Housing privatisation in the transformation of the housing system - the ...

Norsk geogr. Tidsskr. Vol. 54, 2–11. Oslo. ISSN 0029-1951

Housing privatisation in the transformation of the housing system – the case of Tartu, Estonia ¨ HRIK ANNELI KA

Ka¨hrik, A. 2000. Housing privatisation in the transformation of the housing system – the case of Tartu, Estonia. Norsk Geografisk Tidsskrift–Norwegian Journal of Geography Vol. 54, 2–11. Oslo. ISSN 0029-1951. The article deals with the process of housing privatisation during the 1990s in Estonia and its impacts on social inequalities. The transformation of the social system has resulted in a changed pattern of housing occupancy and new bases for social inequalities. The major causes of change are related to the privatisation process. Briefly, it will be argued that in Estonia the opportunities of households to privatise were not related to their socio-economic status. Rather, their gains were related to their housing situation at the beginning of the privatisation process. As an impact of the privatisation, the gap between the rental and ownership sectors, as well as the social segmentation across different housing submarkets based on form of occupancy, are increasing. Keywords: Estonia, housing privatisation, social inequalities, social segmentation Anneli Ka¨hrik, The Institute of Geography, The University of Tartu, 46 Vanemuise St., 51014 Tartu, Estonia. E-mail: [email protected], [email protected]

Introduction The transformation from the Soviet-type social system with command economy and strong state regulation to the capitalist social system with liberal market economy and minor state intervention has brought about radical changes in the Estonian housing sector. These changes involve a considerable modification of social structures through legislative and executive activities, activity of owners and tenants, as well as private and public entrepreneurs. The importance of state authorities has decreased whereas the role of households has become more significant in influencing the outcomes of housing-related practices. Private entrepreneurs have been new agents in the system. Development practices in the Estonian housing sector have similar features to the other post-Socialist countries, although the changes in Estonia have been among the most radical. This article emanates mostly from a quantitative study of inhabitants of Tartu in 1998 (Tartu University & Tartu City Government 1998). Additionally, the data from two national surveys carried out in 1994 (Statistical Office of Estonia & Fafo 1994) and 1997 (Statistical Office of Estonia 1997) are used in the analyses. I will examine some social consequences of privatisation, with a particular focus on its impact on social inequalities. The main question to be answered is thus: are there signs of deprived opportunities for some social groups, as well as inequalities in the housing sector due to housing privatisation? First, the theoretical approach, the background, concepts and objectives of housing privatisation within the Estonian context are presented. The procedure of housing privatisation and the extent of the process will also be described. Second, the preference of home ownership and the opportunities households had in the privatisation process will be analysed. Third, it will be argued that the gap between homeowners and tenants in terms of access to different housing submarkets by households, as well as advantages related to ownership and rental sector, has increased, and it provides a

favourable basis for social segmentation. The different access to housing submarkets by households has also its territorial expression.

Housing as an expression and reinforcer of social inequalities Housing may be viewed as a contested resource in society. As the housing market consists of segments of various quality, the stakes are higher in some parts and lower in others. In a market economy, the price expresses the value of housing, and, thus, income is the major factor that enables access to different types of housing. In other social systems, access can be limited by other factors: in the Soviet system, for instance, certain professions were guaranteed access to better quality housing. In this paper, the unequal distribution of socio-economic groups between housing market segments based on form of occupancy is defined as segmentation (see Lindberg & Lindeń 1986, Wessel 1996b). The unequal distribution of social groups across forms of occupancy, types of housing and different locations is an outcome of choices people make within the framework of opportunities and constraints they have. The opportunities and constraints are the result of interplay between the social and material resources people have and rules existing in society (Fig. 1). The choices people can make are, thus, to a large extent limited by social constraints. These social constraints are also an expression of existing inequalities in society (see Ringen 1995). Segmentation can be the expression of people’s freedom and preferences, but it is, however, also influenced by social and material resources households have, such as financial resources, knowledge, skills, housing conditions, etc., which are in turn influenced by social structures such as social norms, values, traditions, power relations and legislative acts. Following the same model, it is possible to explain the change in the positions of households in the housing market

Housing privatisation in Tartu, Estonia

NORSK GEOGRAFISK TIDSSKRIFT 54 (2000)

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Fig. 1. Households’ position in the housing market as an expression of households’ opportunities and choices, which are influenced by households’ resources, preferences and rules existing in society.

as a result of privatisation. In this case, it is the interplay between the rules, predominantly the changes in legislative acts, and household resources, predominantly their housing conditions at the beginning of the privatisation process and financial resources (e.g. vouchers), that influences the subjective choices and determines the outcome. According to Bodna´r (1996, 633): ‘Recognition of privatisation opportunities, quick reactions to legal changes and, most of all, a good starting position explain new housing inequalities and unequal urban privileges.’

Housing privatisation in Estonia During the last 60 years, most of the housing units in Estonia have undergone a twofold change of ownership. The land and nearly all of the dwellings that had previously belonged to private owners were nationalised during 1940–1950 without any compensation to the owners, and de-commodified. The state achieved control over housing distribution and housing construction, as well as maintenance. In 1991, prior to the beginning of the privatisation process, public dwellings made up approximately 65% of the housing stock in Estonia. While one- or two-family houses constructed during the Soviet time were mostly privately owned already before the privatisation, the majority of multi-flat dwellings belonged to the public sector. The co-operative housing established the third type of ownership. It contained both private as well as public investments. The housing privatisation process cannot be observed independently from other socio-economic changes that the Estonian society has recently experienced. There has been a rejection of collective solutions, responsibility and state control characteristic of the Soviet system in favour of individual solutions, responsibility and liberty (Ka¨hrik 1999, see also Lauristin 1997). The command economy has been transformed into a market economy. The state had failed to satisfy efficiently the housing needs of people

and maintain the housing units, so the market economy was expected to improve housing conditions. The Estonian state budget had reached a very poor state and the investments in housing were greatly reduced. The most significant reasons and objectives of the privatisation have, thus, been financial, ideological and psychological (Table 1). The objectives of the Estonian government regarding housing privatisation are: to minimise public expenditure on the housing sector (e.g. administrative costs, renovation, subsidies on housing) (see also Clapham & Kintrea 1996b, Struyk 1996); to encourage people to invest more in their housing; to return to the pre-Soviet institutional organisation, in which the private ownership was dominant (as the government has declared the continuation of the Estonian national state during the years of ‘Soviet occupation’, the meanwhile existing ‘Soviet institutions’ were also considered to be ‘false’); and to establish social justice in returning the ownership rights to those who had been deprived of them during the Soviet time (Ka¨hrik 1999). For the households, the objectives and expectations of privatisation were related to gaining a greater degree of security in an insecure social system (see Daniell & Struyk 1994, Clapham & Kintrea 1996a, Clapham & Kintrea 1996b), privacy and liberty to act according to their own judgement – to carry out thorough renovation and rebuilding works, or to sell their housing in the market (see also Struyk 1996). One of the most important objectives of the individuals was related to the investment value of property. As people could get the property almost free, most of the households who privatised are able to earn profits selling the housing unit or renting it out in the market (see Daniell & Struyk 1994). The interests of the state and people can also be intertwined, as in the case of investments into housing. The state is interested in better maintenance of the housing stock, and private owners invest in housing as it is a possible source of capital accumulation and can improve their living conditions (Ka¨hrik 1999).

Table 1. The objectives of housing privatisation. Type

Government

Household

Financial

To cut down the governmental expenditure on housing To promote private investments in the housing sector

To become property-owner To invest in housing with the purpose of improving housing conditions and raising property value in the market

Ideological

To re-establish the pre-Soviet social institutions To compensate for the injustices of the Soviet period

Psychological

To return to the pre-Soviet norms and values To gain a sense of security To gain more freedom

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The meaning of ‘privatisation’ and ‘private property’ In general terms, housing privatisation in Estonia is legally defined as ‘the transference of state- or municipally owned property to private ownership …’ (RT (State Gazette) 1997, 884). The supposed result of privatisation is that ‘the role of the public sector in housing will be limited and the role of the private sector will increase’ (Young 1986, see Clapham & Kintrea 1996a, 5). In order to understand the impact of the process on social inequalities, we should, however, explain the concept more thoroughly. It is argued that ‘property is a bundle of rights which are relations among persons and institutions with regard to a thing’ (Marcuse 1996, 122), and that changes related to ownership and property rights ought to be described as ‘the substitutions of one set of rights for another, with substantial and differential impacts on different groups in society’ (Marcuse 1996, 144). Furthermore, property relations can be split into rights and duties (Wessel 1996a). To put it another way, public tenants in the Soviettype public housing enjoyed many property rights – they could rent the property, exchange it, bequeath it to certain family members, etc. However, the legal owner – the state authority – bore the main responsibilities and duties for the maintenance of housing and repairs. As public tenancy was highly subsidised by the state (only about one quarter of the housing expenses were met by rent) (UNDP 1998), the tenants of this type of housing were in a much more favourable situation than private owners. ‘The status of the state as the owner of the apartment houses was actually never consciously conceptualised by the tenants’ (Paadam 1995, 288). After privatisation, the owners enjoy more property rights, e.g. the right to sell the housing unit, but their responsibilities have also considerably increased – including the duties regarding housing repair and maintenance. The shift of ownership does not mean that all the rights concerning the property have automatically been transferred to the private owner. The legislative and executive authorities continue to define and monitor what one may or may not do with one’s property. Thus, the aim should be rather to identify the impact of the substitution of ‘one set of property relations’ for another than to evaluate the changes in terms of transference of property rights from public to private hands. Owners, tenants, public authorities and real estate companies are the main actors involved in and influenced by the process. While the impact of housing privatisation on authorities and companies has mostly been expenditure- or profit-oriented, the impacts on households are many-sided – these might be emotional, perception-, behaviour- and profitrelated.


In cases where there was no ‘pre-war’ owner or where the former owner was not applying for the property to be returned, the sitting tenants had the right to privatise (UNDP 1998). The process of returning the property taken over by the Communist regime to its former owner or his/her successors is called ‘restitution’. Therefore the tenants who had occupied housing units subject to restitution did not have the right to privatise, unlike other public tenants. According to an estimate of the National Union of Tenants’ Association, the number of such tenants in Estonia may reach 150,000, i.e. approximately 10% of the total Estonian population. Sale and purchase took place on favourable terms for tenants. The purchase of apartments occurred for the most part through vouchers, i.e. all individuals permanently living and working in Estonia were entitled to privatisation cheques (public capital vouchers) (UNDP 1998).1 In 1994, 98% of the compensation for privatised housing was paid in privatisation cheques (2,337.5 million Estonian kroons) (Statistical Office of Estonia 1996). The privatisation of housing is having a direct impact on half of Estonia’s population (UNDP 1998): as an outcome, 67–68% of non-Estonian families, i.e. mostly the Russianspeaking population, and 43–44% of Estonian families are becoming owners of apartments (Sillaste & Purga 1995, see Ko˜re et al. 1996, 2153–2154). It is estimated that by the time the housing reform is completed (within a couple of years), approximately 90% of Estonia’s residents will be private owners and 10% tenants.

The case of Tartu, Estonia The following analysis concerning the privatisation-related attitudes and perception, as well as the impact of housing privatisation on social inequalities is mostly based on the data of a quantitative survey carried out in Tartu (Tartu University & Tartu City Government 1998). Tartu is the second largest town in Estonia with ca. 100,000 inhabitants (in 1998). The town consists of housing districts of various age and quality (Fig. 2). In and around the centre there is older housing stock, often made up of low-quality housing (Fig. 3). In the suburbs there are quality-housing areas of small-scale housing (Fig. 4) and districts of high-rise dwellings constructed during the Soviet period (Fig. 5). In Tartu, the housing privatisation started in 1991 and by 1998 the process was almost completed (Figs. 2–5). The sample was designed according to the stratification method, based on national groups, age groups, gender groups and sub-areas (town-districts). A proportionate stratification was used for age groups, gender groups and national groups, whereas a disproportionate stratification was used for subareas. Later on, the data for the whole town was weighted according to the proportions of the population in different sub-areas. The total number of respondents was 1,518.

Procedure and extent of housing privatisation in Estonia The housing privatisation reform in Estonia (started in 1991) gave the right of first refusal to pre-nationalisation owners or their successors with respect to the property taken from them.

Preference for home ownership Prior to describing the attitudes, perception and impacts related to privatisation, it is important to note that some of the



Fig. 2. Dominating types of housing in districts of Tartu, 1998. Source: Tartu University & Tartu City Government 1998. (1 – Supilinn, 2 – Vaksali)

Fig. 3. Multi-flat housing with partial or no facilities (Supilinn district, Tartu). Source: U. Alakivi photo collection.

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Fig. 4. Detached housing (Tammelinn district, Tartu). Source: U. Alakivi photo collection.

Fig. 5. Multi-flat housing with all facilities (Annelinn district, Tartu). Source: U. Alakivi photo collection.



Table 2. The impacts of housing privatisation on households who have privatised, according to their own evaluation, in Tartu, 1998 (%). Encourages to take better care of housing Encourages to invest more into housing Makes the future more secure Improves communications with neighbours Brings tensions between neighbours Brings more responsibility and duties Has changed, other impacts Has not changed anything

36 28 33 10 5 26 2 25

Source: Tartu University & Tartu City Government 1998.

objectives of privatisation outlined above have been brought about by changes in the social system. These are related to the process of marketisation, privatisation and new ideologies. For instance, public tenants could enjoy a great degree of psychological security under the Soviet system (as regards the fear of eviction and their property-related rights) whereas in the new system their future would become quite unsafe if they were to continue as tenants. In short, each social system prefers and supports certain types of forms of occupancy. The Soviet system supported public tenancy. Private owners were left in a relatively unfavourable situation, as their housing was not subsidised in the same way as public housing. In capitalist society, on the other hand, private ownership is the favoured type of tenure. Thus, according to Boddy (1980, see Saunders 1990, 67): ‘The “desire” for private property springs not from individuals but from the socio-economic system.’ Short (1982, see Saunders 1990, 67) claims that ‘people desire owner occupation as it is more financially attractive because state policies have made it so’. In view of the above, the high rate of preference for home ownership under the new conditions is not surprising. According to the results of the survey carried out in Tartu, 91% of the respondents considered home ownership as the most preferred type of occupancy. As 93% of all the households who privatised their housing also preferred to become owners, then only 7% would have preferred to continue as tenants. The decision to privatise can be explained by the facts that privatisation was carried out on extremely favourable terms – with practically no costs for households – and the period of privatisation was limited. Privatising was rather a ‘taken for granted’ than a deeply considered decision. The central arguments which led households to privatise seemed to be related to the insecurity of the rental sector caused by the new social system (the growing rent levels, fear of eviction, etc.), the financial benefits people would gain through privatisation (through selling or renting out in the market), and achieving a greater control over housing maintenance and management. The negative aspects of privatisation were related to the increasing responsibility and duties. According to Paadam (1995, 280), the negative side of the opportunity to privatise was related to ‘the low motivation to privatise the present housing for its low standards (as to building quality, planning, maintenance, etc. and poor residential qualities)’. The main arguments for and against privatisation seem to coincide with the case of Moscow (see Daniell & Struyk 1994). As the survey data from Tartu indicate, most of the households are

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Table 3. Comparison of the level of housing privatisation between Estonians and non-Estonians in Tartu, 1998 (%).

Estonians Non-Estonians Total

Privatised

Whole population

70 30 100

79 21 100


able to perceive some kind of changes as a result of the privatisation. Whereas privatisation has encouraged 44% of all privatised households to invest more into their housing or to take better care of it, for 33% it has given more security in respect of their future. However, 25% perceive more responsibility and duties concerning their property as a result of privatisation, and for 25% the privatisation has not changed anything (Table 2).

Privatisation – equality in opportunities? Next, I will analyse in more detail whether all the public tenants were entitled to equal privatisation opportunities or if some households were placed in a more favourable situation as compared to others. I will discuss the participation of different social groups in the privatisation process and give an overview of the kind of housing stock that has most extensively been transformed from public to private ownership. As briefly explained above, the law that has provided the basis for housing privatisation has enabled the government to carry out privatisation on favourable terms with almost no financial costs for the households who have been living and working in Estonia for a sufficiently long time. As a result, one might assume that there are no major differences in the extent of privatisation by households at different levels of economic welfare. The empirical data shows that among households who have privatised there is almost no differentiation relating to different incomes and educational levels. In relation to the whole population, the share of elderly people (60 and more years) is slightly lower among those who privatised (21% privatised, whereas the total percentage of this group makes up 25% of the whole population). Middle-aged people (40–59 years) are over-represented. This difference could be explained by the fact that the elderly people were over-represented in the housing stock, which was subject to restitution (UNDP 1998). Estonians privatised less than other nationalities (mostly Russians) (Table

Table 4. Comparison of the level of housing facilities between those who have privatised and the whole population in Tartu, 1998 (%) (one- or twofamily housing is excluded).

Flats with all facilities Flats with partial or no facilities Total

Privatised

Whole population

85 15 100

78 22 100


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3).There are two reasons for this: (1) Estonians tended to live in private houses already prior to privatisation, and (2) Estonians exceeded non-Estonians in older parts of housing stock which were restituted and which tenants in most cases could not privatise. The privatised or restituted housing units were mostly located in multi-flat buildings and they contained all facilities (i.e. washing amenities, WC, etc.) (Table 4, see Figs. 2 and 5). As most of the one- or two-family houses were constructed by means of private capital and were already owned privately, this type of housing made up only a negligible share of all the privatised housing (around 1%). To take the level of facilities and the age of housing as the only indicators of housing quality, the privatised flats tend to have better quality when compared to all flats in the town – these are not as old and contain more facilities. The main reasons for not privatising public apartments were that the flat was returned to its legal pre-war owner (5%), that the quality of the flat was very low (1%) or that the household did not have enough privatisation vouchers (1%). Among the least favoured households in the privatisation process were thus the tenants living in housing subject to restitution. These tenants have usually lived in their home for longer than other public tenants. Every second tenant has been living in his (her) current housing for more than 20 years (UNDP 1998). There are some advantages given to these tenants by the state or local governments in buying or renting a new apartment, but often issues related to the problems of these households remain unsolved. Favourable loans have been offered by the authorities, but a large proportion of the tenants do not have access to these as their income is not high enough.

The status and prospects of the rental sector Since the great majority of the housing stock has been privatised, it might be interesting to look at the status and future prospects of the remaining rental sector. Saunders (1990) has argued that in Great Britain (where a large-scale privatisation programme has been implemented) the general trend is that tenure divisions are reinforcing and expressing existing social divisions. It is gradually becoming more difficult to enter the ownership sector, and the inequality gap between tenants and owners seems to grow as the former group is forced to pay high rents to landlords or authorities


Table 5. Segmentation indexes for income quartiles by housing submarkets based on form of occupancy, Tallinn and Tartu, 1994 and 1997.

1994 1997

1st quartile

2nd quartile

3rd quartile

4th quartile

Weighted index

0.1 8.0

1.7 0.2

2.1 8.1

0.3 0.3

1.0 4.1

Source: Statistical Office of Estonia & Fafo 1994, Statistical Office of Estonia 1997.

while the latter group is mostly enjoying financial gains from their status of ownership. As a result of privatisation, marketisation and reshaped ideologies, similar developments might be expected in the Estonian housing sector. The procedure and outcomes of privatisation have a remarkable influence on the structure of remaining tenants and the filtration of the rental housing stock. As pointed out earlier, in Socialist society there were differences in urban space not unlike those in the capitalist world. Still, the basis for differences tended to be qualitatively different from those in capitalist countries. While in the capitalist world the differences have mostly developed out of a great variation in income levels, being associated with occupational as well as educational structure, the differences in Socialist countries emerged more from a political than an economic background. As demonstrated by the data, the form of occupancy was not related to income even in 1994: the segmentation index in two major cities of Estonia – Tallinn and Tartu – was then 1.0 (Statistical Office of Estonia & Fafo 1994) (Table 5). The distribution of social groups between types of occupancy was not correlated with the household’s income, as the meanings of ‘owning the housing’ and ‘renting the public housing’ were not qualitatively different. Further, the occupational and political position of those receiving housing, as well as need, were usually far more important than income. In comparison, the segmentation index by income in different tenure sectors in the three major cities of Norway was 22.4 in 1995 (Wessel 1996b). During the transformation in Estonia, an emerging correlation has become noticeable between income level and form of occupancy. A very small correlation was already registered in 1997 (the segmentation index in Tallinn and Tartu was 4.1) (Statistical Office of Estonia 1997) (Table 5). Households with high earnings tend

Fig. 6. The distribution of housing submarkets by form of occupancy in Tartu in 1998 (%). Source: Tartu University & Tartu City Government 1998.



to live in self-owned housing, while those who earn less are more represented in the rental sector. The privatisation process has created a basis for a private rental market where the rent levels are usually uncontrolled. In a situation where property prices have increased and the public rental housing stock is only a few percent (and access to fairly limited), lowincome families are able to afford only the lowest quality private rental apartments (see Fig. 3). While the socio-economic status of tenants and owneroccupiers is not yet considerably different, the percentage of tenants in multi-flat houses with partial or no facilities is higher than that of owner-occupiers, whereas owner-occupiers exceed tenants in multi-flat housing with all the facilities (Fig. 6). Thus, housing conditions are worse for tenants as compared to owner-occupiers, and tenants occupy older and depreciated parts of the housing stock. To make a comparison: 60% of the tenants in Tartu have only a woodheating system in their housing, while the corresponding percentage in other tenure sectors is 23%; only 33% have running hot water, as compared to 76% in other sectors; washing amenities such as a shower or bath have been installed by only 48% of the tenants, compared to 85% of others. The lower quality of the rental housing stock is affected by high rent levels in the private rental housing market (the tenants’ inability to pay high rents), as well as by the owners’ unwillingness or lack of possibilities to occupy those housing units (in case of restituted housing). Mostly tenants occupy the pre-war housing stock (constructed before 1946). The reasons are: (a) most of this stock had belonged to private owners before nationalisation and is therefore subject to restitution, but, as the law does not allow the eviction of tenants if they do not have a substitute apartment, the tenants remain there on the same conditions for some time; (b) as some parts of this housing stock are of very low quality and highly depreciated, some tenants decided not to privatise

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their apartments but chose to continue as public tenants; (c) as the rent levels of this housing are relatively low compared to other parts of the housing stock (mostly because of inexpensive heating), some social groups who are not able to pay higher rents are interested in renting apartments there (e.g. students). Such an uneven distribution of tenants is also noticeable in the territorial organisation of the city. The lowest quality and oldest neighbourhoods, located next to the city centre, have a higher percent of tenants than the other parts of the city (Fig. 7, see also Fig. 2). The best examples are Supilinn district and Vaksali district. The concentration of the worst quality housing and tenants to certain areas may easily lead to the formation of slums.

Conclusions The extent of housing privatisation in Estonia has been one of the largest among post-Socialist countries. Most of the public tenants, however, seemed to be willing participants in the privatisation process. While in the Soviet social system public tenancy was the preferred type of occupancy due to its advantages over private occupancy, the transformation of the social system has resulted in a changing preference because there are more advantages related to private ownership in the new system. The success of privatisation might be explained by the following reasons: 1. The privatisation was carried out on favourable terms for public tenants. Households, having privatised their housing units, have acquired a property practically for free. Even if the values of the privatised housing units vary largely, it is, nevertheless, possible to exchange each property unit for a charge or to rent it out in the market. It gives a certain material feeling of security to the house-

Fig. 7. Correlation between presentation of flats with low level of facilities* and tenants in the districts of Tartu, 1998.** Source: Tartu University & Tartu City Government 1998. * Flats, where at least one of the following facilities is missing: electricity, sewerage, shower/bath/sauna, WC, central/gas/electric heating system. ** Over- or under-representation rates are calculated by dividing the percentage of tenants and the percentage of flats with low level of facilities in given district by the same percentages in the whole city.

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holds who have privatised their housing. Other important aspects in favour of privatisation were related to the growing insecurity of the rental sector and to the achievement of better control over the housing unit in terms of maintenance, management, and bequeathing. 2. The negative aspects of ownership were not much discussed prior to privatisation. 3. Home ownership was type of occupancy preferred by a majority of the population at the beginning of the process. Many motivations for privatisation can be related to the changing social system. While during the Soviet period public tenants did enjoy a lot of rights concerning the apartments they were living in, some of these rights were abolished in the new social system. Whereas the Soviet system supported public tenancy, the new system finds measures to reduce such a huge public housing stock and supports private ownership. Thus, tenants in fear of losing their right of disposal preferred to become owners. The households’ position in the housing market depends on their choices within given opportunities. The opportunities are an outcome of interplay between the resources people have and the rules existing in society. On the one hand, the legislative acts related to privatisation have had a significant role in influencing the choices people could make and the outcome of the privatisation process. On the other hand, the households’ housing conditions (quality, location, etc.) and their financial resources were relevant in influencing the households’ gains and losses in the privatisation process. As for privatisation opportunities, the process has brought along both equalities and inequalities. The privatisation procedure used in Estonia secured relatively equal privatisation opportunities as regards the socio-economic status of households. Unlike most of the other East European countries, it enabled most of the tenants of public housing to privatise. Thus, there has been an immense growth of home ownership. The transformation of the social system and the inherent privatisation, however, have created a new basis for social inequalities. The inequalities relate to the following three aspects: First, the housing conditions of those who gained the opportunity to privatise varied greatly from low-value old apartments in run-down neighbourhoods to highly valued quality dwellings in desirable locations (see also Bodna´r 1996). As housing of good quality in many cases was occupied by the so-called ‘nomenclature’ (those in higherlevel or favoured occupations) during the Soviet time, this group continued to benefit from the privatisation (see Daniell & Struyk 1994, Marcuse 1996, Ka¨hrik 1999). Whereas some of the households received large financial gains from the process, the gains for other households have been minimal and they have incurred major expenditure maintaining their dwelling. ‘Privatisation, while placing some in the ownership of great wealth, traps others in their very private misery and despair’ (Bodna´r 1996, 634). Thus, the tenants of quality housing were more eager to privatise than those in lowquality housing (see also Daniell & Struyk 1994). Second, perhaps the greatest inequality relates to the different situations of those public tenants who had the


opportunity to privatise their housing units or who got their property back and those public tenants who were deprived of the right to privatise their housing as the property was to be restituted to the former owner. These tenants usually suffer emotionally when being compelled to move out from their homes to which they have experienced a deep emotional attachment. Third, the younger generations and those households who did not occupy public housing have gained little or nothing directly from the privatisation process. Among them, we find residents of private houses and members of co-operatives, who had incurred much higher housing-related expenses already in the Soviet time. Despite the fact that the institutional-legal context of housing privatisation in Estonia did not create unequal distribution of socio-economic groups across occupancy sectors, it has, however, established a good basis for such segmentation in the future. The gap between owners and tenants has increased as a result of privatisation. Those households who have not entered the home-ownership sector are now put in a situation where they find it difficult to cope with high rent levels in the housing market, as the share of public housing is close to zero after privatisation. The situation is especially difficult for young, newly formed households and for low-income households. Even if the tenure divisions do not yet clearly indicate social divisions now, i.e. one cannot find clear evidence of the concentration of a marginalised population in the rental sector, they will probably become apparent in the near future if the current trends continue. The first steps towards an unequal distribution of socio-economic groups across these sectors can already be observed. The remaining rental housing stock tends also to be of a lower quality than in the owner-occupied sector. Thus, it can be assumed that it will often be beyond the powers of both tenants and owners to improve the quality or even to sustain the present quality of the housing. As these depreciated housing units are often territorially concentrated, there is a danger of slum-area formation.

Notes 1 The value of the privatisation vouchers depends on the length of time worked in the Estonian territory since 1945 and is linked to the privatisation price of the apartments. Besides the privatisation cheques (EVP), the securities issued in compensation of illegally expropriated property and the employment shares issued to collective farm workers during the agrarian reform, can also be used for privatisation. The financial cost to the purchaser of an apartment is low and mainly consists of legal fees for the transaction (the latter do not exceed 1% of the total value of transaction). In case of property that do not belong to restitution nor privatisation to sitting tenants, the sale occurs in the form of a public auction. (RT (State Gazette) 1994; UNDP 1997).

Manuscript submitted 16 August 1999; accepted 1 October 1999

References Bodna´r, J. 1996. ‘He that hath to him shall be given’: housing privatization in Budapest after State Socialism. International Journal of Urban and Regional Research 20:4, 616–636.


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