No. 35
A L B A N I A S E R I E S April 2000
Recent Reforms of the Urban Housing System in Central and East Europe
William C. Thiesenhusen RECENT REFORMS OF THE URBAN HOUSING SYSTEM IN CENTRAL AND EAST EUROPE
by
William C. Thiesenhusen
WORKING PAPER, NO. 35
ALBANIA SERIES
Land Tenure Center University of Wisconsin–Madison
April 2000 ii
William C. Thiesenhusen Professor Emeritus Agricultural and Applied Economics and the Land Tenure Center University of Wisconsin–Madison
All views, interpretations, recommendations, and conclusions expressed in this paper are those of the author and not necessarily those of the supporting or cooperating institutions.
Copyright © 2000 by William C. Thiesenhusen. All rights reserved. Readers may make verbatim copies of this document for noncommercial purposes by any means, provided that this copyright notice appears on all such copies. iii
CONTENTS
Page
1. Introduction 1 Radical process or transition? 2 Organization of Paper 3
2. State socialist model of urban housing 3 Evolving rights under state socialism 4 Case of Albania under state socialism 8
3. Reforms of the housing system: The CEE model revised 11 Retreat of government 11 Why privatize? 11 Steps to reform 12 Restitution and compensation 17 Condominiums or property owner associations 19
4. Strengths and weaknesses of the reform 22 Housing market: Engine for growth? 22 Construction enterprises 23 Social tensions, unequal access 23 Investing in newly purchased property 24
5. Distribution problems 24
6. Pricing trends for housing 27 Housing prices and issues in Bulgaria 29 High-price versus low-price strategy 30
7. Financing urban housing 31 Financing in the FSU and the CEE compared 31 Tasks of a housing finance system and problems of the 1990s 32 Problems with old loans 33 New housing loans 33 Tax incentives 36 Does ownership foster investment? 36
8. Physical city spaces 36
9. Urban infrastructure 39
10. The City’s periphery 39 Socialist housing on the periphery 40 Post-socialist housing on the periphery: Albania example 40 Proposed strategies for city development in Albania 42 iv
11. Mobility of labor 42
12. Property records 44
13. Conclusion 45
Annex: Studying the urban housing market 51
Bibliography 53 RECENT REFORMS OF THE URBAN HOUSING SYSTEM IN CENTRAL AND EAST EUROPE
by
William C. Thiesenhusen1
The urban housing system in most of Central and East Europe (CEE) is undergoing decentralization, deregulation, and privatization together with other basic changes due to the fall of the iron curtain, the demise of the Soviet Union, and the reinstitution of democracy. This literature review shows that while there was a housing shortage in CEE during the period of state socialism, the privatization that has occurred since about 1990 has not yet begun to close the gap. Much of the problem these days is focused on the lack of affordable housing and urban infrastructure, scarcity of funds that would enable building, and difficulties of obtaining what few loans exist. This situation is not likely to improve until the CEE economies begin to grow again (as they have begun to do in countries like Poland, Slovenia, Hungary, Slovakia, and the Czech Republic2); housing shortages seem to be least in the CEE countries whose economies are most robust.
1. INTRODUCTION
In most countries of Central and East Europe the urban housing sector is economically important, accounting for 10 to 20 percent of total economic activity. In view of its implications for land use, energy consumption, waste generation, and water pollution, it also has a significant effect on sustainability of development (UNECE 1998a, p. vii). Thus, a prime development need in CEE, according to the World Bank (1996), is to improve the performance of the urban housing sector for: a) economic reasons: not o