Erste Group
Partner Content
Erste Group
This content was paid for by Erste Group and produced in partnership with the Financial Times Commercial department.

The home advantage

New research has shown widespread concern about housing in Central and Eastern Europe. As the pandemic forced us to spend more time indoors, how can the region ensure that its citizens have housing that is affordable, comfortable — and a proper home?

25 May 2021

The Covid-19 pandemic has shown us all the importance of the home. It is where many of us now work, play, educate and exercise — but are our homes up to the job?

In new research conducted by Erste Group in collaboration with Longitude, a Financial Times company, nearly 8 in 10 citizens (78 per cent) of seven Central and Eastern European (CEE) countries say that the comfort of their accommodation is very important to the quality of their life. But only 48 per cent of the 3,500 surveyed agree that they are happy with their current living conditions.

This rises to 54 per cent among baby boomers and falls to 45 per cent among Gen Z residents. Could the dissatisfaction of younger generations be fuelled by a fear of being left behind?

Nearly three-quarters of millennials in the study (72 per cent) say that home ownership is one of their most important life ambitions. But even upper-middle-income earners are struggling to secure decent housing — either as owners or tenants. Rising costs, especially in urban areas, and a lack of affordable housing are significant concerns. Sociologist and author Daniel Prokop points to Prague as an example.

“Unlike Austria, there is very little public housing, so there are limited possibilities to help poor households, single parents or pensioners,” he says. “Another problem is that cities like Prague have very expensive flats to buy and limited supply of commercial rentals. Even if you are a university graduate with good qualifications, it is quite hard to secure decent housing if you don't inherit it from your family. Wealth inequality is much higher than income inequality and it reduces social mobility in Czech society.”

Public housing is also scarce in Romania, where according to Eurostat data 96 per cent of people live in homes they own. “It is the highest rate in Europe and an obsession dating from the communist era, when a lot of homes were nationalised,” says Elena Calistru, chair and founder of Romanian NGO Funky Citizens. “But despite levels of ownership, rising costs for housing is a major concern, especially in cities like Bucharest and Cluj.”

However, high rates of ownership across CEE mask other challenges. With homes passed down through inheritance, extended families often live together and quickly become overcrowded. In Romania, this is estimated to disproportionately affect poorer families and their children.

The impact of the pandemic, according to Calistru, has hardened the views of those seeking change in public services. “You see a growing polarisation in Romania in people’s sense of their future,” she says. “As well as dealing with current challenges, the existing to-do list with regards to state provision is already quite long.”

Out of reach

According to the Deloitte 2020 Property Index, buyers need 11.4 average salaries to buy a standard dwelling in the Czech Republic. And this cost disparity stretches across the CEE region.

The Longitude research shows that nearly half of respondents (46 per cent) feel that their income cannot keep pace with the rise in housing costs.

The Longitude research shows that nearly half of respondents (46 per cent) feel that their income cannot keep pace with the rise in housing costs, and the pandemic has exacerbated this by reducing salaries.

The majority (60 per cent) say that the lack of affordable, quality housing is a problem that is getting worse. With house prices having risen by 104 per cent nationally since 2014 and by 184 per cent in Budapest, the governor of the Hungarian National Bank (MNB) has called for the establishment of an organisation to create “a vision, a strategy and a sustainable home market”. In December 2019, the mayors of the Visegrad Group (Warsaw, Bratislava, Slovakia and Prague) signed the “Pact of Free Cities”, which includes measures to address rising housing costs and sustainable city planning.

Banks can play a positive role — and citizens expect them to step in. According to the research, 70 per cent overall agree that there should be greater support from banks for social housing after the pandemic (see Vienna: The role model). This rises as high as 84 per cent in Serbia.

Investment in cities — but are people moving away?

The European Investment Bank and Erste Group Bank are collaborating to provide €500m to support affordable housing in Austria. The aim is to provide financing, with interest fixed for up to 28 years, for new subsidised or non-profit rental units, securing rents for nearly three decades for the benefit of thousands of tenants.

The money for the Austrian scheme is designed to be used in cities, where the demand for affordable housing is particularly high. However, one impact of the pandemic has been a recognition that urban living is not essential. The reliability of technology has made home working a viable proposition and is prompting people to re-evaluate their location. Could this spark a slowdown of rural depopulation across the region?

“The last year accelerated an ongoing process of flexible working, and I hope that we will continue to see moves in that direction,” says Goran Prijic, co-founder of Serbian web development company Vivify Ideas. “We don’t all need to live in big cities. We can just as easily live and work in rural areas and lead healthier lives. It can simply be better for the mind and body.”

Vienna: The role model

Housing policies dating back to the 1920s, including government subsidies paid to developers to build affordable housing, mean that almost half of housing in Vienna is public or non-profit, and 60 per cent of residents live in rent-controlled flats.

That has led to rents that are nearly a third of the price of those in Paris, according to the Deloitte 2020 Property Index. In 2015, the city committed to building more social housing, with 4,000 apartments set to be available by the end of last year. In 2018, it passed legislation requiring all buildings larger than 5,000m2 to include at least two-thirds subsidised housing, with rent to not exceed a fixed sum.

Erste Bank is one of the shareholders of Wien 3420 Aspern Development Agency, which owns Aspern Seestadt, one of Europe’s largest urban development projects. By 2030, the new district in the north-east of the city will be home to more than 21,000 apartments, of which 14,000 will be offered at affordable prices.

Erste Bank is also involved in a number of non-profit housing associations, among them ÖVW, which is one of Vienna’s largest private real estate developers. Between 2018 and 2020, ÖVW built nearly 2,300 apartments, the majority of which will be offered at affordable prices.