RICS
European housing Review 2005
Chapter three housing in the new EU countries
Housing systems & Comparative standards 2
Housing tenures
One of the most noticeable features of the new accession 
countries’
housing systems is the high levels of owner-occupation. They are far
higher than the old EU15 average of 65% of all dwellings (Figure 3.2).
Only the Czech Republic has a relatively small share of owner-occupation.
Yet, it has a co-operative sector where rights can be bought and sold,
which accounts for 17% of the stock; adding this brings the share
of owner-occupation to 64%, and very close to the old EU15 average.
Owner-occupation has always been the dominant tenure in Southern
Europe. It was also quite significant in the CEE8 prior to the 1990s,
although most urban housing was either of municipal, state or co-operative-owned
rental forms. Tenant rights-to-buy also existed in formal terms from
the 1970s or earlier in a number of countries. With the switch to
market-based economies, however, there was a major shift to the tenure,
with thousands of flats sold off to sitting tenants at knock-down
prices with monthly payments of less than equivalent rent levels.
The speed of the tenure transfer and its precise details, especially
who owns and manages the building in which privatised flats exist,
has varied from country to country. Nevertheless, this shift to owner-occupation
has been undoubtedly the most consistent and dramatic housing policy
in the CEE8 – and in Europe as a whole – for a long time,
and it is not entirely over yet. Bulgaria and Romania have even higher
homeownership rates than the current new EU countries, with virtually
all their housing now in owner-occupation.
The justification for this homeownership-only policy partly was based
on a desire to meet personal aspirations and provide households with
the freedoms of homeownership and a wealth asset. However, given the
previously high levels of public expenditure associated with providing
very low cost housing, the personal ownership option was also virtually
the only possible one in the post-socialist state era. Governments
bereft of surpluses from state enterprises, a weak tax base and requirements
for more transparent public accounting had no means by which to continue
to subsidise so heavily such large proportions of their housing stocks.
Handing them over to tenants was the only politically feasible way
out.
In the main, the privatisations have been successful and popular.
There has been no overwhelming political pressure to turn back the
clock and reintroduce the old systems. Some countries, such as the
Czech Republic, have recently put moratoria on further social housing
sales; though others are still keen to extend the process further.
Nevertheless, several difficulties have arisen.
They include
• Poverty and ownership
Many new owner-occupied households, especially if they are not working,
have very low incomes and, so, have been able to do little with their
properties. Apart from the implications for those households, this
has frozen housing transactions in wide parts of the stock, which
in any case were generally low, and created difficulties in renovating
rundown buildings.
• Institutional gaps
Many of the institutional arrangements associated with developed owner-occupied
housing markets are still embryonic in the CEE8, such as well-defined
property rights, easy marketing and transfer of property*, insurance
in various ways*, good valuation and building quality assessments,
and effective mortgage finance*. Considerable efforts to overcome
these problems have been made, and more are currently underway, as
the country chapters on Hungary and Poland illustrate. However, the
results may take years to become fully embedded into the framework
of housing markets and, unfortunately, as with any machine, all the
interconnected bits have to work for a housing market to function
well. Owner-occupation has come to predominate, therefore, in the
context of only rudimentary markets. It is not clear, however, that
it is easy or quick to make the leap to the institutional structures
typical of Western European and other advanced economies. Of course,
there is no lack of competing advice over which one is supposed to
be the best.
• Constraints on mobility
Paradoxically, private ownership has frozen up mobility, which in
any case was already low. Often most households cannot afford to purchase,
especially if they fall outside of the screening criteria of mortgage
lenders; and many owners cannot find anyone to sell to, and so they
cannot move either. New households, unless they have been lucky in
the job market, may find their housing options extremely limited.
This has significant effects on labour mobility in countries where
structural change and economic flexibility in the face of shocks are
vital for much-needed economic growth.
*1. Poland’s new land registry system, for example, will only
be fully implemented by 2009.
*2. Building defects insurance is often unavailable, for example,
so that new house purchasers may find themselves facing large unrecoverable
costs.
*3. See, for example, M.Ball, Making Housing Markets Work, RICS, and
various World Bank publications on housing.
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