Housing policy of Kazakhstan in the transition period

Murat Istamkulov, Almaty, Kazakhstan

General characteristic of housing stock in Kazakhstan

The process of privatization Of housing and buildings in Kazakhstan has, practically, been completed. Kazakhstan has advanced further down the road of privatization than other States of the former Union of Soviet Socialist Republic. Kazakhstan is, probably, the only State in the former USSR where the housing situation has not deteriorated rapidly since the break up of the Union. This has not been achieved through the construction of new homes but by major changes in the demography of the country. Over the past nine years the population of Kazakhstan decreased by 1.5 million to 15.5 million in 1999. This was mainly due to the emigration of people to Russia, Ukraine and Germany.

Since 1996, the housing stock of Kazakhstan has gradually decreased. It had a total floor area of 251.2 million m². But, due to de-population, the actual floor area per person has increased slightly to 16.2 m² per person. The inhabited area, released by emigration, has been redistributed to meet the needs of the population. In the early 1990's, people were given legal title to their property and in subsequent years further housing law was enacted to liberalize the housing market. The final law passed in 1997, allowed complete freedom for private transactions of housing. As a result, a thriving property market was developed with private sale and purchases of apartments taking place without major difficulties. This is a significant step forward because in Soviet times it was prohibited.

In two cities, namely Almaty, and the new capital Astana, there is a strong demand for apartments, and the value of apartments is above the cost of construction. In other towns and villages, the market value of apartments is appreciably lower than their construction costs. A significant number of the country towns were created around large, traditional and heavy industries, or around enterprises that were not economical and have collapsed in the market economy leaving the workers jobless. In the absence of new job opportunities, people have either moved to other cities in Kazakhstan or abroad, abandoning their apartments. Abandoned apartment blocks rapidly became stripped of fixtures and fittings, including doors, windows, plumbing etc. making it expensive to rehabilitate them in the future. In some areas very large numbers of apartments have been abandoned creating an urban disaster zone. As the abandoned housing does not enter into official statistics, it is impossible to establish the amount of abandoned properties. The real housing area could, therefore, be 8-10 million m² less than what is shown in the official statistics.

There is an indication that the rate of depopulation is beginning to decline and in the next few years it is anticipated that housing shortage will again become acute. The amount of housing being abandoned exceeds the rate of construction and hence the housing stock is declining. In other cities there has been significant changes in building use. In the early 1990s, many office buildings and recreational buildings were converted into residential homes, but in the past few years the trend has been reversed with residential properties being converted into shops, cafes, bars, hotels and other types of businesses. In the fast developing cities like Almaty, Astana, and Atyrau, the rate of change is accelerating with private apartments on first floors being converted into businesses at an ever-increasing pace.

Physical condition of housing stock

As a result of the general impoverishment of the people, the problem of aging and deterioration of housing stock has become acute. At present, more than half of the population of Kazakhstan has an average income below what is considered as a minimum subsistence level. Pensioners are, particularly, badly affected as they lost all their savings in this transition period and State pensions are of little value. The costs of basic foodstuff accounts for 53 per cent of average income, while the costs of services account for an estimated further 30 per cent. It is, therefore, perhaps not surprising that after other essential expenditure for example for cloths etc. 15 per cent of the population is unable to meet the costs of housing services and owe an ever growing debt to the service providers - an unsustainable situation.

The State recognizes the problem but, with limited resources, can only help the most needy segments of the population. At present, it provides subsidies to help support the poorest 1 per cent of the population. The result is that the service providers find it increasingly difficult to provide services and in some large towns and many smaller villages they are unable to provide heating, gas or electricity. The result is that not only does the housing stock continue to deteriorate (as it ages) but also the service infrastructure deteriorates at an even faster rate.

The inhabited housing stock of Kazakhstan consists of about two equal parts: half of it is multi-story apartments with several dozens of apartments per block, and the second half is low-story one family houses. The private housing was built during Soviet times, consisted of mainly one - and very seldom-two-story houses. Planning restrictions in those times prohibited the construction of housing, both private and State, that approached the size or luxury of most western standards. The average floor space per apartment was 50.7 m². In the past few years, however, the size of many of modern homes has grown significantly with steel frames and reinforced concrete columns and beams increasing the room size. Although it is only the new rich people who build new houses, it is expected that the size of dwellings will grow significantly in the year to come.

The condition of most inhabited buildings however deteriorates continuously, often with the most essential repairs being neglected. Some basic technical problems in the housing stock include:

· The basic structural condition of buildings continues to deteriorate in the harsh climate. Corrosion of reinforcing bars and spoiling of concrete steadily decreases the strength of the buildings. Much of Kazakhstan is seismically highly active, with Almaty, the largest of the cities, being assigned the maximum category of risk. A total of 6 million people are living in seismically sensitive regions. In addition, an expert assessment indicates that 15.6 million m² of housing do not meet the requirements of seismic resistance and require renovation and strengthening. After the destructive earthquakes in Turkey and Taiwan, the problem of seismic-resistance of inhabited housing stock has created great concerns for inhabitants. The continuing deterioration of the structural integrity of the housing stock increases the level of risk.

· In addition to problems with the main structures, there is a more rapid deterioration of roofing and cladding of the buildings. The quality of roofs was poor when first constructed and has deteriorated rapidly in the harsh climatic conditions. For example, one in fifteen roofs in the country leaks. Insulation of the outside walls and windows is also very poor. In Soviet times, energy costs were almost negligible and wastage was not an issue in the low-cost buildings. Hence, thermal insulation was not incorporated into the buildings and although all windows were double-glazed their efficiency is low because of the poor quality of manufacture. Recently, the cost of energy has increased many times and it constitutes 70 to 80 per cent of service costs depending upon the region. When the level of payment for a block or district falls below a given number of households the service providers cease provision. The layouts and the existing control equipment are such that in most cases it is impossible to connect or disconnect individual consumers. Therefore, even the payment by a household does not necessarily guarantee supply.

· The nature of the building layouts, the lack of individual household control and, in particular, metering measures of services do not allow the householders to manage their consumption to match their needs or their budgets. The first who suffer are the poor who have no opportunity to reduce consumption to match their income. They have to pay the average tariff or go without. The existing law states that service providers must install individual household meters. But without an adequate income for service providers, funding for the provision of meters is lacking.

Currently, there is a large amount of property in the market with very active estate agents that are capable in developing marketing skills very fast. The implication of the availability of housing and the present economic conditions vary across the country and is affecting different economic classes in different ways. The present purchase price of the old housing stock over most of the country is only one fifth to one tenth of the present construction costs and prices are even lower in much of the countryside. Unfortunately, these low prices do not improve the housing conditions of the needy and middle classes. Although the prices are sufficiently low to allow the middle classes to move up, market service costs are prohibitively high. In northern cities, for example, the level of payment of the central heating is about US$0.5 per square meter per month while the average wages are less than US$90 per month. In such cities, a tendency of resettlement of people in apartments of the smaller size is observed. The market condition does, however, provide an opportunity for those who work and who are in need of accommodation.

The main beneficiaries of the present market conditions are the richer classes who can acquire the better quality apartments cheaply. The exception to these general conditions is also the rich who are building a significant number of large houses and villas, often to a very high standard. The result is that over the last few years the average size of houses has grown dramatically. See the table below.

The steady increase in the size of new houses from 150 to 300 m² floor areas, is the result of the large houses being built by the new rich. It is interesting to note the change in demand for housing by the economic well-off people over the past 9 years. In the first few years, the rich people aspired to own large country private residences. Now, however, as a result of the increasing crime incidents, poor services and weak infrastructure in the large cities, there has been a tendency for resettlement of the richer people in large urban apartments in multistory blocks that are refitted to western standards. These are equipped with security systems, underground garages and lifts. In many such blocks, independent electricity generators and heating systems are incorporated so that they are not dependent on cities ailing services.

Privatization of housing in Kazakhstan

The distinctive feature of Kazakhstan compared to other Republics of the former Soviet Union is the almost complete transfer of housing stock to the private sector. In the past, the State owned 46 per cent, collective farms 2 per cent, cooperative societies 2 per cent and private individuals 50 per cent of the housing stock. The basic concept of housing privatization was well founded. Each person was issued with property coupons of a given value. In addition, people who had worked for a long time in an organization, were given additional coupons. Properties were valued and households with sufficient coupons were allowed to exchange them for their property. Those with insufficient coupons were required to buy additional coupons or pay additional money to cover any shortfall. Those with excess coupons were allowed to use them to help them to acquire a larger property or exchange them on the open market. Coupons were issued at a time of hyperinflation and the reality was that anybody living in a large flat, but who only had a small family had only to pay a small amount of money to acquire the title to it. The result was that no property changed hands to give a more equitable distribution in relation to need, but it did achieve the main objective of rapid privatization. At present, 93 per cent of the housing stock is in private ownership.

In multi-story houses the privatization was only partial, as the owners possessed only their apartments with fixtures and fittings. The general structure of the building and common areas remained in State ownership. The maintenance of the blocks of apartments and provision of services was the responsibility of the Municipality Property Services Agency. They collect revenue from the households for most of their operating costs but also receive State subsidies, particularly for the provision of services. The agency proved not to be that effective, a situation aggravated by rapidly rising costs and poor payment, as the country moved to a market economy.

With the rapidly rising costs, the State subsidies grew to a level that could no longer be met by the budget and in 1996 the second housing reform act was enacted resulting in the liquidation of the Municipality Property Services Agencies. Large Apartment Cooperative Societies (KCK) were created and they have overall responsibility for the maintenance of the building's fabric of up to 10,000 blocks each. The new co-operatives charge households at an agreed rate for building maintenance. Service providers were required to bill individual households for services. Prototypes of such cooperative societies were the building cooperative societies that existed during the Soviet times. Within several months, half of the housing stock of Kazakhstan was transferred from State management to KCKs. Now there are approximately 5,000 KCKs in the Republic.

Privatization of construction industry

The privatization of the construction and building industry was accompanied with gross irregularities. Due to the slump in the building industry and the new market economy, many of the contributing companies went bankrupt shortly after privatization in the early 1990s. At the same time, there was high inflation. Some corrupt senior managers and officials have skillfully taken advantage of privatization and some have become the owners of the companies. In early stages, many enterprises became stock companies but shortly after privatization, senior executives bought the shares of the companies at an almost nominal price. The State received less than 5 per cent of the market value of these enterprises. The ordinary workers who received shares in the privatized companies were often compelled to transfer their shares to the new management.

As a result of inept management and theft, some of the privatized enterprises quickly went into liquidation, while those that have survived the transition have a good chance of rapid development. At the present time, 96 per cent of the building industry is private or in joint ventures with State and private companies, and the privatization of the building industry in Kazakhstan is effectively complete.

Although there are only a few foreign companies operating in the country, they have constructed the majority of significant new buildings in Kazakhstan. In the country there is a legislation that limits the importation of workers to Kazakhstan. Nevertheless, foreign companies are active in the construction market, particularly the Turkish companies who actively tender for the construction of large buildings, frequently wining them. Turkish contractors have constructed many of the new public and residential buildings in the new capital Astana. It should be also mentioned that many foreign investors or international organizations providing credit, stipulate that a foreign firm must be the main contractor or that the contract must be placed for international tender.

Construction of housing

The housing construction in Kazakhstan collapsed with the break-up of the Soviet Union, particularly in the public sector. The figure below shows the decline in building construction over the past 10 years. In the first half-year of 1999, some 444 thousand sq.m of housing was constructed compared with some 8600 a decade earlier. This decline occurred at the expense of the public sector, whereas the contribution of the private sector has remained fairly constant over the past 10 years. In the previous year, the private sector constructed 374.2 thousand sq.m of housing, which is 84 per cent of the total. The basic share of housing construction was made up of the private investments. It should be noted, however, that the general (common) economic crisis might not permit to stabilize the housing construction in the country. However, in 1999, in many large cities, for the first time, after many years, the volume of housing construction has risen as a result of growing private investment. It is hoped that this is a turning point in the supply of new homes in the Republic.

Construction of new houses (thousands m²)

Improving management and maintenance of housing

It has been three years since the formation of the housing maintenance cooperatives. During this time, there have been problems with both management and technical maintenance of buildings. Co-operatives are far from being the ideal agencies for maintaining property. But if management of housing is to be the responsibility of co-operatives, it is essential that these are as effective as possible. The greatest problem is the size of the majority of the maintenance cooperative societies that are small. For a normal management, the cooperative society should consist of an average of 1,000 apartments. As a result of the chaotic creation, the cooperative societies are far from this optimum size.

This pattern of distribution is characteristic of the whole Republic with average and large cooperative societies servicing less than half of the housing stock. Small cooperative societies make management difficult, as there are fixed management personnel and administrative costs. The present household payments to the cooperatives are so small that even the very smallest of repairs need some months or even years of payments to fund them. The huge cooperative societies (KCKs) have become inefficient because the managers of such cooperative societies are badly supervised by the tenants. In large KCKs there is an opportunity to repair a few housing blocks at the expense of funds raised from houses of all the cooperative society. But even the largest cooperative societies can not collect sufficient funds to reorganize or renovate buildings.

One of the main problems is the non-professional management of KCKs. The existing working practices in KCKs and the lack of accountability allows chairpersons to abuse their power and it is very easy to hide the abuse. In this situation even the small income of KCKs, which could have been used for maintenance of housing, is plundered. To improve the management of housing co-operatives it will be essential to establish a reliable mechanism for replacement of the chairperson of the KCKs. Unfortunately, the people of Kazakhstan have yet to completely realize how to use the freedom of democratic choice. At the present time, in order to replace a chairperson, it is essential to have more than half of the inhabitants of the cooperative society requesting the change. But the attendance of tenant assemblies, typically, is less than 15 per cent. Such a situation is very advantageous for the chairmen and the majority of them deliberately do not call assemblies of the tenants for re-election. Where there is a will to replace a chairperson, the process becomes prolonged and drags on for many years while the KCKs become insolvent.

There is also a serious problem with the physical condition of the older housing stock. The structures are often poor and the service infrastructure is worn out and needs replacement. They are often poorly insulated and heated and, in reality, they have reached the end of their technical life. Demolition of old structures and re-housing people are the only real alternative. In other words, this aging and poorly constructed housing stock is like a time bomb waiting to go off. It is estimated that in 10 years time more than half of housing stock of Kazakhstan will be sub-standard. Not only will the physical conditions be unacceptable but also the standard will not meet the growing expectations of the population. It is clear the owner-occupiers will need to be re-housed. People with high prosperity can leave their out-dated housing and can buy new ones but the needy citizens will not be able to afford new housing. Public funds are unlikely to be sufficient for the maintenance of housing the poor in the foreseeable future unless there is a rapid turn around in the nation's economy.

In apartment blocks that are coming to the end of their lives, it is envisaged that the wealthier citizens will relocate leaving the poorest to survive. The depopulation of the blocks will happen over a number of years, which will hasten the blocks' deterioration to a level where they will become unsafe for habitation. In essence, the problem was in-built into the first housing reform. The people living in apartments built in the past 10-20 years have been very lucky with the privatization process while those in the older blocks have been much less fortunate. The coupons were designed to benefit the most deserving but because of their rapid devaluation they proved to be of little worth and the poorer section of the community ended up getting an unfair share of the national housing stock. This problem could be resolved if the State taxed the people who are better off and used the funds to provide a safety net for the poor.

Problems within the private building industry

Lack of quality construction equipment and plant was a significant contributing factor to poor quality building construction. In Soviet times, the situation was further aggravated by poor supervision and lack of motivation of much of the workforce to achieve high standards of building construction. The population had also come to accept poor quality construction as the norm and had little idea of what could be achieved. They were just very grateful when their turn to be allocated an apartment arrived. Typically, it took 10 years waiting on the housing list before a flat was allocated and a flat was perceived as a gift from the State.

Many people have now had the opportunity to travel overseas and see better construction standards and as new high quality buildings are being constructed in the country, the result is that the population expects better construction standards. The building companies appreciate this and most of them are rapidly improving their construction standards. However, those that do not will go out of business. All modern fixtures and building materials need to be imported, as there is no source of supply within the country. Import substitution will be essential if the country is to develop a self-supporting construction industry. A barrier to the development of the construction industry is the shortage of capital, coupled with the high interest rates charged by the banks.

Another significant problem in the building sector is the lack of an effective building industry. In Soviet times, each large city had one or several large housebuilding organizations. These organizations built factory-made pre-cast site assembled buildings. The apartments built this way were not of the highest quality, but these quick-build apartments solved the housing problems. These types of structure are more resistant to seismic effects than the conventionally built apartment blocks. The huge industrial complexes for manufacturing housing blocks became idle when the house-building industry rapidly declined. As a result, the basic equipment was plundered or sold and the factories converted for other purposes. The old machinery and methods and the dilapidated facilities are no longer applicable to a market economy and in the future new construction techniques will have to be introduced.

The other main problem in the housing construction industry is the absence of large investors. The economy is unstable and consequently credit is very expensive and short. The national currency is unstable and banks aspire to give short-term loans at high interest rates. The size of bank loans relies heavily on the credit rating of the construction firms. They need real estate and/or expensive modern equipment as collateral. The cost of loans among large banks is 15 to 20 per cent per annum in hard currency. However, getting this expensive credit is a long and difficult procedure. In these harsh economic climates, only private firms with their own means have ventured to build multi-storey housing. Most firms are building very high quality apartments or houses for the rich. The firms are also obliged to have good contacts with urban municipality officials if they are to get permission to build on the most prestigious sites.

Since construction firms build houses with their own capital, they must be paid in cash on the sale of the finished flats. They have insufficient capital to construct property for rental purposes and there are no organizations willing to buy them for renting.

The rental sector is also discouraged from developing property for lease because of high taxes on rent and inadequate legislation for this sector. The process of the sale of apartments is, often, delayed for years and the working capital of construction firms remains frozen.

The tenants of new houses, normally, join the cooperative societies for the management of their houses and employ a manager. Very frequently, such managers represent the firm, which has constructed the house. The important issues relating to the maintenance of a property will depend on the decision of the owners. It is expected that the inefficiency of such management will come to surface in the foreseeable future.

Policy of support to low-income people

Implementation of the State policy for the improvement of housing conditions of the most needy people is the responsibility of the Akimats. Akimat is the Kazakh name for the urban municipality. Akimats have defined a list of categories of people who deserve State housing privileges. Included in this list are certain categories of citizens such as: invalids and participants of war; families having children; persons suffering by some forms of chronic disease and pensioners; children - orphans under 20 years old; persons who have lost housing as a result of ecological, natural or man-made disasters; large families and families of the persons killed in serving the state; etc.

These are clearly the groups that need social protection. There is a waiting list of people entitled to receive housing free-of-charge or for a rather low rent, providing only payment of municipal services and the charges of operation. Akimats have the responsibility to provide social housing for the needy but they lack the resources to do so. They have no funds to buy apartments. The only ones available to them are:

· Apartments released after death of an owner with no heirs;

· Apartments given to Akimats in lieu of cash for land for building;

· Buildings that were partially constructed in Soviet times are unfinished. These are given to developers in exchange for a number of the completed flats.

Using these resources, Akimats periodically allocate apartments to people in the queue, and also create a State municipal housing fund. The apartments from the State municipal housing stock are rented without the right of privatization. The numbers of apartments available are inadequate in most cities and, although a few apartments are allocated annually, the queue may as well extend into infinity. The reality is that the social housing policy is little more than conceptual. The policy includes the possibility that Akimats can buy property and then leave it to the needy. But, in practice, they lack adequate resources to implement the scheme.

At the present time the State does provide subsidies for essential services for the most needy one per cent of the population. But the level of subsidy and the total number of people in need are so that severe hardship amongst the poor, particularly the pensioners, can not be prevented easily. The author is of the opinion that it was a big mistake for the city administrations to transfer the ownership of housing to low-income people. The main beneficiaries of privatization were the elderly population of householders who will pass their property on to their heirs.

Akimats should provide the poor with rent subsidies and subsidies for essential services rather than buying and managing a state housing stock. The private sector can manage houses far more efficiently than the State and there is no advantage in the State having capital tied up in property. Renting accommodation allows them to meet the needs of far more people in the short term than spending the money buying a few flats.

The basic directions of developing housing policy in Kazakhstan

The legislative base of a new housing policy has been put in place in Kazakhstan and the policy of privatization has also been fully implemented. The law has also been enacted which will enable private construction companies to grow and develop.

The greatest threat to the development of the private sector is mismanagement and corruption among Government officials. Mishandling and favouritism play significant parts in awarding State tenders for housing construction and on the allocation of prestigious building land. The corruption of officials in the country has become so menacing and pervasive that the President of the country announced a fight against corruption and gave to this fight the first priority. In recent times, businessmen have begun to try to find ways around corrupt officials. In the past, the construction businesses were also State owned and the employees were often in league with State officials to optimize personal fringe benefits. However, with privatization of the construction industry, the businessmen now have to make irregular payments to the officials from their own resources. It is expected that serious corruption will continue for some time. However, as the construction industry develops, it is hoped that the corruption could be brought more under control.

Another important problem is the shortage of investment in housing. The main factors restricting investment in the housing sector are:

· The crisis in economy;
· Low demand for housing due to high emigration;
· Inadequate State policy to encourage potential investors;
· Absence of measures to develop the rental sector.

At the present time, the peak of the crisis has passed and the transfer from a centrally planned economy to a market economy is well advanced. The private sector has become the prevailing form of ownership for industry and agriculture and the privatization process has been all but completed. It is anticipated that in the coming years the economic situation of the country is expected to improve, particularly due to the increase in oil price and the development of new export pipelines.

On the other hand, emigration from the country has begun to decline. In 1998, net emigration was 203,000, less than 22.3 per cent of the 1997 level. The birth rate in the country fell last year to 2.22 per cent, while the death rate was only 0.56 per cent. As emigration continues to decline the demand for housing will again grow. The main demand for housing in the coming years will, however, come from the replacement of old or poorly constructed housing stock and that people will move to better accommodations. It is, therefore, essential that the country has a construction industry that is able to meet this demand.

Currently, most of the construction is financed by private commercial enterprises. The private construction companies behave very flexibly and actively, and as demand increases and resources become, available, they will be able to meet the increased demand. However, the financial reserves of the private building companies are very small. The main investors in the construction of housing, today, are the banks, but the growth in investment by the banks is rather limited since industrial and agricultural sectors do pay a better return on capital. Furthermore, the interest rates charged by banks are higher for housing construction than other economic sectors.

The author is of the opinions that pension funds and, to a lesser degree, insurance companies are large potential investors in the housing. The insurance companies are looking for ways of growing, and their participation in the housing market is feasible in the next 5-10 years. The pension funds are already willing to finance housing construction. The pension funds have been functioning in the country since January 1998. According to the law, employers have to transfer 10 per cent of their salaries to pension funds. Today, the funds receive 6 billion Tenge per month (143 Tengi = 1 US$). For comparison, in the first 6 months of 1999, some 5.2 billion Tenge was spent in the construction of housing. If pension funds put half of their investment-income in real estate, it would be sufficient to construct almost 2 million m² of housing per year. Unfortunately, under existing legislation, the pension funds cannot invest in real estate. They must invest in the stock market or in State stock.

The problem for the pension funds is that the amount of money they have to invest exceeds the value of the stock, pushing stock market prices artificially high and threatening the financial stability of the pension funds. The investment of money in real estate, and particularly in housing, traditionally is an investment with the minimal risk. In our country, such investments can bring a stable income. For instance, in the new capital, Astana, investment in housing gives a return on capital of between 10-15 per cent (in hard currency). Western pension funds are unable to achieve such levels of financial returns.

The greatest threats to investment in property in much of Kazakhstan are natural disasters such as earthquake (in the seismically dangerous areas), landslides and floods. But, as has been demonstrated in Turkey and Taiwan and elsewhere, structurally sound designed and properly constructed buildings can withstand even extremely strong earthquakes. The quality of buildings funded by pension funds is expected to be better than average. They are designed and built to withstand seismic activity, thus, protecting their investment.

Finally, it is worth mentioning that it is unlikely that the present methods of management by cooperatives will provide a lasting solution to the problem of property maintenance. The management of housing by owner-occupiers or small groups of owners with legally binding joint management agreements will be more effective. For new apartments, it would be better if commercial enterprises would build blocks and either rent or sell their leasehold. The State should establish acceptable conditions for the development of such businesses. State support could be provided through allocation of land with permission of construction and decreasing the level of the taxes on the rent of apartments. The reduction of taxes is especially important, as it will free rented property from the black market. The formation of large housing enterprises will also improve the performance of the construction sector and the quality of housing constructed for owner-occupiers.

Conclusions

Kazakhstan has managed to redefine its housing policy in a relatively short period of time and has tried to match it to the emerging market economy. This was, however, accomplished with considerable irregularities on the part of the officials. Today, privatization of the housing sector in Kazakhstan has been completed. The legislative base is largely in place to improve the housing situation, even though there is some way to go before the overall situation is improved. In the meantime, the overall housing stock continues to deteriorate. Some recommendations requiring action in the coming years are summarized below:

· The current practices of the State and/or municipalities need to be rectified so that adequate housing funds are created and the poorest members of the society are housed properly. The most needy population will require subsidized rented apartments and subsidized municipal services.

· A mechanism needs to be created by the State for the resettlement of the owner-occupiers of substandard and unsafe buildings.

· There is need to encourage the potential housing investors, particularly pension funds to become active in the sector.

· Development of private rental sector through priority allocation of land and tax exemptions should be encouraged.