Affordable Housing in Central and Eastern Europe: Identifying and Overcoming Constrains in New Member States

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Affordable Housing in Central and Eastern Europe: Identifying and Overcoming Constrains in New Member States Affordable Housing in Central and Eastern Europe: Identifying and Overcoming Constrains in New Member States Research for the European Housing Partnership (EHP) Program directed by Elena Szolgayova and financed by the Government of the Netherlands Authors: József Hegedüs, Vera Horváth and Eszter Somogyi in cooperation with Anna Bajomi, Éva Gerőházi and Hanna Szemző Experts: Anneli Kahrik (Estonia), Martin Lux (Czech Republik), Veronika Reháková (Slovakia), Richard Sendi (Slovenia) Metropolitan Research Institute 1st of November 2017 1 Table of Content Introduction ............................................................................................................................................. 3 1. The state of the NMS in EU ............................................................................................................. 6 1.1 Gross Domestic Product and demographic trends ................................................................. 7 1.2 Long term and continued demographic decline ..................................................................... 9 1.3 Income inequality and poverty ............................................................................................. 11 2. Convergence and divergence among NMS ................................................................................... 11 2.1 Economic growth ................................................................................................................... 12 2.2 Demography .......................................................................................................................... 13 2.3 Social and regional inequality................................................................................................ 16 2.4 Conclusion: beyond the divergence-convergence dilemma ................................................. 18 3. Housing sector and housing policies in NMS................................................................................. 19 3.1 The periods and the main stream approach to restructure the housing sector ................... 19 3.2 Housing situation in the NMS (in the context of EU) ............................................................ 20 3.3 The development of the housing sector ............................................................................... 23 3.4 Structure of the housing market and housing regimes: submarket matrix – combination of the tenure and housing provision approach ..................................................................................... 32 4. Housing affordability ..................................................................................................................... 36 4.1 Definitions of affordability .................................................................................................... 36 4.2 Affordability in a volatile economy and housing market ...................................................... 37 4.3 Two types of housing poverty in NMS .................................................................................. 40 4.4 Affordability issue in the NMS – statistical evidence ............................................................ 42 4.5 Housing affordability in a dynamic approach ........................................................................ 45 4.6 Criteria to evaluate the social and affordable housing programs ......................................... 48 4.7 Critical overview of the programs ......................................................................................... 52 5. Recommendations......................................................................................................................... 62 5.1 Expansion of the social rental sector .................................................................................... 65 5.2 Using the private rental for social use ................................................................................... 65 5.3 Affordable home ownership programs ................................................................................. 66 5.4 Supporting housing renovation ............................................................................................. 67 Appendix: Case studies of the affordable housing programs in the NMS ............................................ 67 A1. State/public integrated public rental – municipal/state ....................................................... 68 A2. State/public integrated public rental – mixed structure ....................................................... 75 A3. State/public integrated private rental................................................................................... 79 A4. State integrated owner-occupied – new construction.......................................................... 82 A5. State integrated owner-occupied – renovation of existing housing units ............................ 83 A6. Housing policy initiatives. The governance of housing ......................................................... 85 Notes: Data source of the indicators ..................................................................................................... 88 Bibliography ........................................................................................................................................... 89 List of Tables .......................................................................................................................................... 92 List of Figures ......................................................................................................................................... 92 2 Introduction The European Housing Partnership (EHP) is committed to investment in affordable housing in Europe through identifying constraints and bottlenecks in terms of access to housing and long term affordability, as well as through examining and promoting good practices and innovative solutions in the sector. Metropolitan Research Institute (MRI) was invited by EHP to carry out research for the Housing Policy working group about the Central and East European experience of these issues, namely in the eleven new Central and East European EU member states (Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia). The research to support EHP in developing its Action Plan must pay special attention to the new EU member states (NMS) because of the historical particularities of Central and East European (CEE) post-socialist countries. The current study draws from MRI’s existing research1, and used the input of four in-country experts: Anneli Kährik (Estonia), Martin Lux (Czech Republic), Veronika Reháková (Slovakia) and Richard Sendi (Slovenia). Affordable housing is one of the most widespread social aims of the housing policies in Europe. Housing affordability has come to the forefront of housing policy research in the past two decades for a number of reasons. In our approach the starting point of analysis is the dual role of housing as both consumption good and investment (savings) good, which makes the housing market volatile – often beyond average households’ ability to adapt to rapid market shifts. The continued, albeit territorially diversified, increase of housing costs (price and rent level) resulted in worsening overall affordability. This is partly explained by the so-called ‘house price disease’: while the production cost of most consumption goods has been reduced by technological improvement and increased efficiency, the production cost of housing remains stable, as a result of which housing costs take up an increasingly large share of households’ consumption baskets. In parallel, labor markets have become more flexible, which makes them more efficient at the cost of employment security: the legal protection of employees has become weaker to permit this greater flexibility and efficiency. Due to this, households face increased risks even in more developed (higher income) societies. These phenomena emerge more pronouncedly so in new EU member states compared to the EU-15 countries (EU members before 2004) due to a number of factors, ranging from an already weaker level of incomes and affordability, lower quality housing stocks, and the chronic lack of subsidized housing. The current study discusses the specific situation of new member states in light of the macro level developments of the recent years. The social consequences of worsening housing affordability stem from households’ efforts to adapt to their changing possibilities. Persons and families affected by the financial constraints of growing housing costs either have to restructure their household budget, which may result in a very restricted consumption of non-housing goods (culture, recreation, transport, food and non-alcoholic beverages etc.); or are forced to change their housing situation, and move to a lower position on the housing ladder (to more a crowded or overcrowded, low quality or substandard dwelling, or to an affordable but remote location, cut away from residential services and good employment opportunities). Moreover, as both labor and housing markets are becoming increasingly volatile, under certain conditions the situation of a household may change drastically in a short timeframe. 1 Hegedüs and Horváth (2015); Hegedüs, Elsinga, and Horváth (2016), Hegedüs (2017a) 3 Housing and labor market institutions’ (policy measures and organizations) ability to neutralize market stress effects depends on
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