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P R I VAT E
RENTAL
HOUSING IN
TRANSITION
COUNTRIES
An alternative to
owner occupation?
EDITED BY
JÓZSEF HEGEDÜS
MARTIN LUX
VERA H O RVÁT H
Private Rental Housing in Transition Countries
József Hegedüs • Martin Lux
Vera Horváth
Editors
Private Rental
Housing in Transition
Countries
An Alternative to Owner Occupation?
Editors
József Hegedüs Martin Lux
Metropolitan Research Institute Institute of Sociology of the
Budapest, Hungary Czech Academy of Sciences
Prague, Czech Republic
Vera Horváth
Metropolitan Research Institute
Budapest, Hungary
public discourse. This issue should therefore not only be explored and
understood by housing researchers and professionals, but also by
policy-makers.
The authors of this volume focus on the factors that have been shaping
these developments and the different trends among the post-socialist
states. Across the region a claim can be made for great policy potential
that lies in private renting: despite a longstanding pro-ownership policy
bias, the massive predominance of owner-occupation in much of CEE is
unaffordable for lower-income households, and the stock of social rental
housing has been decreasing and is particularly small in former socialist
countries. On a more theoretical level, in the CEE context the develop-
ment of niches and sub-markets for the private rented sectors reflects the
development of the overall housing regime.
Private renting began a long nosedive in the post-war period in both
Western and Eastern Europe. In the former, heavy state subsidies in social
housing coincided with rising incomes and the growing popularity and
accessibility of homeownership. In socialist countries, the housing sectors
were firmly in the grip of the state which had little tolerance for private
leases. By the late twentieth century, the PRS was a minority form of
tenure in most—although not all—European countries. Nonetheless,
external shocks to the housing and housing-finance sectors, like the
Global Financial Crisis of the late 2000s, revealed how a well-functioning
market-based rental sector can serve as a good source of housing for per-
sons who do not have the resources to access homeownership and at the
same time are not eligible for public housing.
The present volume takes a look at some of the key phenomena that
shaped the sector in European transition countries in a set of thematic
chapters and country case studies. The thematic chapters present an over-
view of the development of the PRS in West European countries (see
chapter “The Private Rental Sector in Western Europe”) and transition
countries before 1990 (see chapter “The Private Rental Sector Under
Socialism”), then look at the role restitution played in the development of
private renting in transition countries after 1990 (see chapter “Property
Restitution After 1990”), the legal and financial context of the PRS in
transition countries (see chapter “The Policy Environment of Private
Renting After 1990”), and the role the PRS can play in accommodating
Preface and Acknowledgements
vii
poor and marginalised social groups (see chapter “Poor and Vulnerable
Households in Private Renting”). They also compare how the PRS is uti-
lised for welfare purposes in Western Europe, and the potential for CEE
to follow suit in this (see chapters “Private Renting in Social Provision:
Social Rental Agencies in Western Europe” and “Private Renting in Social
Provision: Initiatives in Transition Countries”). The information gathered
in the preparation of the volume is synthesised in the concluding chapter
(see chapter “Central and East European Housing Regimes in the Light
of Private Renting”). The country case studies (see chapters “Croatia:
Towards Formalisation”, “Czech Republic: Growth and
Professionalisation”, “East Germany: Integration to a Well-Established
Environment”, “Estonia: Prospects for Steady Improvement”, “Hungary:
The Growing Role of a Hidden Sector”, “Poland: Gradual Growth Across
Barriers”, “Russia: A Long Road to Institutionalisation”, and “Slovenia:
Untapped Potential”) offer a detailed description of the sector’s develop-
ment in selected transition countries: Croatia, the Czech Republic, the
former East Germany, Estonia, Hungary, Poland, the Russian Federation,
and Slovenia. East Germany may appear to be the odd one out on this
list, but it was included in this volume precisely because it followed a
completely different path, despite its housing sector being similar to other
CEE countries at the start of the transformation. The specific example of
East Germany demonstrates that there could have been an alternative
policy route to the prevailing policy focus of most CEE governments on
increasing homeownership through the giveaway sale of public housing,
a route in which private renting could have played a significant role.
Regarding the methods used, for a number of historical, legal, and finan-
cial reasons, many PRS actors prefer to conceal their tenancies and rent
revenues, which also means they are hidden from surveys like censuses. It is
the broad consensus of statisticians and housing policy researchers in CEE
countries that official statistics systematically underestimate the size of the
rental sector. As a result, the statistical data that do exist had to be supple-
mented in the research undertaken while writing the chapters with field
experience and qualitative data collection. An important source of infor-
mation for this volume was the results of the project ‘TENLAW –
Tenancy Law and Housing Policy in Multi-level Europe’, a three-year
research project conducted under the European Union’s FP7 Research
viii Preface and Acknowledgements
and Innovation Fund between 2012 and 2015, which provided detailed
comparative analysis of the tenancy regulations and policies of 32 European
countries and regions. The research, editorial work, and preparation of the
book were also supported by a grant from the Czech Science Foundation
(grant number 16-06335S). The country case study chapter on Poland was
co-financed by the Polish Ministry of Science and Higher Education from
financial resources for science in the years 2012–2015 awarded for the pur-
pose of conducting a co-financed international project. A number of expert
collaborators provided invaluable input for many of the issues discussed in
the thematic chapters of this volume. While some of them also authored or
co-authored the chapters in this volume, we would also like to express our
gratitude to Anna Zsófia Bajomi, Gojko Bežovan, Robin Cassling, Maša
Filipovič Hrast, Anneli Kährik, Stefan Kofner, Alina Muzioł-Węcławowicz,
Alexander Puzanov, Richard Sendi, and the support of Metropolitan
Research Institute. As mentioned above, reliable statistical data on the PRS
is scarce in many CEE countries. Consequently, without the insights and
hands-on knowledge of national experts, meaningful analysis of private
renting across the region would not have been possible.
ix
x Contents
Index413
List of Figures
xiii
xiv List of Figures
Fig. 12.3 The structure of supply and demand for private rental
housing in Moscow (in per cent from total demand and
total supply, December 2015)300
Fig. 12.4 The trend in average rent levels of economy-class flats in
Moscow (thousand RUB)302
Fig. 14.1 Basic functioning of an SRA 340
Fig. 14.2 Overview of the partnership between an SRA and a landlord 340
Fig. 14.3 Overview of the relationship between an SRA and its tenants 341
Fig. 14.4 Flanders—growth in the number of SRA dwellings 349
List of Tables
xv
xvi List of Tables
Introduction
Across Western Europe, private renting is viewed from very different per-
spectives. In some countries, especially the UK and Southern Europe, the
reputation of this sector of the housing market has often been linked to
insecure housing of questionable quality for the less privileged. By con-
trast, in Germany, Austria, and Switzerland, private rental housing has
become a widely accepted and secure form of tenure for a wide variety of
people; it is a solid part of housing policy and is often considered a cor-
nerstone of market stability during economic crises.
M. Haffner (*)
TU Delft/RMIT University, Delft, South Holland, Netherlands
J. Hegedüs (*)
Metropolitan Research Institute, Budapest, Hungary
T. Knorr-Siedow
UrbanPlus Droste & Partner, Berlin, Germany
actors in the PRS and the sociological/legal meaning of the PRS in the
context of national housing regimes. In the section titled ‘The Historical
Development of the Private Rental Sector in Western Europe’, we describe
the four dominant housing policy approaches of the last century that
have impacted the changing position of the PRS, but not necessarily in
the same way. The section titled ‘Rent Regulation and the Subsidisation
of Private Renting’ focuses on key areas of housing policy intervention in
the PRS that could help explain the development of the sector. The sec-
tion ‘The State of Private Renting in Europe’ summarises the develop-
ment of the PRS in the countries, especially in those where either a large
PRS has been preserved in this century or where its market share has
significantly increased in this century. The final section ‘A Future for
Private Renting’ sets out the authors’ insights regarding various aspects of
the sector’s future development.
Tenure Types
Table 1.1 A typology of the rental sector by landlord, allocation, and subsidies
Social rental Private rental
Landlord Rental State, Institutional Private person,
type cooperative, municipal, accidental, or
NGO (Church, or municipal non-institutional
etc.) company professional
Control of Rules set by the Based on Market based Typically market
allocation institution government- based, but
rules consistence defined rules other principles
with the law or with reference influence the
housing policy social need agreement, no
specific rule
Subsidy Accumulated (mortgage free) Typically not subsidised, but
capital, and/or different specific programmes may be
subsidy scheme. Though the involved, both on the supply
conditions are in the process side and on the demand side
of change
of the urban and rural housing stock may be comprised of informal forms
of tenure. Furthermore, tenure forms in European countries are often
barely compatible with their Third World ‘counterparts’ in spite of some
similarity, because of their different social, economic, and historic envi-
ronment (Hoffman et al. 1991; Mandic and Clapham 1996), making
cross-country and cross-continental comparison problematic.
Landlord Types
As private renting represented the only form of housing for all non-owners,
increased attention to the lack of affordable rents for ‘the war heroes’ during
and after WWI led to enhanced rent security, and rent controls were estab-
lished across the countries that had been at war, culminating in many coun-
tries in rent freezes that were to last well into the 1920s and in some cases far
beyond that (Donner 2000). Rent controls/regulations in the UK, accord-
ing to Munjee (2003, p. 17) ‘made [an] impact as far away as India’. WWI
thus marked the start of a shift as stricter regulation improved renters’ rights,
14 M. Haffner et al.
rent controls and, usually, freezes were brought in, and rent clearing courts
were introduced/established (see first point in the section titled ‘Rent
Regulation and the Subsidisation of Private Renting’). Private renting nev-
ertheless remained the standard form of tenure until public and cooperative
building programmes gradually took off in the interwar period to offset
public unrest, and then more intensively after WWII in response to the
post-war economic upswing. However, for decades to come, private residen-
tial renting remained a sphere of constant political conflict, which from the
late nineteenth century to the 1980s occasionally led to rent strikes (Weitz
2007).
The first fundamental turn in the status of private renting occurred
during the 1920s following the introduction of public housing pro-
grammes and the emergence of a social rental sector. Special taxes were
often imposed upon private landlords to co-fund public rental projects,
as was the case in Germany and Austria (Hauszinssteuer), reducing the
profitability of private rental housing and thus investors’ interest (Geist
and Kürvers 1980; Schmid et al. 2016). Private renting came under even
more pressure when, after WWII, Keynesian public building programmes
and the states’ co-financing of non-profit social housing resulted in a real
choice for a growing group of tenants. As investment in private renting
was comparatively discouraged, the quality of older private rental dwell-
ings was often lower than that of social housing, and in turn it became
more difficult to find tenants—partly leading to a downward spiral (for
instance, in France, Denmark, or Italy). Where most social housing was
public housing, policy makers ceased to pay attention to the PRS, even
though in some countries (like in Germany) private landlords were con-
tinuously integrated into social housing programmes from the early post-
war years onwards.
While during the 1960s the proportion of private rented dwellings in
the housing stock of some Western European countries had reached 40
(the Netherlands) to 60 per cent—or even more (West Germany)—and
a general shift occurred in the proportion of tenure categories over the
following decades. In the following decades, the PRS declined sharply in
the Netherlands, Spain, and the UK; was halved in France; and decreased
to less than half in Sweden. The reasons were manifold. Private rental
housing was bought up by public builders from the mid-1970s to the late
1 The Private Rental Sector in Western Europe 15
1980s in the course of massive urban renewal. This aimed at replacing old
and often run-down privately owned tenements with new public social
housing blocks (for instance, in Germany, France, the UK, and the
Netherlands; Hoekstra et al. 2012). As many countries strongly encour-
aged owner-occupation (UK, Italy, Spain, Ireland, Belgium, and to a
lesser degree France), many privately rented dwellings were also sold to
their tenants after government policies (like the right to buy in Ireland
and England) were introduced (Haffner et al. 2009). This often coin-
cided with a weakening of the financial motivations of owners-landlords
to invest in rental housing, as new forms of investment seemed more
profitable and easier to manage (e.g. Denmark; Juul-Sandberg 2015).
Household wealth increased during the 1960s and 1970s in all industri-
alised western countries. At the same time, as the virtues of private home-
ownership and the singe-family house were extolled and the undeniable
drawbacks of social housing—especially in the large estates of the 1950s
to 1980s—were highlighted, there was a downturn in the status of rental
housing in general and of private renting in particular.
In many countries, the housing policies of this period can be charac-
terised as a reaction to the housing shortage caused by the two great wars
and the subsequent economic crises (Boelhouwer and Van der Heijden
1992), and resulted in the emergence of welfare capitalism. State inter-
vention turned permanent the various temporary forms of rent control
that were put in place after WWI. Private investment in rental housing
dried up in many Western European countries. Not only did landlord-
investors withdraw from the market and decreased in numbers, but
financing institutions also changed their strategy, as rental market inter-
ventions also often led to construction loan defaults. The drop in housing
construction compelled states to boost construction for o wner-occupation,
which required, among other things, the condominium to be codified as
a legal form of housing/tenure and the creation of various tax incentives.
In many countries, state intervention was indispensable in the post-war
housing shortage, and the further development of the interwar period’s
organisational and financing designs led to residential construction
booms all over Europe. National construction setups differed, as did the
scale of investment, but construction booms were the result (Donnison
and Ungerson 1982).
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