Housing Ministers Meeting (2010) defines rehabilitation as âthe group of ... or group of buildings, in order to meet the ... As this author claims âthe vicious circle.
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The role of public administration in fostering urban housing rehabilitation
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Carlos Oliveira Cruz1 and Jorge de Brito2 1
Assistant Professor at the Civil Engineering, Architecture and Georresources Department of Instituto
Superior Técnico, University of Lisbon, Portugal, and ICIST Researcher. 2
Full Professor at the Civil Engineering, Architecture and Georresources Department of Instituto
Superior Técnico, University of Lisbon, Portugal, and ICIST Researcher.
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Abstract
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Urban rehabilitation has long been a major concern for academics, practitioners and
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the Public Authorities. City centers’ “decline cycle” in many countries, particularly in
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Europe and the US, has involved deteriorating conditions in housing, which has led to
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a decrease in the population, moving towards suburban areas, in a well-known phe-
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nomenon - urban sprawl. Rehabilitation has found difficulties in succeeding within a
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full-liberalized market, and usually requires public intervention, at different levels, in
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order to stimulate the renewal of housing, particularly in historical city centers. This
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paper reflects on the roles of the Public Administration, and its different levels. It lev-
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erages the main conclusions on the Portuguese experience, whose lessons may be
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valuable to other countries.
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Keywords: urban rehabilitation; maintenance; urban politics; urban planning; strategies.
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1. Introduction
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Urban rehabilitation has been a major concern over the last two decades, particularly
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in Europe, where most city centers have a large number of old buildings and districts.
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Rehabilitation is a crosscutting activity that requires a deep commitment and in-
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volvement of several stakeholders (Mayer et al., 2005). This paper addresses the par-
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ticular role of public authorities in developing a more effective and efficient urban
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and housing rehabilitation, basing the main conclusions on the Portuguese case. The
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Housing Ministers Meeting (2010) defines rehabilitation as “the group of interven-
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tions needed to improve a building’s structural conditions, its energy performance,
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environmental protection, use of renewable energies, and architectural aspects, and
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to guarantee its safety and weather tightness.”
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Rehabilitation in this paper means all actions that will lead to a full recovery and ben-
1
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eficiation of an existing building (including physical intervention in the building and
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surrounding infrastructure, financing, etc.), or group of buildings, in order to meet the
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functional requirements, which legally establish minimum quality levels. Most coun-
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tries have legislation establishing functional requirements for housing, e.g., thermal
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and acoustic comfort, and minimum values for areas, just to give some examples,
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which need to be addressed when buildings are rehabilitated Nevertheless, when dis-
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cussing “urban rehabilitation”, these actions are not just the specific actions on a
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building, rather they are a policy towards an intervention in an urban area, with vary-
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ing dimensions, from a small group of buildings to a large district with thousands of
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inhabitants (Cameron, 2003). Therefore, rehabilitation policies can include complex
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financing mechanisms, and changes in the legal context.
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Urban rehabilitation is generally seen as part of a larger policy to regulate and support
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the supply of housing (Andersen, 1995), but it is also seen as part of an effort to pre-
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serve the city centers. The decline of city centers is commonly associated with the
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loss of residential areas and, therefore, by providing housing with certain levels of
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quality (and price), it is possible to keep the residential function of city centers.
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Why is the “free market” unable to provide answers to rehabilitation?
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There are several reasons to explain why the real estate market does not provide an-
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swers to urban rehabilitation, and why urban rehabilitation is not a market functioning
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on a stand-alone basis (Davis and Whinston, 1961), usually requiring public interven-
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tion (Clark, 1968). First, urban rehabilitation is affected by major externalities. This
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means that the value of a dwelling depends not only on its quality but also on the quali-
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ty levels of other buildings in the neighborhood. An investor that decides to invest in
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rehabilitating a building may not benefit entirely from the investment if the buildings in
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the neighborhood are not rehabilitated (Weber, 2002). In fact, any investment in that
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building will benefit more the owners of the surrounding buildings that do not invest,
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but benefit in terms of image from being close to a rehabilitated building.
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Secondly, the decline of urban centers is a cycle that, once initiated, does not end without
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external intervention. Once the buildings start to deteriorate, which in the case of Portugal
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resulted essentially from rent control policies and consequent lack of investment by own-
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ers, demand decreases, investments are smaller, physical condition decays, quality is low-
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er, and again, demand lowers (Andersen, 1995). As this author claims “the vicious circle
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consists of the interaction of three factors: the characteristics of the residents; the eco2
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nomic conditions of the property; and the physical conditions of the dwellings. All three
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factors are changing simultaneously because they affect each other”.
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There is a permanent expectation of owners towards public investment that will revi-
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talize the area, e.g. a new green space, a new metro line, or a new commercial area.
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These expectations, often created before political elections, lead to a lethargic attitude
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form owners. Again, they benefit more when the investment is made by others, own-
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ers or public authorities.
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Why is it important to rehabilitate urban centers?
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The paradigm of concentration within urban areas has long stood as an unquestionable
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assumption. Most urban planners and sociologists have demonstrated that, over the years,
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population living in urban areas has increased. In the beginning of the XX century around
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13% of the population lived in urban areas, whereas in 2010 was more 50%. Many stud-
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ies claim that around 2050 almost 70% of the population will live in urban areas.
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The question is: do cities have the ability to grow geographically in order to accommo-
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date such increase in demand? Although many cities can increase in an urban sprawl
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model, most of the cities in the developed world do not have this ability, due to land
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availability reasons. Furthermore, there are sustainability issues. To expand beyond
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current geographical limits will mean overloading the roads, thus requiring more travel
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by car. Urban policies point the opposite way, i.e. to increase the use of public transport
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and decrease the use of private cars. So, the argument is that rehabilitation is not merely
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an option; it is rather a crucial action in order to keep the cities healthy and alive and,
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simultaneously, cope with the increasing demand (Lee and Chan, 2008).
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City centers can also be seen as an investment opportunity, through the well-known
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“rent-gap” theory (Smith, 1991; Smith, 2002). This theory argues that with lower
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property prices more investment opportunities can arise, giving birth, for example, to
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the gentrification process (see more in Rose, 1984).
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Why is it necessary government intervention?
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Rehabilitation should be seen as part of a general housing and urban policy, but it is
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also linked to cultural policies, as argued by Garcia (2004). This is a typical govern-
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mental function, not only to the local governments, but also to federal and central
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governments. Local governments are usually more able to understand the problems
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and solutions for urban rehabilitation, and some authors have argued that the central 3
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and federal response to urban problems can be unrelated with the actual problems and
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needs (Dye and Hurley, 1978). Urban rehabilitation could be, and should be, coordi-
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nated with general housing policies such as solving the problems with slums and other
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inappropriate housing. Simultaneously, it is a crucial element in any policy regarding
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the preservation of historical centers and districts (Mohamed and Gammaz, 2012).
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This is particularly acute in Europe, where most centers of medium and large cities
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have been, or are being, targeted in historic preservation policies.
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The private market has not been entirely capable of providing answers and solutions
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to the problem of urban rehabilitation, particularly in historical heritage city centers.
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The high costs and administrative barriers are among the most common bottlenecks.
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Hastings (1996) claims, using the UK example, that there is a consensus on the need
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of developing multi-sectorial partnerships to address urban rehabilitation, involving
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not just the several levels of the public administration, but also private initiative.
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2. Maintenance and rehabilitation in Portugal
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2.1 Historic perspective of the Lisbon urban development
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The history is Lisbon is closely related with the development of its port. This is a city
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placed in the north Bank of the Tagus River, and is the place from where the Portu-
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guese initiated the discovery period in the XV century. The city provided support to
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the port, and the main activities were devoted to the maritime industry. The city did
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not have any urban formal structure, but was the result of centuries of unplanned de-
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velopment, and therefore, with an irregular, and in some places chaotic, urban layout.
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The 1755 earthquake was a milestone in the history of urban development of Lisbon.
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Pombal Marquis, a former Portuguese ambassador in London, arrived in Lisbon some
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years before the earthquake, and quickly assumed a high political status. Given his
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reforming ideas, the earthquake, which devastated most of the city, provided him with
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the opportunity to define a structured urban form, which is still the main matrix of the
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city today.
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2.2 Challenges for urban building environment
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In the early XX century, the city had severe problems with lack of housing, and major 4
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plans were developed to provide its citizens with proper living conditions. Several
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plans were developed until the late 1990s, where most inadequate housing was eradi-
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cated. This was done by developing several housing quarters in the edge of the city,
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moving the population from the city center to the surrounding areas. This initiated the
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decline of the city center, which has been losing population for several decades.
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Without population, the city center, and its buildings, started suffering from major
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construction pathologies, such as problems with the structural safety, problems in the
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wooden structure (both in claddings and structural) and several damages due to water.
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But this problem is not exclusive to the historical city centers. In fact, several reasons can
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be found to explain the main problems of the urban building environment in Portugal:
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Urban growth is a process that took place relatively late, when compared to
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other European countries, and was the result of migrations from the rural envi-
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ronment to the cities; the urban growth was not planned, but it was a reaction
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to an increase in the population of the metropolitan areas;
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During the period of greater urban growth, the institutional setting was not ad-
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equate; the public administration lacked professional skills, and had little
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know-know on urban planning and development, and on how to prepare ade-
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quate construction standards; the local administration, with direct responsibil-
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ity over the building environment, was not able to supervise, and many illegal
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constructions took place, without any scrutiny from local authorities;
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Furthermore, the economic framework was not favourable, and therefore, the
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market was more dedicated to provide low cost, low quality solutions to a
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population with low income;
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Simultaneously, there was a significant increase in the motorization rate,
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which inevitably led to urban sprawl; this is a phenomenon known in many
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cities throughout the world;
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In the 1970s, the government decided to control all rents, in an attempt to pre-
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vent social inequalities; this caused housing owners to stop investing in reha-
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bilitation, since there was no possibility for them to recover the investment;
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although the short-term effects of this measure might have been positive, the
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long-term effects were extremely negative.
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Most of these reasons are not exclusive to Portugal. For example, “rent control” poli-
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cies were, and in some cases still are, in place in many countries. The same can be
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said of the economic situation or the evolution of the motorization rates that were 5
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definitely a driving force to the re-shaping of metropolitan areas. So, most of the ex-
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ternal problems limiting rehabilitation strategies, can be found in other countries.
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Rent control is often identified as a measure able to deal with decay, since by keeping
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rents in pre-determined intervals it avoids excessively low rents, thus preventing lack
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of investment. The Portuguese experience went exactly the opposite way. The rent
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control established in the mid-1970s, placed a cap on rents, and did not account for
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inflation. A decade later the rents were already excessively low. The impacts of this
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legislation lasted until today.
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All these drivers have led to an urban housing market full of distortions and favouring
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new housing rather than rehabilitation. In the 1990s, credit to buy houses became
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easily accessible, and therefore the market shifted towards providing new housing.
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Nevertheless, during the 2000s this trend decreased. According to data form Eurocon-
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struct, in 2003 the construction of new housing was only 36% of the construction
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market, decreasing to less that 30% in 2009. Rehabilitation was 13.8% in 2003 and
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increased to over 19% in 2009.
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Figure 1 presents the main factors for an ineffective urban housing rehabilitation pro-
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cess. Several vectors can be found, starting in the 1940s with the fact that Portugal did
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not engage in the II world war. Even though from a societal perspective this was a
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positive development, the fact is that many countries underwent major rehabilitation
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efforts after this war (e.g. Germany, France or UK), which was an opportunity to re-
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think cities. Many other social and economic changes impacted the phenomenon of
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urban growth and construction of new housing to accommodate increasing demand
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(e.g. accommodating the population returning from the former Portuguese colonies, in
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the mid-1970s). In the 1990s, credit availability to buy houses, particularly new hous-
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es, shifted the demand towards suburban areas. But all things told the policy of rent
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control was possibly the most critical measure, as mentioned earlier.
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[INSERT FIGURE 1 HERE]
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3. The role of the public administration
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In most countries, the responsibility over rehabilitation is shared between local au-
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thorities and the central government. In countries with regional governments, the re-
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sponsibility at this level of administration is often shared with the central government. 6
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However, there are some exceptions. According to the Housing Ministers Meeting
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(2010), in Malta these competences belong exclusively to the central government
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while in Slovenia, Estonia and Sweden, the local governments are the only authority
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in charge of these affairs.
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3.1 Central administration
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Although the urban rehabilitation process has essentially a local scale, it is heavily
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dependent on macro policies, which are a responsibility of the Central Government.
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Therefore, the intervention of the Central Government is essential in some key areas.
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The Central Administration needs to act on revising the urban renting legislation to allow
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the creation of an effective renting market. This means allowing rents to be upgraded
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when there are investments in the rehabilitation of the buildings. This has a two-fold im-
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pact: on the one hand, it stimulates investors to look at rehabilitation as a business oppor-
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tunity and, on the other hand, it boosts the offer of housing, balancing the market with
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new and refurbished housing. The Central Administration should also foster the private
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initiative in rehabilitation through the use of public-private partnerships to rehabilitate
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large areas of the city (Hastings, 1996). These models have been used in other countries
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(e.g., UK) with interesting results (Hastings, 1996). Nevertheless, these models still re-
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quire a strong intervention from the government. The private sector will not bear the costs
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of administrative barriers, which could result in delays of several years considering the
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size of the investment usually involved in the rehabilitation of city centers.
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A good example of this Public Administration multi-level cooperation is the case of
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the “Vancouver Agreement”. This a collaborative partnership between the Govern-
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ments of Canada, British Columbia and the City of Vancouver, signed in 2000 for a
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five-year period. The coordination between the different levels of the Public Admin-
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istration, developing integrated actions, allowed the revitalization of Vancouver
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Downtown Eastside (Mason, 2007).
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Another barrier to rehabilitation processes has been the legal conflicts between land-
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lords and tenants. The legal system is not as fast and effective as one would desire,
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and therefore the creation of arbitration centers to mediate these conflicts and provide
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fast solutions should also be seen as an important measure.
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At the Central Administration level, it is also crucial to act on the social policy side to
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accelerate the process. The first measure is the revision of the “ghetto” model to pro7
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vide social housing. This model was quite common in European countries and the US,
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over the 1980s and 1990s, but has failed in providing an equitable social structure.
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Sociologists have been arguing that social housing should be inclusive, meaning it
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should stimulate mix solutions with different social classes within the same geograph-
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ical area (Kleinhans, 2004). Considering the decrease in the population in city centers,
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this could provide an opportunity to boost the gentrification process (Bailey and Rob-
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ertson, 1997). The gentrification process is characterized by a movement of upper and
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middle-class population to deteriorated city centers. This could be positive, but should
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be carefully monitored to prevent making city centers into exclusive “high value”
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properties, only affordable to a very wealthy few.
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At another level, it is necessary to revitalize the entire urban center, providing these
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areas with the adequate infrastructure level (e.g. parking, schools, or medical facili-
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ties) in order to create livable conditions for the residents. No matter how significant
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the improvements in the buildings might be, if there are no adequate infrastructures to
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support the residential activity, then it is not possible to attract new inhabitants.
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3.2 Local administration
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The Local Administration plays a central role in the rehabilitation of city centers.
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First, it is their responsibility to provide the necessary permits to authorize the neces-
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sary construction works. And here lies an important bottleneck of the process. Reha-
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bilitation can be an extremely bureaucratic process. The complexity of the process,
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and the temporal length to acquire the necessary permits (in some cases, it can be sev-
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eral years), can jeopardize any private initiative towards rehabilitation.
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Therefore, it is crucial to develop “fast track” alternatives to traditional authorization
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processes, in order to guarantee a timely response, making the public administration a
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player in transforming cities and not a problem, as it frequently is. Formally, these
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“fast track” routes have been enabled by the existing legislation (e.g. Portugal) but
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few successful examples can be found. The success of these actions is closely de-
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pendent on strong political commitment, since they will involve a strong involvement
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of different departments among the local public administration. It is relatively easy for
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the process to be “stopped” due to technicalities.
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In the case of Lisbon, the Municipality has created a public company, with the pur-
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pose of providing housing for young people in the city center at affordable prices. 8
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This strategy had allowed delivering over 8,000 houses in the city center, but the
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strategy of the company was not so much rehabilitation, but new construction. Again,
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the focus was much more on providing new houses at affordable prices, rather than
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rehabilitating existing ones.
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4. Conclusion
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As Schall (1967) claims, urban renewal is an essential task that will directly impact
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the economic efficiency of cities and countries. This problem has been affecting most
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cities of Europe and USA and, although it has been extensively discussed in the litera-
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ture, the professional experience is still far from successful at a global scale.
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The need of cities to deal with increasing demand is unquestionable. Although many
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city centers can be suffering from a decline in population, the overall population of
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the metropolitan areas has been increasing worldwide, and the trend of concentration
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in urban areas will be exist over the next decades.
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The paradigm of new construction is already shifting towards rehabilitation in many
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cities, but, as argued, this process needs to be fostered by active public policies. The
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externalities within the rehabilitation process are an impairment to wait for private
292
market solutions.
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These policies are different across the several levels of the public administration. Alt-
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hough this depends on the administrative, and legal, organization of each country, one
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should expect different actions from the central, federal or local levels. At the central
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and federal levels, the policies should include revise legal practices, at a strategic lev-
297
el, in order to foster the rehabilitation and allow the development of alternative organ-
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izational models. At the local level, the engagement of the public sector should be
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focused on management of processes, particularly in alleviating the administrative
300
burden of most rehabilitation processes. The question of financing is clearly essential,
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and it should be a cross-cutting concern at all the administrative levels.
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In this paper, a reflection on the role of the public authorities in facilitating and
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providing the incentives to foster urban rehabilitation is provided.
304 305
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Main factors for an ineffective urban housing rehabilitation process in Portugal
Portugal did not join World War II
Freezing of all rents
Rural migration
Return of population from the excolonies Low quality of social housing
Low financial resources
1940s
No “post war” reconstruction plan
1950s
Housing renting market became uninteresting
1960s
The urban infrastructure was not ready to meet the growing urban development demand
1970s
“Boom” in the illegal construction market
1970s
Early aging of the construction
1980s
Difficulties in financing rehabilitation and high quality construction
1990s
With easy access to housing credit, the priority became buying a house, rather than renting one
Housing credit became easy
Figure 1 - Main factors for an inefficient urban housing rehabilitation process in Portugal [Source: Adapted from Ferreira (2007)]
