The transition from a centrally planned to a market-oriented economy in post-communist states has taken much longer than most observers anticipated. However, as a consequence of years of privatization and decentralization, the so-called “East European housing model” has now disappeared. Even so, efficient market relations (especially in the housing finance system) have developed very slowly, and this has made any attempt to introduce major social housing programs unfeasible: in the absence of readily available mortgage finance, the state has continued to help middle-class families address their housing problems. If housing is not affordable to the majority of households, the influence of fiscally constrained social housing programs is correspondingly limited.

Even 15 years after regime change, transition countries have not yet developed efficient new housing finance systems. Housing has essentially developed as a consequence of economic transition, and, despite expectations, has not become an “engine of change.” Changes in the housing system2 can be interpreted as “corollaries” of the restructuring processes in the political and economic systems such as housing privatization, banking reform, company laws, etc. Explicit housing policies served more as “shock absorbers” (Struyk 1996) and not as strategies to develop a new housing model. Housing privatization was much more a political step to ease possible tensions created by economic hardships than a housing restructuring policy.3 In most countries privatization preceded legislation on management of newly formed multi-unit residential buildings (e.g., Moldavia, Albania, Poland). Typically, no target tenure structure was set and no programs for managing affordability were designed. Management of the housing stock was left to market processes and the related ad hoc legislation trying to correct the most difficult problems.