Armenia Housing Study

72 Pages·2010·1.15 MB·English

Armenia
Housing
Study
Prepared by: Hayastan Stepanyan, legal expert, UFSD
and Armen Varosyan, housing expert, UFSD
Contents
Foreword ________________________________________________________________________________4 n
Acknowledgements _______________________________________________________________________5 mIllSTEI
Executive summary _______________________________________________________________________6 RA
Ez
Introduction and methodology _____________________________________________________________9
Context analysis
Background information on the Republic of Armenia _______________________________________10
Housing stock of Armenia before independence ____________________________________________11
Housing situation after independence _____________________________________________________13
Condition of current housing stock in Armenia _____________________________________________15
Vulnerable groups in Armenia lacking access to decent housing _____________________________16
Housing analysis
The property rights regime _______________________________________________________________17
The housing finance regime ______________________________________________________________19
The housing subsidies regime ____________________________________________________________21
Residential infrastructure _________________________________________________________________23
The regulatory regime ___________________________________________________________________26
Position statement and recommendations
Property rights recommendations _________________________________________________________30
Housing finance recommendations _______________________________________________________31
Housing subsidies recommendations _____________________________________________________31
Residential infrastructure recommendations _______________________________________________34
Regulatory recommendations ____________________________________________________________34
Housing solutions
Government of Armenia housing solutions ________________________________________________35
Best practices ___________________________________________________________________________38
The Monument of Sardarapat celebrates the Republic of
Armenia’s battle for independence, which took place from May
References ______________________________________________________________________________41 24 to May 26, 1918. Sardarapat is 40 kilometers west of Yerevan,
and the battle is considered to have stopped the Turkish advance
Annexes ________________________________________________________________________________45
in Armenia and prevented the nation’s destruction.
Photographers: Kim MacDonald and Ezra Millstein. Cover photography by Zaruhi Tonapetyan.
2 Armenia Housing Study
Acronyms
AB ........................Apartment building GoAm ..................Government of Armenia nRC ......................norwegian Refugee Council
ACRA.................... Armenian Credit Reporting HFHA ....................Habitat for Humanity Armenia PD .........................Passport Department
Agency HFHI ..................... Habitat for Humanity PmU .....................Project management Unit
ADB ......................Asian Development Bank International PPP .......................Public Private Partnership
AmD .....................Armenian Dram HIG .......................Housing improvement grants PRSP .................... Poverty Reduction Strategy
ARC ......................American Red Cross HOB ......................Heat-only-boiler plant Paper
Armenian SSR .... Armenian Soviet Socialist HPC ......................Housing purchase certificates RoA ......................Republic of Armenia
Republic HPP ......................Hydropower plant RoA nA ................ national Assembly of the
ASWC ................. Armenian Water and Sewerage IDA ....................... International Development Republic of Armenia
Company Agency RD ........................Road Directorate
CBA ......................Central Bank of Armenia IFC ........................ International Financial SCREC .................. State Committee of Real Estate
CHP ......................Combined heat and power Corporation Cadastre
CIS ........................ Commonwealth of ImF .......................International monetary Fund SDC ...................... Swiss Agency of Development
Independent States IRD ....................... International Relief and and Cooperation
CJSC ....................Closed joint stock company Development SDP ...................... Sustainable Development
CPS ......................Country Partnership Strategy IUE .......................Institute for Urban Economics Program
DCA ......................Development Credit Authority KfW ......................Kreditanstalt für Wiederaufbau SmE .....................Small and medium enterprises
DGF ......................Deposit Guarantee Fund lG .........................local government SWm ....................Solid waste management
DIGH .................... Dutch International Guarantee lTV .......................loan-to-value ratio TPP .......................Thermal power plant
for Housing mlSA ................... ministry of labor and Social UCO .....................Universal Credit Organization
EBRD .................... European Bank for Affairs UFSD .................... Urban Foundation for
Reconstruction and mmPAA................ mortgage market Participants’ Sustainable Development
Development Association of Armenia UI ..........................Urban Institute
EQz ......................Earthquake zone moD .....................ministry of Defense UnHCR ................ United nations High
EQzRP .................. Earthquake zone Recovery mOTC ................... ministry of Transport and Commissioner for Refugees
Program Communication USAID .................. United States Agency for
FC .........................Financial cooperation moUD .................. ministry of Urban International Development
FmC ......................First mortgage Company Development USSR ................... Union of Soviet Socialist
FSAP .................... Financial System Assessment mTA...................... ministry of Territorial Republics
Program Administration VAT .......................Value Added Tax
FSDP .................... Financial Sector Deepening nBF .....................non-bank financial sector WB .......................World Bank
Project nmC .....................national mortgage Company WTO .....................World Trade Organization
GAF ......................German Armenian Fund nPl ......................non-performing loans Ym ........................Yerevan municipality
GDP ......................Gross Domestic Product nPP ......................nuclear power plant
Armenia Housing Study 3
Foreword
Over the past two decades, Habitat for Humanity, a Christian nonprofit organization dedicated to fighting
the scourge of poverty and inadequate housing, has built or improved more than 350,000 affordable homes
worldwide. While this is clearly an impressive achievement for a nonprofit, we know that it is impossible to At Habitat,
meet the goal of “decent housing for all” through Habitat’s building efforts alone.
we believe we
To eliminate poverty housing from the face of the earth, our mission calls us to go beyond building and
need genuine
refurbishing homes. At Habitat we believe we need genuine partnerships and participation with individuals,
communities, corporations, nonprofits, local and national governments, and other institutions. Increasingly partnerships and
through our programs in 90 countries where we work, we are aiming to influence the overall housing policy
participation
and practice to enable a functioning housing sector that works for everyone.
with individuals,
To start, we all need reliable information on the housing environment and a good understanding of the
communities,
primary housing needs. This Armenian Housing Study, conducted around a methodology developed for
Habitat for Humanity’s emerging global housing policy index, is one of the first steps in this direction in corporations,
Armenia. It is an attempt to analyze the context and environment that affects housing issues in Armenia,
nonprofits, local
and to identify the most vulnerable groups affected by current housing policies and practices. The housing
policy index looks at five key policy areas and is based on extensive research and studies from many of the and national
world’s leading housing policy experts and institutions.
governments,
Through the data and analysis in this report, we aim to improve our understanding of the housing and other
environment and need in Armenia. We believe the analysis and recommendations are useful to policy
institutions.
makers, development professionals, nonprofit organizations and donors who are willing to work together
to find lasting and sustainable solutions to the large demand for decent housing that is portrayed in this
document. This study is obviously not a panacea for the housing issues in Armenia, but we hope you will
find it a helpful guide to developing working solutions to bring about positive change.
Don Haszczyn
Area Vice President
Habitat for Humanity International
Europe and Central Asia
4 Armenia Housing Study
Acknowledgements
Research was carried out by staff from the Urban Foundation for Sustainable Development in Armenia.
■ Authors: Hayastan Stepanyan, legal expert, ■ Acknowledgments from the authors: Atayan, Housing and Communal Policy department
and Armen Varosyan, housing expert. In preparing this study, the Armenian Housing head of the Ministry of Urban Development, and
Study team received support from different agencies Astghik Minasyan, department head of the Ministry
■ Editorial team: Habitat for Humanity and individuals. Firstly, we would like to recognize of Labor and Social Affairs. The names of other
International Europe and Central Asia area vice the assistance offered by Irina Vanyan, director of officials, practitioners and experts with whom
president Don Haszczyn; Habitat for Humanity the Habitat Armenia office, and Siranush Vardanyan, we met are listed in Annex 15. These individuals
International Europe and Central Asia program program development manager. They provided were cooperative, open and informative, and
department, Lucija Popovska, Mike Meaney and very useful comments and supportive suggestions we are grateful to them for their time and good
Feike Dik; Habitat for Humanity International throughout our work. ideas. Sociologist Arsen Aslanyan did a fine job in
Europe and Central Asia resource development The study team met and conducted interviews interviewing experts and practitioners.
and communications department, Willo Brock with the officials and practitioners of the While the aforementioned individuals provided
and Katerina Bezgachina; Habitat for Humanity Armenian ministries of Urban Development, invaluable assistance to the team, the authors are
International Government Relations and Advocacy Labor and Social Affairs, and Transport and solely responsible for the report. The statements
office, Jane Katz; Habitat for Humanity Armenia, Communication; the Central Bank of Armenia; herein are the authors’ alone and not necessarily the
Irina Vanyan. the State Committee of Real Estate Cadastre of the views of HFHI, governmental agencies or the Urban
Armenian government; the Republic of Armenia Foundation for Sustainable Development.
■ Technical support: Staff of Habitat for Passport Department; Yerevan Municipality;
Humanity Armenia; Habitat for Humanity Creative USAID/Armenia Tax Improvement Program;
Support Services in Americus; Habitat for Humanity Kreditanstalt für Wiederaufbau/Development of
Europe and Central Asia, resource development and a Sustainable Housing Finance Market (Phase I)
communications department, Barbora Fricova; Arlene in Armenia; International Financial Corp. office,
Corbin Lewis at Habitat for Humanity International’s Victims of Public Need North Avenue NGO; and
Government Relations and Advocacy office; Siranush independent experts to obtain information and
Vardanyan, program development manager at Habitat insight about the housing sector and policies related
Armenia. to affordable housing in Armenia. Particularly, we
are fortunate to have strong support of Yevgenya
Armenia Housing Study 5
Executive summary
The housing situation in Armenia was influenced a comprehensive national housing strategy to areas can be offered as collateral only if they are
largely by the conflict with Azerbaijan over Nagorno address all housing problems effectively. registered in the real estate cadastre and have an
Karabagh in the late 1980s and early 1990s, forcing Housing stock is deteriorating because of issued ownership title.
the influx of an estimated 350,000 refugees. And poor maintenance. Nineteen years after the Maintenance of single-family housing stock is not
in 1988, a devastating earthquake in the northern collapse of the Soviet Union, transformation to given enough attention by the government or donor
regions of Armenia rendered about 17 percent a new housing management system still is not organizations. It is the sole responsibility of the
of the nation’s housing stock uninhabitable. In going smoothly. Although projects supporting owners, who maintain their house over time at their
addition, Armenia experienced a production decline the management and maintenance of apartment own expense. Single-family housing improvement
in its housing sector. Other major problems were buildings, including upgrading communal and new construction are needed, especially in the
deteriorating housing stock (apart from those caused infrastructure and monitoring communal rural areas of the earthquake zone and villages along
by the earthquake) and the households designated as services, are some of the most important the state border of Armenia.
underhoused. priorities of the government, reportedly only 20 Evictions are often illegal and performed without
The aforementioned challenges forced the percent of registered condominiums are effective. proper compensation and resettlement.
government to undertake reforms in the housing This is due, in large part, to irresponsible owners There are many unfinished residential structures
sector. Since 1989, a number of laws, regulations not caring for common areas of buildings; in Armenia. Construction on these structures
and strategies have been adopted to handle the poor service provision; a lack of competition; started prior to 1991 and halted because funds
shelter problems of earthquake-displaced and nonpayment of service fees by local governments; dried up. Most of them are in the earthquake zone
refugee households; to regulate property and land lack of knowledge of building residents; and weak and Yerevan; the remaining units are scattered
relationships; to boost privatization of state-owned managerial skills by the management body. throughout the country. Most units within the
apartments to the registered tenants (by 2000, 96 A startup revolving fund (“seed funding”) unfinished buildings had already been allocated
percent of Armenia’s housing stock was privatized); by donor organizations, commercial banks, or to households. Therefore, any policy that aims to
to introduce market-based housing management and credit organizations is needed to initiate any complete these buildings must take into account
maintenance systems; to expedite the legalization major activity connected with maintenance. the claims that those households might have on a
and registration of “unauthorized buildings and Additionally, homeowners’ knowledge and particular unit.
unauthorized land occupation”; to promote the capacity in building maintenance should be Currently there are damaged buildings in
development of a housing finance market in increased. Efforts to attract external funds to Armenia that are too dangerous to live in, but which
Armenia; and to solve housing problems of the support apartment building maintenance are could be made habitable again after reinforcement,
middle-income population. hindered because receiving long-term loans reconstruction or capital renovation. Such buildings
from banks or credit organizations—an ongoing are designated damage category III by the Armenian
Problems in Armenia’s housing sector: source of external funding—requires collateral in government, and it is illegal to live in them. The
The government of Armenia has not yet developed the form of real estate. For apartments, common number of buildings in this category is increasing.
6 Armenia Housing Study
Many apartment buildings built in Armenia during the Soviet era are now crumbling.
interest rates. Because of the and implementation of targeted state projects on the
global financial crisis, private- provision of affordable housing for young families,
sector crediting slowed down and vulnerable refugees, the elderly, etc. Based on
the portfolios of banks decreased separate laws and government decisions, 15 ad hoc
further. projects have been implemented by the Armenian
The private rental market Ministry of Urban Development to support residents
is relatively small. The largest in apartment buildings subject to demolition; those
category of rental units is those deprived of housing because of the taking of land
transferred to local governments for state and community needs; internally displaced
(4 percent of housing stock). There persons; residents in wooden houses in the zones
is no rent control. Landlords set prone to landslides and falling rock; children without
the rents themselves, and most parental care; families of dead soldiers; and victims
private leases are concluded of Stalinist repressions. Earthquake-displaced
informally. Lease contracts are households and households along the state border,
EzR subject to notarization and state mainly in rural areas, remain special concerns for
A m registration, which is expensive the government. In addition, thousands of families
IllSTEIn and not expedient for the many are underhoused.
landlords who have to set low Since independence, Armenia has adopted many
The registration process of these illegal structures rents for housing. laws and regulations (see detailed legal analysis
is not yet finalized. The passage of the 2003 law “On Because of a lack of funds, there are no investment in Annex 1) that govern the housing relationships.
Unauthorized Buildings and Unauthorized Land plans for urban expansion to accommodate “Housing Code of the RoA” was in force until
Occupation” provided the basis for bringing the population growth in the capital, Yerevan. November 2005, after which a new legislative
significant number of informal structures into the There is no unified government housing package was adopted by the National Assembly of
formal housing market, but there are still tens of strategy for vulnerable groups. Commitments in Armenia, which doesn’t close the gap in the housing
thousands of illegal structures to be legalized. various regulations and documents often overlap: legislation. There are a lot of relationships that are
Despite the improvements in the legal framework The Armenian government’s action plan for not regulated by the Civil Code or the laws “On
in housing finance and the testing of mortgage 2008–12 pays special attention to housing projects Management of Multiapartment Building” or “On
mechanisms in Armenia by international donors, the for earthquake-displaced, refugee households; Condominiums,” such as the establishment of social
mortgage portfolio of banks is very small, with strict children remaining without parental care; the housing systems in Armenia, including the social
eligibility criteria, low maturity period and very socially vulnerable; newly formed young families; rental housing sector; a provision for the definition
high interest rates (13-16 percent). Loans mostly and people with disabilities or partial mobility. of “socially vulnerable,” “social” and “affordable”
were allocated for housing purchase and renovation. The list of measures in the Republic of Armenia housing; assessment criteria definition; needs-
There are no mortgages that are given at subsidized Demographic Policy Strategy includes development assessment methodology; criteria of registration
Armenia Housing Study 7
and housing provisions; etc. According to the ■ To shared property of multiunit building. ■ Improve housing conditions by supporting
information provided by the Republic of Armenia’s ■ To the apartments in the buildings under rehabilitation or new construction.
Ministry of Labor and Social Affairs, n about 140 construction (so-called “elite” buildings) that ■ Establish legal mechanisms for construction
legal documents of the Republic of Armenia, the have not yet passed final inspection. of affordable, economical and safe housing
term “socially vulnerable” is specifically used to for vulnerable groups. It is important legally
reflect the meaning of a given legal document. Housing finance to approve a “road map” of construction for
There is no national housing allowance scheme ■ Regulate the housing finance sector to ensure such houses starting from design-drawing,
in Armenia, although the ministries of Urban its viability without impeding its ability to construction permission documents, use
Development and Labor and Social Affairs are meet a broad spectrum of housing needs. of special construction materials (low-cost,
considering this option. ■ Support the creation and development of nonstandard) and volunteer labor, providing
Key legal problems in the field are the lack of housing finance institutions. technical inspection for these houses free of
housing strategy development and clear policy ■ Channel housing subsidies through, or in charge (this service to the “socially vulnerable”
on state responsibilities to vulnerable groups; conjunction with, housing finance. should be provided by the local authorities).
separation of responsibilities among state and local ■ Determine effective housing demand by
authorities; private-sector involvement in housing income and location (urban, rural) to identify Residential infrastructure
industry and finance; improvements of eviction, and define market segments and the volume ■ Develop a strategic approach to solid
foreclosure and bankruptcy mechanisms to conduct of finance required by each segment. waste management (acceptance of concept
legally transparent and sustainable transactions in ■ Find out sources of lenders’ funds and the papers, laws, other legislative acts, and local
real estate, including sales and other transfers of elasticity of these sources. government ordinances).
nonperforming loans; and the implementation and ■ Determine the gap between potential demand ■ Establish clear mechanisms for municipal
enforcement of acting laws and regulations. and current supply for each market segment. borrowing or the issuance of municipal bonds.
■ Develop adequate mortgage and housing ■ Develop a policy document and upgrade
The authors of this study tried to cover all saving products. infrastructure in informal settlements.
housing problems in the country and provide ■ Provide mortgages for vulnerable households ■ Develop capital investment plans for urban
recommendations to solve them. Recommendations with subsidized interest rates. expansion to accommodate population growth.
are summarized and made by subfields to further
facilitate activities of responsible authorities or Housing subsidies Regulatory regime
interested parties (investors or donors, including ■ Create the necessary legal and regulatory ■ Strengthen zoning legislation to protect
international organizations). frameworks to support supply-side subsidies. wetlands and endangered species near urban
■ Increase housing production, which means areas.
Main recommendations: directing more resources to residential ■ Improve spatial development and planning
Property rights construction. activities in all communities.
Ensure and finalize registration of property rights: ■ Increase affordability by building low-cost ■ Deploy the national urban cadastre.
■ By the state, municipalities, legal and physical housing or by supplementing housing ■ Improve the legal and regulatory framework for
entities putting real estate into civil circulation expenditures. urban development.
and making it subject to property taxation.
8 Armenia Housing Study
Introduction and methodology
Data as of December 31 2009, since some changes has been taken place in 2010.
Habitat for Humanity seeks to generate reliable and To prepare the study, the study team used the
comparable information on the global housing policy following methods:
environment. The organization seeks to do so by ■ Interviews with the relevant central and
collecting housing policy data in a large number of local government officials, nongovernmental
countries on a regular basis to determine a Housing organizations and independent experts were
Policy Index for each country. conducted based on a questionnaire initially
developed by HFHI.
The data are collected in Armenia in five ■ Ad hoc meetings with the specialists from Armenian
sections—the Property Rights Regime, the Housing ministries of Urban Development and Labor and
Finance Regime, the Housing Subsidies Regime, Social Affairs and, and Department of Statistics
the Residential Infrastructure and the Regulatory within Government of Armenia.
Regime—and an index score was generated from the ■ Review of existing legislation, papers and
analyses. Although the index is yet to be published publications.
alongside those of other countries, the process ■ Review of existing legislation on real estate,
already undertaken to generate data lends itself to the particularly in housing.
development of a narrative report. ■ Review of publications about housing in
Armenia.
The proposed study is a narrative report on ■ Review of other papers available on the Internet
the housing sector of Armenia framed around the about housing in Armenia.
methodology of Habitat for Humanity International’s Data collection: Ministry of Urban Development,
global Housing Policy Index, which analyzes the Department of Statistics, Central Bank of Armenia,
current context and the policies and environment International Financial Corp., Armenian Credit
that affect access to adequate housing in Armenia; Reporting Agency and the Internet.
identifies the vulnerable groups in the country that
lack access to adequate housing and determines how The study team drafted each section and sent it
their access is affected by the five policy areas; and to an editorial committee for review and comments.
reviews the activities of government, international Meetings were held with some members of the editorial
agencies and the private sector to identify good committee to discuss comments of the committee.
practices and opportunities for scaling up or Based on the comments and meetings, a final draft was
replicating programs. prepared.
Armenia Housing Study 9
Context analysis
Background information of a centrally planned economy and the breakdown
on the Republic of Armenia of former Soviet trading patterns. Nevertheless,
The Republic of Armenia is a landlocked country the government was able to make wide-ranging
in the South Caucasus. The territory of the republic economic reforms that paid off in dramatically lower
is 29,740 square kilometers. The population is 3.23 inflation and steady growth. Armenia had strong
million.1 The official language is Armenian; the economic growth beginning in 1995, building on
capital city is Yerevan. On Sept. 21, 1991, based the turnaround that began the previous year, and
on the results of a referendum, the parliament inflation has been negligible for the past several
announced the independence of the republic from years. This economic progress has earned Armenia
the Soviet Union. increasing support from international institutions
such as the International Monetary Fund, the World
Political structure: Based on the constitution, Bank and the European Bank for Reconstruction
the Republic of Armenia is a sovereign, democratic, and Development, targeted at reducing the budget
social, rule of law state. The constitution was deficit; stabilizing the currency; developing private
adopted July 5, 1995, through a popular referendum businesses; helping the energy, agriculture, food Like other states of the former
and was amended Nov. 27, 2005. The president is the processing, transportation and health and education
Soviet Union, Armenia’s
head of state and is the guarantor of the country’s sectors; and assisting ongoing rehabilitation in the
sovereignty, territorial integrity and security. The earthquake zone. One of the main sources of foreign economy suffers from the
president is elected for a five-year term of office. direct investments remains the Armenian diaspora,
legacy of a centrally planned
Executive power is exercised by the government, which finances major parts of the reconstruction of
which is composed of prime minister and ministers. infrastructure and other public projects. economy and the breakdown of
The single-chambered National Assembly is
former Soviet trading patterns.
the supreme legislative authority. The National The global financial crisis also affected Armenia.
Assembly is elected through general elections for a Economic decline for 2009 was 14.4 percent.
term of five years. Justice is administered solely by
the courts in accordance with the constitution and
the laws.2 Housing stock of Armenia
before independence
Economy: Like other states of the former Soviet Before independence, Armenia had well-organized
Union, Armenia’s economy suffers from the legacy housing stock and regular housing production, and 1. Statistical Yearbook 2008, www.armstat.am.
2. Official website of the Government of Armenia, www.gov.am.
10 Armenia Housing Study