Homeownership, poverty, and legislative pitfalls in Romania

2 February by Ioana Florea , Enikő Vincze


There is a myth about the Romanians being “natural” homeowners. It was propagated by the dominant right-wing anti-communist ideology after 1990, in an effort to legitimise the private property market as the only housing solution and to de-legitimise state involvement in ensuring the right to housing for all. The legislation of the 1990s facilitated the right-to-buy of apartments that people formerly rented from the state. Alongside the restitution process, this was a mechanism of housing privatisation and commodification. In addition, following the trend shown by the World Bank, [1] the state decided to contribute to the creation of the housing market. All of this was a break from previous characteristically socialist legislation, where the housing stock (still 70% in personal property) was controlled so as not to become a matter of real estate speculation.

Thus, the ideal of “The homeowner” is a politically and discursively constructed subjectivity, not an ethno-national characteristic. “The homeowner” is created materially by a political economy that actually makes it impossible to access housing if not on the market. This aspect is particularly important since the state withdrew from its former role as producer of public housing and became the facilitator of housing production via private investments and real estate development.

Today even in the big cities of Romania, such as Bucharest and Cluj-Napoca, where the average income (circa 700 euro/ month) is much higher than the average national level, people cannot afford to pay a market rent (at around 420 euro/ month) from one salary, while also providing for the other household needs. Thus, many are required to take up a second job, rely on wider family support or even take on household debt. Although the Roma are disproportionately affected by housing exclusion, the lack of an adequate legal and economic framework ensuring the right to housing affects a much wider population. The majority of workers earn well below the average income and can hardly afford to pay a market rent even from two salaries; they are often forced to look for cheaper housing characterised by overcrowding.

Based on statistical data we argue that the reported high levels of homeownership and owner-occupied housing in Romania are not equivalent to secure adequate housing for everyone. For many households, homeownership is not a guaranteed path to a good quality of life, but the only precarious resource in a de-regulated market economy. We consider that legislative and budgetary measures for a wide stock of social and public housing, under public ownership and management, available where it is needed the most, would be the main solution for a lack of adequate and secure housing at prices that are affordable in comparison with household incomes.

According to the Romanian National Statistical Institute (INS), in 2018, 98.77% of the existing housing stock was in private property; the percentage of housing in public ownership has fallen from around 30% in 1990 to below 2%. Eurostat data from that same year reflected that 96.4% of the population lived in owner-occupied housing, the vast majority (95.3%) in mortgage Mortgage A loan made against property collateral. There are two sorts of mortgages:
1) the most common form where the property that the loan is used to purchase is used as the collateral;
2) a broader use of property to guarantee any loan: it is sufficient that the borrower possesses and engages the property as collateral.
-free homes. In 2018, 22,208,803 persons declared domiciles in Romania, which means that 21,409,286 of them lived in owner-occupied housing. Contrary to dominant mass-media accounts, this does not mean that they are all owners of their homes, but rather that one household member owns the house in which several non-owners are formally registered. Moreover, mortgage-free housing does not mean debt-free security, as default on widespread consumer loans or on utility arrears also leads to foreclosures and loss of home. Romanian legislation does not protect households in these situations, which renders many dwellers in owner-occupied housing vulnerable.

We propose a more complete interpretation of the above data by correlating it to a set of figures reflecting the severity of poverty and housing deprivation in the country. Eurostat shows that circa 24% of the Romanian population is living under the relative poverty line; according to INS, in 2018, this meant an income of 750 lei = 155 euro/ month. As the number of residents that same year was 19,476,713, it means that 4,674,411 persons suffered from poverty. The rate of poverty-and-social-exclusion – based on both the indicator of income and that of severe material deprivation – is, obviously, much higher, around 32%. Among all persons with residence in Romania, 6,232,548 were affected by this phenomenon.

Furthermore, FEANTSA’s Fifth Overview on Housing Exclusion in Europe [2] noted that, in 2018, 37.4% of the poor suffered from severe housing deprivation and 56.4% of them lived in overcrowded homes. Paying for the utilities was another challenge that people earning below the relative poverty line were facing: 20.3% of them were in arrears on utility bills. This phenomenon is increasingly worrying due to the further liberalisation of prices on electricity and gas, while the fundamental right to water is not accessible for everybody: 14.4% of the total Romanian population had utility debts [3].

In the last 30 years, a continuous series of privatisation laws dismantled the social state. Legislation regulating real estate became ambiguous and incomplete, allowing tax avoidance. Rent became de-regulated, while tenant-protection legislation was weakened during the post-2008 austerity wave. In this context, people not living in owner-occupied housing are usually more vulnerable. If we were to consider a stretched hypothesis in which all people not living in owner-occupied housing are affected by poverty-and-social-exclusion, we would still find that at least 5,430,000 persons in owner-occupied housing – the so-called “homeowners” – were suffering in 2018 both from income poverty and social exclusion measured by different forms of material deprivation. Using the same hypothetic calculation, we would find that of the total of 10,282,675 persons in overcrowded homes (46.3% of the total population), at least 9,483,000 of them are “homeowners”. This stretched scenario shows that even the lowest estimations of vulnerable “homeowners” are actually quite high.

Looking at the situation of home renters (supposedly 3.6% of Romania’s population in 2018), we note that, due to legislative loopholes and high rents, the formal registration of private rental contracts is not a usual practice. In fact, the number of market renters could be higher, occurring mostly in the big cities of Romania with recovering economies after the crisis of the 1990s and the 2000s. Moreover, 46.3% of the market renters were overburdened in 2018 with the costs of housing, while among the “reduced price renters” this percentage was also relatively high (20.5%). [4] The biggest problem with becoming a renter is the insignificant number of public or not-for-profit Profit The positive gain yielded from a company’s activity. Net profit is profit after tax. Distributable profit is the part of the net profit which can be distributed to the shareholders. homes in Romania. This not only affects people who, due to their material conditions, cannot not afford to rent or buy an adequate home from the market, but also impacts how the housing market is solely influenced by private developers and real estate speculators, and is dominated by the logic of profit-making.

Additional housing problems are revealed when looking at workers earning the national minimum income. In early 2020, approximately 32% of the employees were earning the minimum net salary; in the majority of economic domains this meant 1346 lei = circa 280 euro; in construction it was 1770 lei = 368 euro [5]. The value of the monthly consumption basket for a decent living, for one person, was calculated at the end of 2019 at 2684 lei. [6] This means that from a total of 5.6 million, 1,792,000 of the employees earned half of the costs of a decent life. Even for homeowners, what they earn is hardly enough to provide food, utilities, and other necessary basic goods.

For all these struggling social categories, the ideal of homeownership is far from solving the interconnected uncertainties; for many, it remains the only safety net and precarious household resource in a market-dominated society. An adequate public housing stock could provide a real response to their housing needs and would solve issues of overcrowding, indebtedness, or living under inadequate conditions. It would reflect in practice and policy the legislation that theoretically recognises the right to housing for all.

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In the context of the Covid-19 pandemic, in April 2020, the Block for Housing submitted a Memorandum to several public institutions at national level, stating that the current epidemiological crisis was also a social and housing crisis. We demanded legislative changes to ensure a decent minimum income for all, and budgetary allocations for adequate social housing, in order to prevent the deterioration of the economic situation of Romania’s population. Today we no longer are under a state of emergency. But, since the pandemic is prolonged and economic recession is worsening, the issues remain.

Several social categories should be prioritised by these measures:

  • those who were earning the minimum salary and have now lost their jobs, those who have lost their informal work, which guaranteed their living from one day to the next,
  • those who recently returned to Romania from abroad [7] and have no way of finding employment, those who cannot pay utilities and/or rent, risking being evicted from their accommodation and becoming persons without shelter.
  • those who do not have the resources to buy or rent a house on the market.
  • those who are in temporary accommodation in night shelters or residential centres for migrants.
  • those who, due to the lack of housing alternatives, are forced to continue to live in unconventional spaces, in overcrowded conditions, or in toxic environments, lacking access to utilities, or risking eviction.

The demands of our Memorandum included, among others: a) raising the value of the so-called “minimum guaranteed income” [8], in order to cover the value of the minimum monthly consumption basket for a decent living; b) modifying the eligibility conditions for receiving the “minimum guaranteed income”, so that all persons with earnings at the level of the minimum salary or below could access it. We sustained that only by respecting these conditions, the minimum guaranteed income in Romania could become the decent minimum income proposed one year ago to the European Commission by the Economic and Social European Committee. [9] Besides, we also demanded legislative and budgetary measures regarding access to housing and utilities, such as: a) increasing the stock of social public houses; b) adopting the “housing first” model in distributing social houses and supporting beneficiaries, through an integrated package of social and medical measures, for as long as needed; c) suspending and preventing all evictions which leave evicted persons without adequate housing alternatives, beyond the period of epidemiologic emergency; [10] d) adopting the implementation of “social tariffs” for utilities – in relation to water, electricity, and gas providers – with the purpose of granting access to these services to all households in vulnerable situations.

We are dedicated to further advancing these demands during the critical months ahead, as they would impact the lives of millions of people in Romania.




Footnotes

[1World Bank: Housing. Enabling Markets to Work, 1993, http://documents1.worldbank.org/curated/en/387041468345854972/pdf/multi0page.pdf

[3In addition, there are a high number of households disconnected from utilities that they can’t afford.

[6According to an updated Syndex study (www.syndex.ro/situatia-salariatilor-din-romania-studiu-anual), a family of two adults and two children would have needed 6954 lei per month, a family of two adults and one child – 5918 lei (www.bursa.ro/valoarea-cosului-minim-pentru-consum-a-crescut-43193837_).

[7Almost 5 million persons left to work abroad in the past decades.

[8Currently, this basic social benefit only ensures survival in conditions of poverty for the recipient.

[9See the proposal For an European Frame-Directive Regarding the Minimum Income, which would constitute a first important European response to the serious and persistent problem of poverty: https://www.eesc.europa.eu/en/our-work/opinions-information-reports/opinions/european-framework-directive-minimum-income-own-initiative-opinion

[10In an unprecedented endeavor, our national-level research calculated that hundreds of thousands of people have been affected by evictions in the last two decades, https://bloculpentrulocuire.ro/2019/04/19/raport-asupra-evacuarilor-fortate-2008-2017/ – soon to be available in English.

Ioana Florea

Investigadora postdoctoral en la universidad de Göteborg y militante en el Frontul Comun pentru Dreptul la Locuire/ Frente común por el derecho a la vivienda, de Bucarest. Ambos forman parte de la red nacional Block For Housing en Rumanía

Enikő Vincze

Profesora en Babeș-Bolyai University y militante por la justicia de la vivienda dentro del movimiento Căși Sociale ACUM!/ Vivienda social ahora! de Cluj-Napoca.

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