CLUJ-NAPOCA
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T o w a r d s a H o u s i n g S t r a t e g y
March 4, 2021 This Presentation
Content Key Findings of a Housing sector assessment conducted by WB in 2020-21 for Cluj-Napoca Municipality to inform forthcoming strategy on housing. 0. Context
97% of Cluj residents are satisfied that they live in Cluj (highest score among surveyed cities)
75% of Cluj residents, however, say that it is difficult to find a home at a reasonable price in Cluj (lowest score among surveyed cities) 0. Context
Constrained urban expansion, largely on the east-west corridor, due to difficult terrain and landslide areas. 0. Context
Incomplete digital cadastre, which does not allow the efficient functioning of the land and real estate markets. 0. Context
Updated General Urban Plan, but cumbersome new building permit procedures, with a negative impact on the real estate market - potentially leading to higher real estate prices and rents and an increase in the number of housing units built without building permits. 1. Spatial and Demographic Trends
Population . Gradual population increase in Cluj county, from 707,647 in 2008 to 732,267 in 2019 (left) . 44% of the total population domiciled in Cluj County lives in Cluj-Napoca . 10% of county’s population concentrated in: Florești, Apahida, Baciu, Chinteni, Ciurila, Feleacu . Of the population domiciled in Cluj-Napoca, 2,700 live in Floresti; 500 each in Baciu and Apahida . Cluj-Napoca is the only locality in the county undergoing a net positive balance of migration (right) 1. Spatial and Demographic Trends
Age and dependency (2019) . most communes surrounding Cluj-Napoca have the highest number of children (< 18 years) (left) . working age (18-64 years) people represents 60-70% of the total population (right) . ratio of the elderly population and the working age population: 25:100 in urban areas, and 32:100 in rural areas . Ratio of vulnerable/elderly/children versus working age population: 57:100 in urban areas, and 42:100 in rural areas 1. Spatial and Demographic Trends
Spatial development . boom in real estate development – including housing – on (much cheaper) land in the peripheral areas of Cluj-Napoca municipality, particularly Floresti, Baciu, and Apahida . largely unplanned/ fragmented, with inadequate infrastructure and social amenities 2. Housing Stock
Age of buildings: . ~70% buildings in Cluj County built before 2000 . Urbanized areas are dominated by newer multifamily housing stock 2. Housing Stock
Large share of people in CNMA living in multifamily buildings: 75% in Cluj-Napoca, 52% in Floresti 2. Housing Stock
High vacancy: . Holiday homes in mountain areas with well-developed tourism industry: Beliș (59%), Băișoara in Mărgău village (56%), and Mărișel (50%). . Villages that are depopulated or with large aging population: Recea-Cristur (38%), Borșa (44%), Cornești (36%).
. No data available for much of the county 3. Housing Market Dynamics
Fast growing housing market in CNMA: 31% in Apahida, 25% in Baciu, 132% in Floresti.
% increase in CNMA housing appears significantly higher than the official population increase, BUT:
. Actual number of residents likely higher due to large number of students . Household size is changing (smaller size but larger number of households) . Housing for speculation/ investment purposes often not “available” . Short-term rental opportunities (AirBnB) limit longer term rental housing stock 3. Housing Market Dynamics Housing completions: . 95-98% of the new houses built annually in Cluj County are in CNMA . In 2018, Cluj-Napoca registered 4,169 new units (55% of total new units built in the county that year), followed by Floresti commune (27%), Baciu (6.6%), and Apahida (5.2%) 3. Housing Market Dynamics
Housing Finance: . % homeowners with mortgages: unknown . Interest rates: 4.51% and 7.8% . Debt-to-income (DTI) ratio is 40%; 45% for first time buyers
. Steady increase in transactions for houses/apartments, both more than doubling between 2013 and 2018
. Larger percentage of buyers – nearly a third of the total – financed their purchases with bank loans in 2018, but 80% of the value of transactions was from own financing
. 85% of total value of transactions by individuals in 2019 financed from own sources; 95% of value of housing transactions by institutions/ legal entities financed by banks o average price/sq.mt. for apartments financed from own sources 1,330 EUR / sq.mt., 1.4% lower than those financed by a bank (1,349 EUR/sq.mt.): underreporting of sale price? 4. Housing for Marginalized and Vulnerable Groups
Informal settlements (2011 Census):
. >10% population lacked electricity and faced overcrowding or housing insecurity . 3,660 people lived in marginalized areas, of which 1,296 were children . five urban marginalized areas in Cluj- Napoca, with 1,040 housing units . 37% of people in marginalized areas self- identify as Roma, which is the highest among all cities in Romania with over 200K inhabitants . lack of ID cards/birth certificates due to lack of proof of address presents difficulties when registering children in school, getting employment or signing up for utilities 4. Housing for Marginalized and Vulnerable Groups
Government Assistance in the housing sector
Public housing
. Share of publicly-owned housing units: 30% in 1990 to 1.78% current . ANL housing being sold to sitting tenants, further depleting publicly owned housing . Of the 1,481 publicly owned housing units, o 174 youth housing o 625 social housing o 624 state funded housing o 29 units for public admin. employees o 29 necessity housing 4. Housing for Marginalized and Vulnerable Groups Government Assistance in the housing sector
. Many located in the city center, but in degraded condition . Supposed to be a 5-year rental contract, but very low turnover in practice (in case of death or eviction) . on average, about 12-15 social housing units become available annually: very low compared to eligible applications (300-400/ year). As a result, only 2-3% receive housing (see table below). 4. Housing for Marginalized and Vulnerable Groups
Government Assistance in the housing sector
Rental vouchers
. Introduced in 2018 . maximum amount is 1,400 Ron (approx. EUR 270) per month for a period of 3 years . 2018 and 2019, Cluj-Napoca City Hall has provided 127 rental vouchers . Landlords do not like to rent to households with children or to ethnic minorities
Heating vouchers
. 1082 RON for single persons or 786 RON/ person in a family connected to the district heating system, or 750 RON/ person if the heating source is natural gas, electricity or solid fuels 5. House Prices
. Cluj-Napoca the most expensive city in Romania – both for purchase @ EUR 1,760/ sq.mt. (right) and for rent @ EUR 410/ month (bottom) for 2-room house 5. House Prices
Purchase price: Between 2013 and 2019, there has been a 66% increase in the house price average per square meter in Cluj-Napoca, Baciu and Floresti.
2019 average prices per sq.mt. 2019 average prices of studio apartments per sq.mt. 5. House Prices
Rental price: The overall average was EUR 250 in 2020, with the most expensive area being Zorilor (EUR 508), and the cheapest being Fanete (EUR 187)
Average rent (euro / month) (2020) 5. House Prices
Land market: . Price varies by location, availability, infrastructure, and degree of urbanization. . Land in Baciu cost about 1/12th, and that in Iris Average selling price per square meter (EUR/ sq.mt.) of land (2019) or Floresti is nearly 1/7th that in Cluj-Napoca city center. In areas of high investment interest like Mănăștur or Borhanci, the values remain high despite the lack of infrastructure. 5. Affordability
Illustration: In order to buy an “average” price studio unit (EUR 51,213) in Cluj-Napoca with a 15-year loan, the borrower must have a gross monthly income of EUR 1,277 or a net monthly income of EUR 894, and savings of at least EUR 12,803 to cover the down- payment (DP) and transaction costs (TC). Debt-to-income ratio is assumed to be 40%, with zero current outstanding debt. 5. Affordability
Illustration: Affordability for an “average” price 1-BR in Cluj-Napoca versus the four neighboring communes. House prices are significantly lower in the communes, the income required to qualify for loans to buy these homes is significantly lower. This may explain why many people in recent years opted to move to the surrounding communes. 6. Income
By Cluj County official salary figures, much of the “average priced” housing appears to be affordable for most households. But even considering other (more optimistic ) sources of income online, it looks difficult for an average income earner to buy anything more than a studio with a single salary.
As a result, any households living in overcrowded conditions, or young people living with parents… Summing up… Cluj-Napoca & the Metropolitan Area
Relatively low population growth in Cluj-Napoca but not declining, unlike other urban areas in Romania and Cluj County. CNMA is still relatively young, with strong attraction and retention potential (universities, job opportunities). City of high-skill/ intensive services, high education levels
✘ Remuneration scales relatively high, but so is the cost of living ✘ Topographic constraints, speculation, vacancy/underutilization: constrained housing supply ✘ Old multifamily buildings: inadequate maintenance, weak financial/ technical capacity of HOAs ✘ High private ownership of housing stock (97.9% in 2017), inadequate public housing ✘ Largely informal rental market ✘ Lack of comprehensive city-level database (household characteristics, income distribution, cost of living etc.): Inability to assess housing demand or affordability As a result,
Urban planning and infrastructure provision lagging behind housing development, and public assets under-utilized: Sprawl, fragmented development, inadequate infrastructure and social services, poor quality of life in new housing developments in CNMA
Inadequate affordable market-based housing: Many “average income” households with dependents cannot afford to live in Cluj-Napoca
Inadequate subsidized housing for poor and marginalized population groups: Overcrowding, informality, and homelessness is becoming more prevalent The good news…..
CLUJ-NAPOCA IS THE FIRST CITY IN ROMANIA TO UNDERTAKE THE DEVELOPMENT OF A HOUSING STRATEGY… Envisioning a functional housing eco-system Role of the public and the private sectors
PRIVATE SECTOR: Q5 Individual houses, flats| Conventional Mortgages
Q4 PUBLIC-PRIVATE PUBLIC INTERVENTIONS TO ASSISTED MARKET ADDRESS MARKET FAILURE/ SOLUTIONS: NEGATIVE EXTERNALITIES:
Q3 More ‘affordable’ (legal and regulatory reform | housing (rental and energy efficiency, seismic purchase) retrofitting etc.) Q2
PUBLIC SECTOR: Q1 More social housing (for rental and ownership), urban upgrading | cash grants, rental vouchers, technical assistance Addressing demand and supply in an enabling environment
Adequate income levels
Demand i Efficient capital .e. How to improve access Strong financial Effective and to affordable housing markets institutions affordable Affordable and (long-term local (mortgage mortgage structured currency origination capacity products rental markets and risk appetite) financing) Supply Professional and quality developers i.e. How to improve Affordable building materials and efficient markets efficient delivery of affordable housing Efficient land Adequate basic Flexible planning and administration infrastructure and sustainable building systems services codes
Enabling Enabling Environment (Upstream) Environment • Stable macro economic environment, housing data/analytics • Regulation and government support e.g. smart subsidies, guarantees etc. THANK YOU