Trends and Progress in Housing Reforms in South Eastern Europe
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TRENDS AND PROGRESS IN HOUSING REFORMS IN SOUTH EASTERN EUROPE By Sasha Tsenkova TRENDS AND PROGRESS IN HOUSING REFORMS IN SOUTH EASTERN EUROPE By Sasha Tsenkova With the support of the Council of Europe, the UN-Economic Commission for Europe and the Norwegian Ministry of Foreign Affairs Paris, October 2005 The findings, interpretations, and conclusions expressed here are those of the author and do not necessarily reflect those of the organs of the Council of Europe Development Bank (CEB), who cannot guarantee the accuracy of the data included in the study. The designations employed and the presentation of the material in this paper do not imply the expression of any opinion whatsoever on the part of the CEB concerning the legal status of any country, territory, city of area, or of its authorities, or concerning the delimitation of its frontiers or boundaries. The study is printed in this form to communicate the result of an analytical work with the objective of generating further discussions of the issue. This publication is available free of charge from: Council of Europe Development Bank 55, avenue Kléber F - 75116 Paris www.coebank.org June 2005 ACKNOWLEDGEMENTS This study was commissioned by the Council of Europe Development Bank (CEB) thanks to the support of the Norwegian Ministry of foreign affairs which strongly supports the Council of Europe Development Bank’s activities in South-Eastern Europe. The study was prepared by Professor Sasha Tsenkova from the University of Calgary who has previous experience with the World Bank and the Council of Europe in the area of housing. The Research and Analysis Department (Directorate General for Loans) of the Bank provided analytical and technical support and served as a secretariat for the preparation of this volume. The contribution of colleagues from the Council of Europe and the UN-Economic Commission for Europe was extremely valuable. All countries from South-Eastern Europe actively participated in the discussions that took place within the framework of the Council of Europe Housing Network and the Social Cohesion Initiative (Stability Pact for SEE). Special thanks are addressed to their representatives to the Network. The involvement of the UN-Economic Commission for Europe secretariat was beneficial especially in maintaining coherence with previous analyses carried out within the programme “Country housing profiles”. FOREWORD The way housing systems are designed, managed and financed affects people’s live and livelihoods. Housing is a basic necessity everywhere in the world and a key element of every economy. It is not therefore a surprise that housing reforms are gathering momentum, in particular in South Eastern Europe, a region to which the CEB attaches great importance. What makes for a sustainable housing sector? How do we know whether a housing sector is performing as well as it could? What is specific to housing reforms in South Eastern Europe? These questions are considered by the study commissioned by the Council of Europe Development Bank (CEB) to Professor Sasha Tsenkova which I have the pleasure to introduce. The challenge is to identify the factors that make a difference. The study is the CEB special contribution to the follow up of the first high-level ministerial conference that brought together ministers of housing and finance of countries in South Eastern Europe. This conference was co-organized by the Council of Europe Development Bank and the World Bank and took place on 23- 24 April 2003. In their conclusions1, the Ministers asked the Council of Europe Development Bank to maintain the dialogue on sector issues in the region. They also paid tribute to the work of the Council of Europe and the UN-Economic Commission for Europe in the area of housing policy. This study was prepared in close co-operation with the Council of Europe, the UN-Economic Commission for Europe and the Stability Pact. Countries from the region were closely involved throughout the process. The study pays particular attention to the pattern followed by different countries in the region in reforming their housing sectors and provides an interesting perspective as to the ingredients for successful housing reforms. The study is based on data provided by the countries themselves and gathered during field missions carried out by Professor Tsenkova. I trust that this publication will make a significant contribution to the development of the housing sector in a region that has returned to a stable path of development, and will serve as a framework for sustainable polices and housing investments. But the report also targets a larger audience of specialists and academics active in the field of housing. Finally, this publication reflects the CEB enduring commitment to improving the living conditions in South Eastern Europe. Special attention is given to the situation of vulnerable groups. It is also complimentary to the project work carried out by the Bank in this region which aims at fostering social cohesion and economic development. Further details about the Bank’s involvement in South Eastern Europe, and in particular in the area of housing, are given in the following sections. Raphaël Alomar Governor Council of Europe Development Bank 1 Council of Europe Development Bank and World Bank (2004) : Housing in South Eastern Europe : solving a puzzle of challenges Trends and Progress in Housing Reforms in South Eastern Europe CONTENTS I INTRODUCTION 4 1 OBJECTIVES OF THE REGIONAL STUDY AND APPROACH 4 2 EUROPEAN AND GLOBAL COMMITMENTS TO AFFORDABLE HOUSING 6 3 EVALUATION OF HOUSING SYSTEM PERFORMANCE 7 4EXTERNAL FACTORS INFLUENCING THE PERFORMANCE OF HOUSING SYSTEMS 16 II HOUSING REFORMS IN SOUTH EASTERN EUROPE 25 1MAJOR HOUSING POLICY DEVELOPMENTS:CHALLENGES AND OPPORTUNITIES 25 2 INSTITUTIONAL REFORMS:DEVOLUTION,PRIVATIZATION AND PRIVATE SECTOR GROWTH 32 3REFORMS OF THE LEGAL FRAMEWORK FOR HOUSING 40 4FISCAL AND FINANCIAL INSTRUMENTS TO SUPPORT ACCESS TO AFFORDABLE HOUSING 47 III HOUSING SYSTEMS:PERFORMANCE CHALLENGES 55 1 ASSESSMENT OF HOUSING DISTRIBUTION IN THE REGION 55 2 IMPROVEMENT IN HOUSING QUALITY:REGIONAL CHALLENGES 58 3 TENURE STRUCTURE AND HOUSING CHOICE 64 4 HOUSING INVESTMENT AND NEW HOUSING CONSTRUCTION 68 5 AFFORDABILITY OF HOUSING 72 6 CONCLUDING COMMENTS 76 IV IMPORTANT HOUSING POLICY AREAS 78 1 PRIVATIZATION AND HOUSING MANAGEMENT:ATROUBLED RELATIONSHIP 78 2 PUBLIC RENTAL HOUSING:CHALLENGES AND FUTURE PROSPECTS 88 3 HOUSING AND REFUGEE RELATED ISSUES IN THE REGION 95 4 BRIDGING THE GAP:DEVELOPMENT OF HOUSING FINANCE 105 V CONCLUSION:PROGRESS IN HOUSING IN SOUTH 115 EASTERN EUROPE 1 INTRODUCTION 115 2 EVALUATION OF HOUSING POLICY REFORMS 116 3 EVALUATION OF HOUSING SYSTEM PERFORMANCE 123 REFERENCES ANNEX 1 Trends and Progress in Housing Reforms in South Eastern Europe TABLES Table I-1 Land, population and economic size Table I.2 Major macroeconomic indicators in South Eastern Europe Table I.3 Major demographic indicators in South Eastern Europe Table II-1 Matrix of priority areas for reforms in housing legislation Table II-2 Matrix of housing policy areas in South Eastern Europe Table II-3 Matrix of fiscal housing policy instruments in South Eastern Europe Table III-1 South Eastern Europe: population and total housing stock Table III-2 Selected housing indicators in South Eastern Europe Table III-3 Selected household and housing indicators in South Eastern Europe Table III-4 Differences in tenure structure in cities and countries Table III-5 Housing submarkets in the capital cities in South Eastern Europe Table IV-1 Major determinants of housing management in South Eastern Europe Table IV-2 Major characteristics of public housing in the region Table IV-3 Refugees and displaced persons in need of durable solution, 2005 Table IV-4 Comparative indicators on war damage and reconstruction in Bosnia and Herzegovina Table IV-5 War related damage and reconstruction of housing, 2005 Table IV-6 Banks and mortgage lenders in the region, 2004 Table IV-7 Terms of mortgage lending in the region, 2004. FIGURES Figure I-1 A model for evaluation of policy reforms and housing market performance Figure I-2 Determinants of housing performance Figure I-3 Regional distribution of population and GDP, 2002 Figure I-4 Regional GDP growth, 2000-2003 Figure I-5 Regional trends in inflation, 2000-2003 Figure I.6 Regional trends in population growth, 2000-2003 Figure I-7 Poverty in the region Figure I-8 Urbanization in Europe, 2001 Figure II-1 The privatization of public housing in the region, 1990-2002 Figure II-2 The ladder of policy instruments Figure II-3 Inadequate progress in housing reforms in South Eastern Europe Figure II-4 Housing policy priorities in South Eastern Europe Figure II-5 Major challenges for housing reforms Figure II-6 The housing provision system: major institutions Figure II-7 Subsidized Housing Construction in Croatia, 2001-2003 Figure III-1 Dwellings per 1000 inhabitants, 2002 Figure III-2 Vacancy rates in South Eastern Europe Figure III-3 Dwellings serviced by water and sewer, 2002 Figure III-4 Dwellings serviced by central heating, 2002 Figure III-5 Age characteristics of the housing stock Figure III-6 Ownership of housing in South Eastern Europe, 2002 Figure III-7 Rates of new construction in South Eastern Europe Figure III-8 Rates of private new construction in South Eastern Europe Figure III-9 Income dynamics in selected countries in South Eastern Europe Figure III-10 Housing costs in selected countries in South Eastern Europe 2 Trends and Progress in Housing Reforms