Housing in Transition? - PDF Free Download

Europe and Central Asia Housing in Transition? Ashna Mathema 12 / 09 / 2018 - BUCHAREST

ECA: Housing in Transition? R o m a n i a B u l g a r i a G e o r g i a A z e r b a i j a n

Context: Basic stats Romania Bulgaria Georgia Azerbaijan Population 19.8M 7.0M 4.5M 9.4M Urban Population 53% 74% 53% 54% Population growth rate -0.25% -0.65%* -0.3% 1.3% Capital city population 1.9M 1.3M 1.2M 2.1M GDP/ capita $9,500 $7,930 $3,600 $7,800 1 person leaving country every 28 minutes 20% population decline between 1989-2017

Context: Trends While ECA transition countries have many of same problems as other regions, their circumstances are more acute. High incidence of poverty Severely hit by 2008 Financial Crisis - Collapse of construction industry; very slow recovery Old (ageing) society Experiencing sharp population decline and population shifts - Movement to cities, and depopulation in rural areas/ small towns

A. Deteriorating housing stock Large percentage of old multifamily buildings (>70-80% of housing stock) Age, quality issues Romania > 55% of housing stock built before 1970 > 35% of housing stock in state of disrepair Bulgaria ~ 75% of apartments in buildings older than 30 years Azerbaijan > 80% residential buildings built 40-50 years ago, many of which require urgent repairs or reconstruction Georgia About 35% of the housing stock older than 50 years Less than 10% constructed after 1990

A. Deteriorating housing stock: Romania

A. Deteriorating housing stock: Georgia

A. Deteriorating housing stock: Georgia Courtyard style Built: 1850s-1920s Old parts of major cities Process of Communalization during Soviet period Relatively well off households moved out, poorer HHs stayed behind Alterations made: private facilities, additional rooms Current state of disrepair

A. Deteriorating housing stock: Azerbaijan

A. Deteriorating housing stock: Bulgaria

A. Deteriorating housing stock: Why? Inadequate management and maintenance of multifamily buildings Nationalization and mass privatization: Rights without responsibilities Lack of technical or financial capacity to undertake major capital repairs or maintenance Bureaucratic hurdles facing establishment of HOAs Culture of dependency on municipal entities responsible for common area maintenance Mix of income groups makes it a challenging task to agree on and pay to undertake improvements

B. Building safety: Romania Bucharest used to be called the Small Paris...

B. Building safety: Romania Bucharest used to be called the Small Paris... March 1977: 7.2 Richter scale earthquake killed 1,500 people, injured over 11,300, and destroyed over 35,000 houses and 33 large apartment buildings. Most of the damage was suffered by Bucharest, including in the Old Town. Source: https://accessromaniaonline.wordpress.com/tag/earthquake/

B. Building safety: Romania Today, tens of thousands of buildings are at seismic risk, and most of them are occupied. No comprehensive up-to-date inventory Over 10,000 housing units in Romania categorized as Class I seismic risk >60% of Class I risk buildings are in Bucharest 2500 housing blocks in Bucharest categorized as Class I-III seismic risk Since the 1977 earthquake, only 41 blocks in Bucharest have been retrofitted

B. Building safety: Romania Red dot buildings: Seismic risk

B. Building safety: Georgia Apartment Building Extensions (ABEs) Since 1980s, adjustments to size and function of dwelling units Legal until 1991, executed by state building companies Post 1991: chaotic unregulated mass phenomenon (const. by unskilled labor) Sometimes upto 60% of original DU size: structurally unsafe, seismic risk

B. Building safety: Bulgaria Structural safety and seismic risk Some 11,000 panel buildings, with 2 million inhabitants Some buildings are past their 50-year intended lifespan, and might be structurally unstable: extent of risk unknown (on-going WB study)

C. Housing informality Inadequate housing conditions for the poor and vulnerable High private ownership (BG: 97.6%; RO: 98%; AZ: 93%: GE: 95%), and very little public housing stock Very limited and ill-maintained public social housing Social, economic, and physical exclusion of Roma and other minorities due to lack of domicile and/or identity cards

C. Housing Urban slums: worst informality: living conditions Romania Roma urban 'slums resemble those in other cities like Mumbai or Nairobi in terms of housing quality and access to basic services. But there is a general sense of despair - high unemployment, children not attending school, social and physical exclusion, forced evictions. Public policy often emphasizes cookie-cutter buildings unsuited to the Roma lifestyle, or public rental ("social") housing of poor quality often with no security of tenure.

C. Housing informality: Romania Urban slums: worst living conditions

C. Housing Urban slums: worst informality: living conditions Romania

C. Housing informality: Romania Urban slums: worst living conditions Old workers dormitories, now called Ghettos occupied by Roma and other minorities

C. Housing informality: Bulgaria Growing number of illegal settlements Often on dangerous or environmentally sensitive land Inadequate infrastructure Roma constitute disproportionate % of population in illegal settlements

C. Housing informality: Bulgaria Exploitation and harassment by utility providers Difficulty in obtaining electricity connection (requires BGN 550 fee, proof of residency, ID etc.)

C. Housing informality: Bulgaria Inadequate support from government Little to no municipal infrastructure in informal settlements Lack of municipal protection for legitimate residents of illegal settlements Lack of access to Social housing: - Eligibility criteria include domicile/ registered address (with at least a TC), employment/ income etc. - Squatters ineligible: <4% of Roma occupy municipal housing

C. Housing informality: Azerbaijan Increasing informality, illegality Significant share of new MFB housing stock illegal or incomplete because it is either on land that is not titled and/or the property is not registered Estimates vary: 50-80% of all new MFBs in Greater Baku; 450,000 in Baku alone Many new units bought and sold on the basis of a Construction Contract/Agreement with the developer: not official transactions and cannot usually be leveraged as collateral for mortgage loans Growth of informal settlements in environmentally-hazardous (oilcontaminated) areas and areas reserved for trunk infrastructure

C. Housing informality: Azerbaijan

D. Housing Market Dyfunctionalities Lack of affordability: High cost overburden, especially among youth Georgia Cost of new construction: USD 400/m 2 in 2004 to USD 1,300 / m 2 in 2008 (Tbilisi) Average sale price: Segment A (USD 400-800 / m 2 ) Segment B (USD 800-1,200 / m 2 ) Segment C (>USD 1,200 / m 2 ) Azerbaijan Average sale price: USD 1500 / m 2 Informal hidden payments constitute upto 30% of sale price Romania Average sale price: USD 600-1,200 / m 2 Bulgaria Avg. sale price USD 700-900 /m 2 for old unit; USD 1200-1500 / m 2 for new unit

D. Housing Market Absence of robust rental market Limited supply of formal rental (<2% in Georgia, 3% in Bulgaria), which makes it very expensive and unaffordable Housing policy focused on promoting homeownership: very little policy discussion to date on market-based renting, less about social housing, and none on public housing Cultural stigma to not own a house: In AZ, to marry, one must own a house Why? Pro-tenant rental laws: difficult to evict Tax on rental income (RO: 24%; AZ: 14%; BG: 10%; GE: 20%) Informal contracts: no tenant-landlord protections; multiple months rent advance

D. Housing Market Dyfunctionalities Net housing surpluses, but high vacancy rates, and overcrowding Bulgaria Vacancy: 30% nationwide, 24% in Sofia capital (despite the surplus, 2.7 million dwellings with 1 million or 15% population doubling up Surplus could be overstated at the national level (number includes vacation homes in tourist destinations, and uninhabitable properties), but what about Sofia? Overcrowding: 45% nationwide; 55% in urban areas Azerbaijan Vacancy: Estimated at 10-30% in Greater Baku (~30,000 units), with many units lying unoccupied for extended periods of time Overcrowding: 44% in Greater Baku region Speculation; Deep-rooted culture of homeownership Romania Vacancy: Estimated at 16% Overcrowding: 52% nationwide; 64% among the population at risk of poverty

E. Urban Sprawl Sprawl: Planning follows development Limited land supply and lack of brownfield development within cities: new projects in suburbs where land is cheap, but no infrastructure Rural or agricultural zones rapidly transforming into peri-urban areas

E. Urban sprawl: Romania

E. Urban sprawl: Georgia

E. Urban sprawl: Azerbaijan

F. Government programs Inadequate policy/ legal framework for housing Weak institutional capacity Inadequate city planning instruments Georgia some very high standards (e.g. 1 car parking per DU) some too lenient (e.g. black frame construction allowed) some just inappropriate (e.g. additional FAR can be legally bought) Mistargeted and/ or underfunded public subsidies Bulgaria, Romania: Poor quality social housing, and new social housing targeted to MIHs mostly; Energy Efficiency programs Georgia: 50 new social housing units in Tbilisi (2015); highly undermaintained and un-cared-for social housing

F. Government programs: Romania Housing for the Youth (NHA)

F. Government programs: Romania

F. Government programs: Romania Social Housing (NHA)

F. Government programs: Romania

E. Government programs: Romania EUR 430/m/HH) EUR 380/m National Average Income per capita EUR 335/m/HH EUR 310/m/HH YOUTH HOUSING PRIMA CASA BAUSPAR ENERGY EFFICIENCY EUR 245/m/HH SOCIAL HOUSING (poor and vulnerable)

F. Government programs: Romania Social housing for the poor - lack of maintenance: mold, no running water, dingy corridors

F. Government programs: Azerbaijan Façade beautification and urban renewal

F. Government programs: Azerbaijan

F. Government programs: Azerbaijan IDP housing for some

F. Government programs: Azerbaijan IDP housing for the others

F. Government programs: Georgia 2007 SDC program Social Housing in Supportive Environment Total of 60 units in Tbilisi Tenancy contracts 10 years, locking a limited number of beneficiaries into the limited stock of social housing units

F. Government programs: Georgia IDP housing: Georgia 45% reside in collective accommodations, many of which are unsuited for residential inhabitation (converted kindergartens, schools, etc.) 55% IDPs reside in individual IDP housing many in publicly provided IDP housing located the far out peri-urban areas

F. Government programs: Georgia Tbilisi Corps: Building renovation program - City Hall offers 50-80% co-funding to HOAs for repairs of roofs, elevators, entrances and staircases, and damages to common spaces in multi-family apartment buildings

What should be the priorities? To address the largest social welfare/ fiscal policy issue At-risk unsafe housing stock: Upgrade, retrofit, rebuild Poorly targeted subsidies: Prioritize direct public assistance to those who need it most (lowest income groups) through a range of interventions To address the largest economic distortion Deteriorating housing stock: Improve management of the existing (old) stock Lack of housing affordability: Incentivize private sector to address the needs of the market (affordable housing), and leverage private investment for low-income housing

Targeting, Transparency, Leveraging Range of income groups: requires different public and private sector interventions..

SUMMARY Main insights Old housing stock - Undermaintained old multifamily buildings - Potential structural safety risks Way forward Policy and institutions - Develop housing strategy - Build institutional capacity at national and local level Housing for the poor - Increasing illegal settlements, lack of social housing, discrimination and exclusion - Untargeted subsidies, inadequate govt. support Housing market - High private ownership, absence of a formal rental market, low mobility - Low affordability, huge vacancies - Tedious/ expensive building permit process Old multifamily housing stock - Enforce maintenance and management - Structural safety and (seismic) risk mitigation Targeting the poor - Improve Social Housing program - Legalize eligible informal settlements and targeted subsidies Housing market - Address rental market problems - Unlock vacant housing units - Streamline building permit process

REFERENCES/ PUBLICATIONS Romania: Towards a national housing Strategy (2016) Link. Bulgaria: Housing Sector Assessment (2017) http://documents.worldbank.org/curated/en/776551508491315626/bulgaria-housing-sector-assessment-final-report A Roof Over Our Heads - Housing in Bulgaria (2017) http://documents.worldbank.org/curated/en/702751508505445190/a-roof-over-our-heads-housing-in-bulgaria T H A N K Azerbaijan: Greater Baku Housing Diagnostic (2015?) Link Georgia Urban Strategy: Housing (2016?) Link Y O U Kazakhstan: Housing and Communcal Services (2014) Link

On Shaky Ground: Housing in ECA (2018) https://blogs.worldbank.org/europeandcentralasia/shaky-ground-housing-europe-and-central-asia Bulgaria: Housing Sector Assessment (2017) http://documents.worldbank.org/curated/en/776551508491315626/bulgaria-housing-sector-assessment-final-report A Roof Over Our Heads - Housing in Bulgaria (2017) http://documents.worldbank.org/curated/en/702751508505445190/a-roof-over-our-heads-housing-in-bulgaria Romania: Towards a National Housing Strategy (2016) http://documents.worldbank.org/curated/en/552171468585744221/harmonizing-public-investments-component-4 Azerbaijan: Greater Baku Housing Diagnostic (2016) https://collaboration.worldbank.org/content/usergenerated/asi/cloud/attachments/sites/collaboration-fordevelopment/en/groups/research-partnership-for-sustainable-urban-development/groups/other-analyticwork/documents/jcr:content/content/primary/blog/great_baku_housings-uzpf/great-baku-housing-sector-diagnostic-english-..pdf Georgia Urban Strategy: Housing (2015) http://documents.worldbank.org/curated/en/422631533128729643/georgia-urban-strategy-priority-area-three-housing