Housing Crisis Threatens to Fracture Central and Eastern Europe

The article published by Social Europe features insights from Jeffrey Sommers, Daniel Pop, and Cosmin Marian, all affiliated with the Babeș-Bolyai University in Romania. They discuss the alarming lack of affordable housing in Central and Eastern Europe (CEE) and its implications for political stability. Following the fall of communism, these countries experienced growth and increased mobility. However, a troubling trend toward right-wing politics has emerged, which the authors attribute to the ongoing housing crisis.

Despite having high home ownership rates, exceeding 80% in CEE countries, these statistics can be misleading. For instance, Romania boasts a home ownership rate of 96%, Slovakia 94%, and both Croatia and Hungary at 91%. However, there is a stark contrast between housing availability in rural regions and the demand in urban centres, where housing is scarce and prices soar. The authors highlight that many working and middle-class citizens face frustration as they struggle to find affordable housing in cities that offer job opportunities.

Over three decades, labor migration from CEE to Western Europe has resulted in a workforce that is increasingly disillusioned. The authors point out that securing good employment often requires relocating to expensive urban areas. For example, Cluj-Napoca, once a quiet city, has transformed into a tech hub, with housing prices per square meter exceeding those in cities like Athens and Genoa. This situation aggravates the struggles of Romanians who wish to work in their home country but find urban housing costs prohibitive.

The article underlines the inadequacy of current government housing policies in CEE. Private banks are hesitant to lend without collateral, leading to high-interest rates on short-term loans, which only inflates existing property prices without increasing housing supply. The authors argue that public development and mortgage banks could provide a solution by extending loans with fixed terms at lower interest rates.

To address the housing crisis effectively, the authors propose the establishment of public or public-private construction programs aimed at building social housing at scale. These projects should focus on creating units for rent, rent-to-own schemes, or outright sales, all while ensuring access to public transportation and essential services. The emphasis is on creating stable communities by serving the working and middle classes, which has been overlooked in past public sector policies.

The article calls for a return to mid-20th century levels of public investment and competency to restore social and political stability in CEE. Increased public sector involvement in housing could mitigate the rise of right-wing populist movements, which thrive in an atmosphere of economic uncertainty. The authors stress that delivering essential public goods to the working and middle classes is crucial for sustainable economic growth.

In conclusion, the article effectively lays out the pressing need for sustainable housing solutions in Central and Eastern Europe, underscoring the connection between housing stability and broader socio-political dynamics.