Homeownership and Housing Finance Policy in the Former Soviet Bloc
The inspiration for this book came from two sets of discussions in 1997 and 1998. One set was with housing finance consultants and policy advisers working in the central European states of Hungary, Poland, and the Czech Republic and in the Russian Federation. The other set of discussions was with officials and knowledgeable observers in the countries in southeastern Europe and nations other than Russia in the Commonwealth of Independent States (CIS). These conversations illuminated a disturbing pattern. First, the types of homeownership policies and related housing finance policies the bellwether reform states of central Europe were pursuing appeared to have serious limitations. Second, the countries of southeastern Europe and the CIS outside of Russia generally seemed to be strongly influenced by what their colleagues to the north and west were doing. Because these nations had yet to tackle restructuring homeownership policies beyond implementing mass housing privatization schemes, this influence could be decisive. This book is the result of a careful analysis of the actual situation in the more “policy-advanced” transition countries of the former Soviet bloc. The book confirms that my initial foreboding was justified. By and large, the policies adopted, while a definite improvement over those inherited from pre-transition governments, are nevertheless conspicuously inefficient and wasteful. One hopes that the other countries in the region that will soon address new homeownership and housing finance policies will learn from the mistakes of their neighbors. Among the many persons who contributed thoughtful analysis and insights about developments in central Europe, I particularly want to thank Douglas Diamond, Achim Duebel, Jozsef Hegedus, Michael Lea, and Katie Mark. I thank Harold Katsura for a careful reading of the entire manuscript. Eric Zaretsky provided competent research assistance. EEI Communications did an excellent job editing the manuscript. Finally, but certainly not least, I gratefully acknowledge the support of the Urban Institute in writing this book.
One of the most important results of the economic reforms in the housing sector initiated by the law “On Privatization of Housing in the RSFSR” in July 1991 is a fundamental change in the role played by the federal government in the functioning and development of the housing sector. Critically, the government stopped operating as the principal centralized source of housing construction finance. Simultaneously, an attempt was made to improve targeting of government investments in the housing sector, which, despite acute budget deficits, the state continued to provide for the social policy goals. The intensive restructuring of the housing finance system driven by the critical condition of the state budget was truly unprecedented. Before the economic reform started in 1991, the budget was responsible for almost 80 percent of the total volume of new housing. By mid-1999 the share of developers in state ownership was down to 11.3 percent, with only 8.6 percent of the housing built by developers in federal ownership.