The article discusses the relatively large share of owner-occupied housing in the housing stock in selected European countries with relatively low per capita income and describes the underlying causes of this phenomenon. We identify the economic implications of the growing number of owner-occupied housing and poorly developed rental markets. The paper analyses home purchase or rental decisions and explain the correlations between housing availability, consumption and households’ savings, as well as housing policy. The way in which the development of the rental market can affect the situation in the property market is presented on the basis of a simple model.

Home ownership is of considerable importance for households as it generates a stream of utility, can be used as collateral and usually constitutes the biggest asset. Most new homes are purchased with a mortgage, which has a major impact on the banking sector. Housing is a good way to allocate savings, yet, hinders worker mobility. In Central and Eastern Europe (CEE) countries, we observe a very high share of owner-occupied housing (OOH) as compared to rented housing. The purpose of this article is to explain in detail the underlying causes of this phenomenon and its economic implications. We present the share of owner-occupied housing and rental housing in selected European countries, as well as the determinants of the situation, such as legal regulations providing tenant protection or the tax shield. We explain how this legislation may affect the housing market, for example, result in the expansion of the grey economy or undermine labor mobility.

A rapid growth A rapid growth in real estate prices enhanced by excessive lending, which grew into the most serious economic crisis since the Great Recession, was one of the key developments in the global economy during the 2005-2007 period. The boom in the American housing market was driven by banks that had eased housing loan criteria and granted loans to individuals with insufficient financial capacities and high repayment risk. The increased availability of credit in the United States was driven by the relaxation of lending criteria as early as 1990 (see Ligon, 2013) and cuts in interest rates by the Fed. Chambers et al. (2008) show that these regulations were intended to increase the share of property owners by expanding the range of credit services and reducing the amount of buyer’s down-payment. Many European countries undertook similar measures, expecting the growing share of owner-occupied housing in the housing stock to exert a positive impact on the economy. Yet, these actions brought major economic problems.