Centrally Planned Housing Systems

Housing systems usually show a mixture of market processes and state regulations (interventions). An extreme version of this mixture is the (socialist style) centrally planned housing system in which the intention is to give state regulation a dominant role and push the market back to an insignificant role. The state meant not only the central government and the councils but the state-owned enterprises as well, which constituted the majority of the economy and which were integrated into the economy through the Communist Party. With state control over property rights (limiting the role of individual ownership and eliminating the private rental tenure form) and [Page 51]concentration of most financial means in central state institutions (control over incomes and expenditures of individuals, enterprises, and local governments), the central planning system takes over the determination of housing investments and even the shaping of housing policy.

This kind of housing policy was introduced from 1917 on in the Soviet Union with the nationalization of all urban land as a first step. After World War II, the countries of Soviet-type political regimes in Central and Eastern Europe had to take over the logic of the system. The concrete forms of the East European housing systems were different (there were significant differences regarding nationalization, tenure structure, etc.), but there existed a common logic, which determined the “rules” for behavior of the state and private sector and for the different social and economic groups. Based on the analysis of similarities and differences in the housing systems of these countries, the theory of the East European housing model (EEHM) has been developed.

Centrally planned housing systems dissolved in Europe around 1989 to 1990, thus phasing out the socialist political and economic system. The main characteristics of the EEHM were one-party political control over the housing sector, the subordinate role of market mechanisms, no market competition among housing agencies (bureaucratic coordination), and a broad control of the allocation of housing services (huge, nontransparent subsidies). However, under this model, several submodels (versions) emerged; these were the responses of individual countries to particular challenges in the development process of the socialist economy.