Azerbaijan Rapid Housing Needs And Demand Assessment – Baku Pilot

Introduction:

Housing markets in Eastern and Central Asia are characterized by high homeownership and widespread deferred maintenance and Azerbaijan is no exception. Across the region, homeownership is above 90 percent in most countries. Widespread privatization of pre-1990 multifamily apartment buildings (MFB) did not provide robust mechanisms for building maintenance and repair. In response, many countries tried to institute homeowner’s associations that could help owners save to make large repairs.

Unfortunately, these associations have not provided the expected benefits and many households continue to face declining housing standards. Azerbaijan faced a similar situation with deteriorating buildings and responded by creating homeowners associations (HOA). Nonetheless, HOAs continue to struggle to access resources for maintenance and operations. Despite the formation of HOAs, pre-1990 MFBs remain undermaintained as the apartment owners lack the resources needed to fully carry out decades of deferred maintenance.

Measuring Housing Demand and Deficits

Theoretical Framework:

Measuring housing demand and deficits requires estimating demographic trends and housing conditions. The single largest driver of housing demand is demographics, which determines new household growth. Another important, but difficult to measure, driver of housing demand is the condition of the housing stock. Tracking the condition of housing often involves a subjective analysis of what constitutes an adequate unit. Definitions of adequacy range widely across the globe from access to secure tenure to the size of the housing units per capita. With a clear understanding of adequacy, it is possible to determine the number of units that are low quality and in need of replacement or renovation.

Assessment Methodology:

Assessing housing demand requires assembling data from the national census, specialized housing surveys, and household budget surveys. Demographic data related to population growth, household headship rates by age group, and projected growth are often found in national census data. Information about individual housing conditions, such as overcrowding and access to services, is often obtained from the national budget survey. Information about the state of the existing housing stock, the stock and flow of housing units, and vacancy rates often need to be collected through specialized surveys. These specialized surveys can be conducted at the national, state, regional, or city level. There is no standardized approach to collecting this information.

Stocktaking of Existing Data in Azerbaijan:

This report draws from a database of existing statistics assembled from various government data sources as part of an initial stocktaking. The Government of Azerbaijan provided information on a range of data. The statistical information came from a range of sources including the National Census, the National Household Budget Survey, the State Committee for Urban Planning and Architecture, and the National Mortgage Fund. The data provided an overview of basic demographic and economic information but several key pieces of information were missing as discussed below. The stocktaking provided useful insight into demographic and economic drivers but revealed significant data gaps related to the condition of the housing stock.

Housing Conditions:

Urban households have very high access to utility services indicating a basic level of adequacy, access to piped water and sewerage is very high in the largest cities. Yevlakh is an exception with lower access to sewer connections. Access to electricity is also universal in these cities. In contrast, access to central heating is mixed across the largest cities. This likely indicates the use of other forms of heating more than it does a deficiency in basic utilities or overall housing conditions. While connections to utilities are high in all of the cities, the data does not provide insight into the quality or reliability of service connections. The reliability of service connections was repeatedly mentioned during the pilot study discussed below.

Conclusion:

As the economies of European and Central Asian (ECA) countries liberalized after the fall of the Soviet Union, several problematic housing trends emerged in Azerbaijan. While significant progress has been made in reforming Azerbaijan’s housing sector since the 1990s, it will take some time for the reforms to result in adequate housing conditions and access for all income groups. In the meantime, some of the older housing stock continues to deteriorate, and the formal housing sector continues to be unable to produce new housing of the composition, type, or price needed to respond to prevailing demand. As a result, housing choice is severely restricted for both low and middle-income households, forcing households into often substandard housing solutions.

Also Read: Housing Supply, House Prices, and Monetary Policy