Advisory Center for Affordable Settlements & Housing

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Housing Finance Systems for Countries in Transition Principels

After more than fifteen years of transition, many countries still experience only sluggish development of market-based housing finance, due to legislative hurdles as well as to low levels of financial affordability, especially on the part of lower and middle income groups. The goal of this study, therefore, is to assist Governments of countries in transition in designing working housing finance markets for their citizens. It is intended to enable decision makers to select appropriate measures for the implementation of different financing schemes. It is designed to show politicians, authorities, the banking community and other interested partners how housing financing policies could be developed and improved, which general housing finance systems could be applied, what experience of some specific solutions has shown and which criteria and information could be used in evaluating, preparing and selecting appropriate policy measures. The study draws on experience from the most advanced economies of the various financing techniques. Given the heterogeneous experience of these countries, the systems and their application can not simply be copied.

Properly adapted to local conditions, however, they are likely to help in laying the ground for new solutions, and thus deserve a closer look from all interested parties. The report illustrates how over the years a great variety of distinct systems have emerged, each reflecting the historical, societal and economic particularities of a given country, and how in most cases no single type of housing finance exists. Generally, various techniques arise side by side, sometimes dominated by a typical feature. To a large extent, a combination of different financing tools is the rule, while no system can be regarded as the “best”. Whether a particular technique is appropriate for serving a given purpose depends as well on the individual benefits for borrowers and lenders, and also on the level of economic development, on the household’s capacity and willingness to make savings, and on the rate of inflation and overall monetary and fiscal policy. Other decisive factors are the legal and administrative infrastructure, and the lack or existence of primary markets for mortgages, as well as the fact that the financing of rental and home ownership units may require different approaches according to circumstances.

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