marcel: I think that in the past, we’ve looked at housing — and especially the activity of our members — very much focused on the social housing aspect. We looked at this in the past exclusively from a purely social investment perspective. But now what the affordable housing segment is addressing is this cliff effect of people moving out of social housing, but not being able to afford housing at affordable market prices. In certain metropolitan areas particularly, but even beyond. Now, why is it a competitiveness issue? We are trying to attract investments in high-tech industries. We’re working on having semiconductor plants or battery gigafactories. This is very high-level investment that we would like to see. But that also has the collateral effect that it pushes up the cost of living, and affordability of housing is compromised in these areas. Berlin, for example, has shown how the cost of living has increased quite substantially over recent years. For competitiveness, you need of course the high-tech investments, but you also need all the infrastructure going along with it. If you want to be a competitive country or region, you need to have functioning social services. You need to have your health services. You need firefighters or other important functions of society. And these people have to be able to find affordable housing in the regions where they work. So you have to look at it holistically. High-tech investments cannot be looked at in isolation. You do need a functioning and performant infrastructure that goes along.
Ricardo: That is such a great point. And sometimes it is forgotten — all that tapestry you just mentioned. It’s not just having factories, but everything around them that industry needs to prosper. When you think about major metropolitan areas, but then all the outskirts — what is called the peri-urban areas — is this something you are also sensitive to regarding investments? Because in a city like Lisbon, where I’m from, to think about affordable housing in the city, it’s out of the question.
Marcel: The case of Lisbon is a very good illustration of how the affordable housing crisis has impacted our economies in recent years. The cost of real estate and housing in Lisbon has skyrocketed, as far as I’m informed. The strength of our members is not to look at it only from a municipal perspective. Our members are the regional development banks or the national development banks. So any solution and approach to affordable housing is going to be more systematic. It is not a solution to look at it only from a single municipality perspective — you have to provide solutions that integrate the hinterland alongside metropolitan areas.
Ricardo: Let’s talk about another need, which you argue in your report: a voluntary social investment framework. This can be comparable to what the taxonomy is for green finance. So let’s project 20 years from now — if this succeeds, how different would the European housing financing ecosystem look?
Marcel: This has been a demand from EAPB for already three or four years. The social investment framework is a key priority in order to channel investments to social investments. We have the taxonomy, we have green bonds — for the green economy. For different reasons, there hasn’t been an equivalent framework proposed for social investments. Green metrics are much easier to determine than social metrics. So on the social framework, you would have to be much more on a principle basis. Our view is that if you want to mobilise funding into the social sector, and notably into the affordable housing sector, you would need to have a framework that allows institutional investors to clearly define what they’re investing in. Here it is important that we highlight the role public promotional banks have in integrating private economic investors. Our members work with the private banking sector and also private equity investors, but they are also issuing bonds on national and international markets on very favourable terms because we have a public guarantee. That allows us to have very good conditions for our bonds, which we can forward to our customers. This is a major and important way of involving the private markets — the bond investors — into turning that money into social investments. In order to do so, you need to have some criteria. These are the lines the social economy entities are working on, promoting such a social investment framework in order to have a clear, predictable and measurable set of criteria that allows you to clearly define investments for the investor. What is really important is that we are insisting such a framework should be voluntary, non-legislative, and lean. These are the lessons we’ve drawn from the taxonomy exercise, which is very detailed, very prescriptive. Here it should be lighter, easier to manage, and more on a principle basis — really based on identifiable principles that would allow an implementation a lot easier for all markets. If we have such a framework, this will allow us to move sufficient investment in the future. The high-level task force on investing in social infrastructure some years back put the gap for needed investments at between 100 and 150 billion euros — on a yearly basis. Cumulatively, that shortfall is 1.5 trillion euros all the way to 2030. We’re doing a lot as public promotional banks, but we’re not going to be able to plug that gap on our own. That’s why we have to fulfil our role as a mobiliser and catalyst for private investment.
Ricardo: I’m wondering here for a second — you just mentioned identifiable principles. Again, for our listeners less familiar with your language, what could identifiable principles for a social investment framework be? Can you give me just one or two examples?
Marcel: International existing frameworks like ESG standards and others that are already recognised at the international level. We can provide you some more information.
Ricardo: Yes, please. I will have a follow-up on this because, again, this is the mechanics we’re very interested in understanding — how this is set. We have a couple more minutes, and I really need to talk to you about calls for simplification and proposed amendments across banking regulations, procurement, taxonomy, state aid, and tax rules. Tell us, how can we explain that this isn’t adding another layer of complexity? I was just asking you about identified principles — how do we make this more streamlined, actually helping reduce all kinds of bureaucracy? Tell us if there’s a tension between these calls for simplification and at the same time having all these readjusted regulations.
Marcel: As I mentioned before, the regulatory framework as a whole — we’ve talked about the state aid aspect, which is key — but there are also other aspects related to banking supervision and regulation, or taxation regulation, or even support instruments at European level. Here, we need to have a coherent framework that does not present an additional layer of complexity, but rather simplifies the existing framework. For example, let us take the point of the CRR. We have now a rule that there’s a 150% risk weight for acquisition, development, and construction exposures for a company. That was calibrated for speculative commercial developers facing the risk that if the building was not yet finished, in the end it might not be sold on the market. 100% is already the cost of the investment. 150% goes way beyond the cost of the investment. So that money — any financial institution would have to set aside — is non-remunerated regulatory capital stock. That’s a cost issue. The higher that own funds requirement is, the more dissuasive it will be for any bank to get involved in funding affordable housing. Of course, it makes sense from a commercial speculative point of view. It has to be seen in the context of the crisis we had at the beginning of the century. However, in our case, we’re looking at a completely different reality. What is being provided in terms of affordable housing — for example by municipal housing companies — we’re looking at an excess of demand on the market. We are nowhere near fulfilling that market demand at the moment. So we’re not at all in a logic of speculative risk or systemic risk coming out of that. What we are saying is that there should be a clear distinction between what is commercially speculative and what is basically addressing affordable housing from a public mission objective. That’s why we are asking to have a much lower own funds requirement to reflect that reality. That’s just one example. Another example is whether affordable housing should fall under the long-term public infrastructure carve-out under the anti-tax avoidance directive. It’s a very technical issue. In the Netherlands, for example, a lot of housing societies fall under that — it’s extremely difficult for them. That is something the Commission has recognised and will address. That’s also what we consider to be very important. Another example is that the cap for the direct loan ceiling under InvestEU for housing is set at 50 percent, where we typically need a much higher ceiling — 65 to 70 percent of CapEx investments refunded by debt. Again, very technical points. All these technical points taken together are important in order to create the right framework conditions for affordable housing to take off. So it’s not creating more complexity — it is tweaking and adapting the framework, trying to eliminate any misalignment between the framework and what is actually needed on the ground.
Ricardo: Fantastic. Marcel, such a substantive conversation. You gave us a really good perspective on the work being done at the European Association of Public Banks, and also the direction we need to track. And if I can add, the urgency of it — this is a discussion topic taking a lot of bandwidth, and people are naturally concerned about the future of housing and affordable housing. But now, please tell us: where can people follow the work done by EAPB? Also, you’re going to send me the report so I can put it on the podcast show notes for people interested in the technical aspect. But tell us, where can people follow you online?Marcel: We have a website at eapb.eu, where you can find all of our policy work and position papers. I also draw your attention to the news section, where we have a lot of information on our members’ activity. It will be very interesting to see concretely what members are funding — affordable housing, cohesion funding, and other areas our members are active in. This really showcases the specificity of the activity of promotional banks. The more dynamic field, of course, is LinkedIn, where we publish on a daily basis all the information about our activities, meetings and events. And finally — this is important — I already mentioned ELTI as a sister association. We are strongly cooperating with them, both on affordable housing but also on the next multi-annual financial framework. We have similar interests and have been speaking with one voice through one position paper on both issues. We have a brochure together with ELTI on affordable housing, which you can also find on our website, with a number of examples of programmes and activities by the members. And finally, EAPB has also published a compendium of different financial instruments. I would like to highlight this because we are strongly advocating in the next MFF for increased use of financial instruments. Financial instruments are loans, guarantees, or any type of financial engineering that allow you to provide very tailor-made support at regional or national level via European programmes — through ECF, but also cohesion funding. In cohesion funding, it will be important because financial instruments will give us the ability to have a lot more leverage of public funding.