Key principles of state housing policy: Recommendations for the development of the bill

Introduction

For more than five years, the Ministry for Regional Development, Construction and Housing (later renamed as the Ministry for the Development of Communities and Territories) worked to prepare a new edition of the Housing Code of Ukraine.

The previous code, adopted back in 1983, still contained Soviet terms and propaganda cliches in its title and preamble up until 2022, causing a lot of criticism and ridicule as well as political mandates to update the “outdated” Housing Code as soon as possible. At the same time, despite the Soviet rudiments in the document’s wording, its meaningful part had been changed radically over the 40 years of the Code’s validity. There were over 40 laws, decrees and Constitutional Court decisions that changed and interpreted the contents of the document. As a result, the contents of the Housing Code of Ukraine which is used today are fundamentally different from the original Housing Code of the Ukrainian Soviet Socialist Republic adopted in 1983. It is more reflective of the housing policy of independent Ukraine as it established and developed its market economy than of the planned economy of the USSR; nevertheless, it still contains certain provisions and rudiments from the Soviet times.

After analysing the contemporary housing policy in Ukraine in the past five years, the Cedos Think Tank has identified a number of weak points and challenges which have become even more critical since the beginning of the Russian war against Ukraine in 2014 and the full-scale invasion in 2022. Given the existence of these weak points of the housing policy of independent Ukraine, which have emerged over the past 30 years, we recommended to first reconsider the conceptual principles and foundations of housing policy, approve them at the legislative level, and only then, on the grounds of these principles, to update the Housing Code as a complex document which establishes the detailed rules of implementation of the state policy. In view of this, we welcome the decision of the renewed Ministry for the Development of Communities, Territories and Infrastructure of Ukraine to start working, first of all, on a bill on the key foundations of the state housing policy.

The Plan of Priority Actions for the Government for 2023, approved by the Cabinet of Ministers of Ukraine Decree 221-r of 14 March 2023, charges the Ministry for the Development of Communities, Territories and Infrastructure with “developing and submitting a bill to regulate the issues of housing policy and introducing changes to certain Ukrainian laws,” which should result in “creating a new system of legislation regulating the key principles of the state housing policy.”

In response to the Ministry’s request to give our recommendations for the development of the draft bill on the key principles of the public housing policy, the Cedos Think Tank has prepared this brief. It covers the issues of social housing, rental housing, as well as affordable rental housing, particularly the kind that is publicly or communally owned.

This brief is based on an analysis of literature as well as on discussions within the housing policy expert group that is a part of Cedos, discussions within an informal working group tasked with writing the bill at the Ministry, as well as consultations with experts. The main previous works used while preparing this document were the reports Public Housing Policy in Ukraine: Current State and Prospects for Reform, Housing2030. Effective policies for affordable housing in the UNECE region, 37 theses about the current state, challenges and principles of new housing policy in Ukraine, Social, temporary and crisis housing: What Ukraine had when it faced the full-scale war, Rebuilding a place to call home. Since the goal of this brief was to structure brief recommendations for the development of the bill, it has no claims about the uniqueness of the collected information or suggestions.

Solutions for the key principles of state housing policy in Ukraine

1. Foundations and strategy of housing policy

Housing is a complex good, and housing policy implementation requires active cooperation between different government bodies and levels. International experience draws attention to the importance of a multilevel approach to housing policy implementation which allows the involvement of various actors to achieve common goals (UNECE & Housing Europe, 2021). One of the key initial conditions for the implementation of this approach is leadership in housing policy, which involves the development of a unified strategy and the establishment of the key principles and priorities.

1.1. The law must establish the duty of regular development and adoption of a state housing strategy; as well as annual public reporting on its implementation in accordance with the defined indicators.

1.2. The law must establish that housing policy is based on the recognition of access to housing as an inalienable human right. To assess the adequacy of a housing policy according to this approach, a number of characteristics are used which should also be reflected in the law as the key foundations of housing policy:

1. protected nature of the right to housing, which presupposes legislative protection from eviction and other violations, such as discrimination in the process of obtaining social housing;
2. financial affordability, which presupposes that housing costs do not limit households in meeting their other basic needs such as food, health care, etc.;
3. access to services, which presupposes access to running water, power and other utilities, etc.;
4. adequate location of housing, which presupposes that tenants are not cut off from other social infrastructure and workplaces, and that housing is not located in dangerous or polluted areas.

1.3. The law must also establish the following principles of state housing policy in Ukraine:

1. equality, which means access to various means of housing provision depending on the needs and capacities of different people: housing construction, purchase or renting;
2. fairness, which means prioritising the provision of the right to housing before the facilitation of the use of one’s desired way of realising their right to housing;
3. solidarity, which means using housing policy as a means of social inclusion and practical realisation of the constitutional definition of Ukraine as a social state;
4. inclusivity, which means orientation towards the needs and capacities of different, particularly vulnerable population groups while developing housing policies and programmes;
5. justification, which means collecting and analysing relevant data on the housing needs and housing situations of various social groups, on which the housing policy is based;
6. transparency, which means timely and full communication of the decisions and programmes in the field of housing;
7. participation, which means public participation and involvement of various stakeholders in the development and implementation of housing policies and housing programmes;
8. balance, which means the need to develop both commercial and social housing as well as various social housing operators, both private and public (state and municipal).

1.4. The law must establish the possibility of using such housing policy instruments as inclusive zoning; complex and integrated planning; accumulation, use and lease of state- and community-owned lands; joint use of privately owned lands; property taxation and tax benefits; state, municipal and private loans; grants and subsidies; bonds and discount loans; revolving funds.

2. National Housing Agency

One of the problems of state housing policy in Ukraine is scattered responsibility. Different ministries and central executive government bodies implement their own disconnected housing programmes. This reduces their effectiveness and increases administrative costs. To change this, the fragmented housing programmes should be combined into a unified state housing policy, and a single agency should be determined which will be responsible for its implementation.

This housing agency allows for the creation of a sustainable housing system. Unlike ministries, agencies are less dependent on election cycles, which is important in Ukrainian context in particular. The National Housing Agency can become the management structure that will engage non-government funding and provide discount loans to social housing operators. In addition, this agency will be able to become a key stakeholder in negotiations between various government structures to ensure stable support for housing programmes.

Ukraine already has the State Fund for the Facilitation of Youth Housing Construction and the Ukrainian Financial Housing Company, whose functions partially overlap and which should be reorganised by merging into the new National Housing Agency. One of the potential options is also the establishment of a new agency on the basis of the State Fund for the Facilitation of Youth Housing Construction.

The law must establish the existence of the National Housing Agency and endow it with the following powers and responsibilities:

1. collection, analysis and publication of data on housing needs and capacities of various social groups, as well as on the housing situation;
2. development of the state housing strategy, its implementation, monitoring, and reporting on its implementation;
3. development of state housing programmes, their implementation, monitoring, and reporting on their implementation;
4. conducting audits of the work of social housing operators;
5. provision of financial support, particularly in the form of discount loans both for private individuals and for legal entities that are social housing operators;
6. provision of expert and technical support with the creation and administration of social housing for local government bodies and social housing operators.

3. Unified Housing Registry

Right now Ukraine has various housing “queues” for receiving housing from social and temporary housing stocks, departmental queue lists, and the general registry of citizens who need an improvement in their housing conditions. The existence of several different registries makes it difficult to monitor the real need for housing and creates an additional administrative workload for local governments. The creation of a unified electronic registry of the need for social housing will increase the transparency of housing policies and make it possible to properly plan housing programmes. In addition, the development of social housing also requires keeping a record not only of the demand but also of the supply, namely of the social housing stock.

The law must ensure the creation of a Unified Housing Registry and define the key principles of its functioning. The Registry must consist of a registry of social housing operators and a registry of the need for social housing.

4. Social housing operators

The issue of long-term housing management has only exacerbated with the beginning of the full-scale invasion, because new housing construction projects have started to emerge, and the question of their legal form and long-term management have become urgent. Local government bodies which are responsible for the existing community-owned housing do not have the sufficient capacity to effectively manage this housing.

Simply singling out social housing into a separate “fund” does not solve the issue of managing this housing. Ukraine has nothing similar to the housing companies which operate in Austria, Finland, the Netherlands or Germany. There is a need to develop a sustainable model that will enable the emergence of specialised social housing operators. This will make it possible not only to properly manage the existing housing but also to engage investment, including private and international investment, in order to increase social housing stocks. The key to this process is the stability and predictability of the rules regulating the work of social housing operators. The operations of housing companies are oriented on the long-term perspective, and frequent changes in legislation can undermine their capacity to engage funding and develop social housing stocks (UNECE & Housing Europe, 2021).

Engagement of investment also requires sustainability and the possibility of return on investment, even if it is in a very long-term perspective. To achieve this, the portfolios of social housing operators must include not only housing provided completely free of charge to those who live in it, but also housing for which the tenants pay rent, even if it is lower than the market rent. In case of the free-of-charge provision of housing, the costs of its maintenance and administration must be compensated from the state or local budget or other sources to avoid the risk of deterioration and marginalisation of social housing.

4.1. The law must establish the rules and limitations for the activities of social housing operators, in particular:

1. establish a profit cap for social housing operators;
2. establish the condition of reinvesting revenue into the creation of new social housing;
3. establish the principles for determining rent prices for social housing, which would be based on its cost price;
4. establish the duty to provide tenants with information regarding issues related to their residences.

4.2. The law must establish the mandatory payment for the cost of renting social housing to the social housing operators. Even when social housing is provided without any payment by the tenants, the price of rent must be calculated and subsidised from the state budget, local budgets, or other sources.

4.3. The law must give the tenants of social housing the right to create tenant associations for collective representation of their interests in the interactions with social housing operators and for the signing of collective agreements.

5. The institution of a Housing Ombudsman

Article 47 of the Constitution of Ukraine recognizes every person’s right to housing and determines that the state should create conditions under which every citizen will be able to build housing, purchase it or rent it. Despite this, the institution of rental social housing is practically non-existent in Ukraine, there are no effective housing records, the private rental sector remains underregulated, the rights of tenants are poorly protected, there are cases of illegal evictions from rental housing or temporary shelters, the commercial activities of landlords are often accompanied by tax evasion. The existing regulations are being violated, and the application of law and legal culture do not correspond to the law. Under these conditions, imposing additional obligations which are not supported by incentives to adhere to them or by the government’s capacity to administer them — for example, the introduction of an obligation for landlords to register their rental unit in a state registry — may not lead to the desired outcomes.

An important component in the protection of the right to housing and the effective implementation of the already existing regulations is a change in the legal culture and the law application practices. The example of the Canadian institution of the Federal Housing Advocate can be useful for Ukraine, which already has a similar institution in the field of education, namely the Education Ombudsman, a position established by Article 73 of the Law on Education.

The law must establish the existence of the institution of the Housing Ombudsman and endow them with the following powers and responsibilities:

1. considering and reviewing appeals;
2. monitoring, recording, covering and responding to cases of violation of the right to housing;
3. obtaining information from government bodies, including limited access information;
4. addressing government bodies and law enforcement agencies regarding the discovered cases of violations of the legislation that regulates access to housing;
5. unobstructed access to government bodies and social housing operators, participation in sessions on the issues of realisation of the right to housing;
6. providing consultations regarding the protection of the right to housing;
7. analysing the adherence to housing legislation and introducing proposals on how to improve it;
8. representation in court.