Massive privatizations of housing in Europe and Central Asia transition countries have significantly reduced rental tenure choice threatening to impede residential mobility. Policy makers are intensifying their search for adequate policy responses aimed at broadening tenure choice for more household categories through effective rental housing alternatives in the social and private sectors. While the social alternative requires substantial and well balanced subsidies, the private alternative will not grow unless rent, management, and tax reforms are boldly implemented and housing privatization truly completed. This study reviews the post-privatization rental housing challenges confronted by six transition countries in the Europe and Central Asia region: Armenia, Lithuania, Poland, Romania, Russia and Serbia. The common problem for policy makers across these countries is that housing privatizations decimated the stock of social housing, while the growing market-based housing production has been almost entirely focused on homeownership. As the number of households who did not benefit from the privatization continues to grow – especially the young, the mobile and the poor  the lack of accessible and affordable formal rental housing is pushing them into informal rentals with little tenure security, discouraging higher residential mobility and thus labor market flexibility. Governments are increasingly recognizing that sustainable homeownership for all is neither financially and fiscally possible, nor desirable for all household groups and life-cycle stages. Consequently, there is a need for post-privatization housing policies to recognize and address the need for social, non-profit and market-based rental housing choice.

There is also evidence of a large shadow rental sector that survived the privatization wave. With the notable exception of Poland, in the broadly defined apartment sector, ownership titles to common property in multifamily (M-F) buildings and surrounding grounds are lacking. Such facilities continue to be serviced and maintained mostly by public sector companies typically owned by municipalities. It points to an important side effect of the mass privatization: significant unintended inefficiencies. The privatizations mostly failed to produce either genuine homeowners or professional rental investors willing and able to undertake maintenance and capital repairs on common property in the multifamily buildings dominating ECA urban areas. Demand for private rental is rather strong among its typical household groups – the young and mobile – consistent with patterns found in mature market economies. Higher incomes of many younger households, typically the winners in economic transition, drive up private sector formal and informal rents in the most attractive cities. However, the lack of a consistent investment framework for formal private rental housing accommodates elastic expansion of supply, discouraging additional migration from smaller cities and rural areas. Consequently, the restricted rental tenure choice is likely to compromise macroeconomic performance in the studied countries, and by inference in the other ECA transition countries.