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Housing Reform in Socialist Economies WDP=125 Public Disclosure Authorized World BankDiscussion Papers Housing Reform Public Disclosure Authorized in Socialist Economies Public Disclosure Authorized Bertrand Renaud Public Disclosure Authorized FILEWOPY Recent World Bank Discussion Papers No. 67 Deregulationof Shipping: What Is to Be LeamedfromChile. Esra Bennathan with Luis Escobar and George Panagakos No. 68 PublicSector Pay and EmploymentReforn: A Review of WorldBank Experience.Barbara Nunberg No. 69 A MultilevelModel of SchoolEffectiveness in a DevelopingCountry. Marlaine E. Lockheed and Nicholas T. Longford No. 70 UserGroups as Producersin PartidpatoryAfforestation Strategies. Michael M. 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Odaet No. 90 ImplementingEducational Policies in Zambia. Paul P. W. Achola No. 91 ImplementingEducational Policies in Zimbabwe.0. E. Maravanyika No. 92 InstitutionalRefonns in SectorAdjustment Operations:The WorldBank's Experience.Samuel Paul No. 93 Assessmentof the PrivateSector: A Case Study and Its MethodologialImplications. Samuel Paul No. 94 Reachingthe Poorthrough Rural PublicEmployment: A Survey of Theoryand Evidence.Martin Ravallion (Continued on the inside back cover.) 12 5 U41World Bank DiscussionPapers Housing Reform in Socialist Economies Bertrand Renaud The WorldBank Washington,D.C. Copyright 0 1991 The International Bank for Reconstruction and Development/THE WORLD BANK 1818 H Street, N.W. Washington,D.C. 20433,U.SA. All rights reserved Manufactured in the United States of America First priniingJune 1991 Discussion Papers present results of country analysisor research that IS cirulated to encourage discussion and comment within the development community. To present these results with the least possible delay, the typescript of this paper has not been prepared in accordance with the procedures appropriate to formal printed texts, and the Wodd Bank accepts no responsibility for errors. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliatedorpnizations, or to members of its Board of Executive Directors or the countries they represent. The Wodd Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. Any maps that accompany the text have been prepared solely for the convenience of readers; the designations and presentation of material in them do not imply the expression of any opinion whatsoever on the part of the Wodd Bank, its affiliats, or its Board or member countries concerning the legal status of any country, territory, city, or area or of the authorities thereof or concermingthe delimitation of its boundaries or its national affiliation. The material in this publication is copyighted. Requests for permission to reproduce portions of it should be sent to Director, Publications Department, at the address shown in the copyright notice above. The World Bank encourages dissmination of its work and will normally give pemcission promptly and, when the reproduction is for noncommercial purposes, without askinga fee. Permission to photocopy portions for classroom use is not required, though notification of such use having been made will be appreciated. The complete backlist of publications from the WooddBank is shown in the annual Indexof Pkbubdons, wlich contains an alphabetical tide list (with fill ordeing information) and indexes of subjects, authors, and counties and regions. The latest edition is availablefree of charge from the Publications SalesUnit, Department F, The World Bank, 1818 H Street, N.W., Wasbington, D.C. 20433, U.SA, or from Publications, The Wodd Bank, 66, avenue d'Iena, 75116 Paris, France. ISSN: 0259-210X Bertrand Renaud is housing nnance adviser in the Infrastructure and Urban Development Department of the World Bank. Library of Congress Cataloging-in-Publication Data Renaud, Bertrand, 1939- Housing reform in socialist economies / Bertrand Renaud. p. cm. -- (World Bank discussion papers ; 125) Summary of the main conclusionsof a seminar held in Washington, D.C. on June 12-13, 1990. ISBN 0-8213-1829-2 1. Housing policy--Communistcountries--Case studies--Congresses. I. Title. II. Series. HD7286.R46 1991 363.5'8'091717--dc2O 91-17959 CIP ABSTRACT This paper summarizesthe main conclusions of the Seminar on Housing Reforms in Socialist Economiesheld in Washington,D.C. on June 12-13, 1990. The seminar was initiated to discuss the transitionfrom socialistsystems, where governmentcontrol and public ownership dominate, to market-basedhousing systems. This transitionto markets is new to everyone, and eight leading questions shaped the agenda: (1) Is there agreement about the ultimate goal of housing reform? (2) How significantis housingreform to overalleconomic reform? (3) Is there a choice between gradual and radical reform in terms of speed and scope? (4) Is there a minimum package of reforms that is generally applicableand should be implementedrapidly? (5) Is there a desirable sequencingof reform in the housing sector, and why? (6) What are the indirect, market-oriented policy instruments necessary to replace past direct administrative interventions by the state? (7) What kinds of new institutions must be created to support and structure housing markets during the transition?and (8) How can the momentumof reforms be preserved and monitored? A significantconsensus emerged at the seminar, and it was agreed that a reform framework based on the proceedings would be prepared to assist individual countries in formulatingtheir reform programs. This framework would also help to assess the World Bank's approach to its operationsin particular countries. The paper consists of two main parts. Part I: The Legacy of Central Planning and Transition Issues for Housing was prepared prior to the seminar and sets the stage for the developmentof a reform framework in three ways. First, it evaluatesthe legacy of Soviet-type central planning and previous reform experiments and describes critical differences between socialist housing systems and market-basedhousing. Then it examines in some detail the complex characteristicsof housing as an economic good, their implicationsfor market-oriented reform, and the redesignof socialhousing policies. Finally, it summarizesprevailing conditions in six major problem areas for managingthe transition to a market-basedsystem. This set of six reform areas is addressedin the frameworkitself. Part I is analyticalrather than operational, and readers familiar with both socialisteconomies and the housing sector may choose to proceed directly to Part Il. Part II: Framework for Housing Reform in SocialistEconomies presents the results of the seminar and provides a concise reference point for developmentof the national reforms accordingto each country's specificconditions. There is broad agreementthat the inefficiencies, distortions,and inequitiesin current housing systemshave created a situationthat is incompatible with a market economy, so that housing reform is indispensableif overall economic reform is to succeed. Taking into account the diversity of macroeconomicconditions and the significant differences in housing conditions faced by socialist countries, the frameworkidentifies priority issues and indicates directions for change in four main functional areas: (1) clarification and adjustmentsof property rights and the scope for privatization of publicly owned housing; (2) reduction and eliminationof distortions in rents, prices, and subsidies; (3) the developmentof soundand viable market-orientedfinance mechanisms
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