HOMEOWNERSHIP AND HOUSING FINANCE POLICY IN THE FORMER SOVIET BLOC COSTLY POPULISM edited by RAYMOND J. STRUYK This is a very thorough and readable analysis of the housing finance situation in the CEE. More than a policy paper, it provides a combination of historical perspective and current, on-the-ground intelligence that will be useful to both practitioners and researchers in housing finance in the region. DEBRA L. ERB, PRESIDENT Societas: International Institute for Real Estate Finance This text makes a major contribution to our understanding of housing finance in transition economies—providing both detailed data which are not available elsewhere and coherent analysis of how governments frame the environment in which housing finance markets develop. CHRISTINE WHITEHEAD Professor in Housing, Department of Economics London School of Economics The Urban Institute Struyk, editor Homeownership and Housing Finance Policy in the Former Soviet Bloc 2100 M Street, N.W. Washington, D.C. 20037 Phone: 202.833.7200 Fax: 202.429.0687 E-Mail: paffairs@ui.urban.org http://www.urban.org Research Reports HOMEOWNERSHIP AND HOUSING FINANCE POLICY IN THE FORMER SOVIET BLOC COSTLY POPULISM edited by RAYMOND J. STRUYK The Urban Institute Copyright © October 2000. The Urban Institute. All rights reserved. Except for short quotes, no part of this book may be reproduced or uti- lized in any form or by any means, electronic or mechanical, including photocopying, recording, or by information storage or retrieval system, without written permission from the Urban Institute. The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. iii Contents Preface v Introduction vii 1 A Regional Policy Report 1 Raymond J. Struyk 2 Home Purchase in the Visegrad Countries: The Case of Poland 75 Sally Merrill 3 Russia: Dramatic Shift to Demand-Side Assistance 151 Nadezhda B. Kosareva, Andrei Tkachenko, and Raymond J. Struyk About the Editors 217 About the Contributors 219 [...]... were low The countries of the Former Soviet Union and, to a lesser extent, former Czechoslovakia are in the second group, and only Hungary, Poland, Bulgaria, and Yugoslavia are in the first In all of these countries, high-volume long-term housing lending was stimulated by various forms of downpayment and interest rate subsidies At first blush, then, long-term housing lending in the former Soviet bloc looks... well to moderate-income families who have been on the waiting list for a dwelling unit But the broad negative conclusion remains And it is critically important because a kind of follow -the- leader mentality has been evident in the region in policymaking in the homeownership and housing finance sphere Governments have seemed to follow housing finance trends,” the most recent being the introduction of... institution, the Agency for Housing Mortgage Lending, which is designed to purchase loans from the banks originating them, thereby relieving banks’ liquidity problems Hungary and Poland Both Hungary and Poland have instituted housing- linked contract savings programs The presence of the specialized Bausparkassen banks is a distinguishing feature of the housing finance system in Hungary Poland passed legislation... that includes both municipal rental housing and enterprise housing leased to workers Directly or indirectly, the state paid for the construction and maintenance of both types The two systems of developing, maintaining, and allocating housing existed side-by-side The develop- ment of the “enterprise channel” was part of the centralized industrial policy that allocated more resources, for everything,... set of topics The discussion begins by tracing developments in homeownership, including mass housing privatization It turns next to the topic of housing shortages and economic developments during the transition It then examines the arrangements for home purchase finance, highlighting those instances in which government policies are in uencing loan terms, who qualifies for a loan, or other aspects of... States other than Russia and the transition countries of southeastern Europe are just beginning the development of their housing finance systems They are examining the possibility of redefining homeownership policies in light of mass housing privatization already implemented and the introduction of borrowing on market terms to finance home purchase Still, the countries of the CIS and southeastern Europe can... everything, to favored industries Priority sectors received not only more inputs and funds for expanding productive capacity, but additional resources for housing, clinics, rest houses, and other benefits to attract and retain better workers The allocation of resources for municipal housing was part of a broader social housing policy, with the level of funding depending in part on the bargaining ability of... programs paying such low interest on savings, the German system features the national government providing “bonus payments” on the amount of each year’s new savings.23 So in the end, it is the government that is subsidizing all cohorts of borrowers With the interest rate on savings typically fixed in the contract, in case of increased in ation the government often must raise the bonus to maintain the attractiveness... construction demand.”9 Objective evidence indicates adequate housing volumes, though, when these countries are compared with others that have similar income levels Table 1.4 presents data on the square meters of housing per person for major cities in the countries of the Former Soviet Union, including the capitals of the three study countries, and for major cities in other middle-income countries The pattern... from the experience of the Visegrad countries and the Russian Federation, especially in their efforts to develop a housing finance system These countries have done well in establishing the legal foundation for mortgage lending Banks generally originate and service loans following international standard practices Poland is creating a credit bureau to improve loan underwriting, and Russia is supporting the . paffairs@ui.urban.org http://www.urban.org Research Reports HOMEOWNERSHIP AND HOUSING FINANCE POLICY IN THE FORMER SOVIET BLOC COSTLY POPULISM edited by RAYMOND J. STRUYK The Urban Institute Copyright. evident in the region in policymaking in the homeownership and housing finance sphere. Governments have seemed to follow housing finance trends, the most