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Abstract
The study sought to investigate the implications of the privatization of home ownership in Ukraine. The researcher employed content analysis and Critical Discourse Analysis (CDA) as data collection methods. Hence, the researcher sought information on the housing trends in the country as well as patterns of private home ownership. The study relied on publications and documents on the housing and real estate sectors in the region. From the information that was accessed, the study established that home ownership is managed poorly and that the supply of housing facilities, especially in the urban areas does not match its demand. Thus, privately-owned houses in Ukraine are generally expensive, an aspect that raises the cost of living in the country. The study also established that mortgage prices are generally high, making it difficult for low and middle-income earners to secure houses in Ukraine. The population of Ukraine, as well as that of UNECE countries, spends at least 40% of their disposable income for housing budget, thus demonstrating inherent problems caused by the privatization of home ownership in the country.
Keywords: Home Ownership, Housing, Privatization, Mortgages
Table of Contents
Abstract 2
Table of Figures 7
1.0 CHAPTER ONE: INTRODUCTION 8
1.1 Background of the Study 8
1.1.1 Overview of Ukraine: A Profile Review based on PEST Model 8
1.1.2 Home Market in Ukraine 13
1.1.3 Privatization in Home Market and Ownership: A Global Review 15
1.1.4 Privatization in Home Market: A Review of Ukraine 17
1.2Problem Statement 19
1.3 Purpose and Aim 22
1.4 Research Questions 23
1.5 Research Objectives 23
2.0 CHAPTER TWO: LITERATURE REVIEW 27
2.1 Theoretical Framework 27
2.1.1 Theories and Models in Privatization 34
2.1.2 Challenges in Home Ownership: A model approach 41
2.2 Empirical Studies 45
2.2.1 Effects of Privatization on Economic Growth 45
2.2.2 Effects of Privatization on Home Ownership 46
2.2.3 Critical Analysis of 2.1.1 & 2.1.2 47
2.3. Factors that Determine the Nature of Home Ownership in a Country 49
2.4. Conceptual Framework 52
2.4.1. Analyzing the Framework 53
2.5 Gaps in Knowledge 58
3.0 CHAPTER THREE: METHODOLOGY 60
3.1. Overview 60
3.2. Research Philosophy 60
3.3. Research Approach 61
3.4. Research Design 62
3.5. Research Instrumentation 64
3.5.1. Content Analysis 64
3.5.2 Use of Critical Discourse Analysis (CDA) 65
3.6. Data Collection Process 66
3.6.1. Search Process 66
3.6.2. Inclusion and Exclusion Criteria 67
3.6.3. Extraction of Data/Information 68
3.6. Validity and Reliability 68
3.6.1. Validity 68
3.6.2. Reliability 69
3.7. Research Ethical Guidelines 70
CHAPTER FOUR: FINDINGS 71
4.1. Obtained Information 71
4.2. Disparities in Home Ownership in Ukraine 71
4.3. Influence of Home Ownership Privatization on Economic Growth 72
4.4. State of Home Ownership in the UNECE Region 73
4.5. Implications of Privatization on House Prices in Ukraine 75
4.6. Mortgage Prices in Ukraine as a Result of Private Home Ownership 77
4.7. Housing as a Private Commodity in Kiev 78
5.1. The Cost of privatization: Financial Crisis and Expensive Housing 80
5.2. How Privatization has impacted on the Population of Ukraine 82
5.2.1. Positive Implications 82
5.3.2. Negative Implications 84
5.4. Systemic Housing challenges in Ukraine and how they affect People’s Livelihoods 85
5.4. Is Privatizing Home Ownership in Ukraine an Ideal Approach? 87
5.5. Efforts to Improve the Management and Organization of Privatized Houses in Ukraine 91
CHAPTER SIX: CONCLUSIONS AND POLICY RECOMMENDATIONS 94
6.1. Conclusions 94
6.2. Policy Recommendations 94
Table of Figures
Figure 1: Number of people over-burdened by housing costs in the UNECE region: Source: UNECE 74
Figure 2: Evolution of House Prices in Kyiv (USD) Source: http://domik.ua/nedvizhimost/ceny-kiev.html 76
Figure 3: Value of Mortgages in Ukraine. Source: National Bank of Ukraine 77
1.0 CHAPTER ONE: INTRODUCTION
1.1 Background of the Study
1.1.1 Overview of Ukraine: A Profile Review based on PEST Model
Ukraine, a country in Eastern Europe, borders Russia, Poland, Romania, Belarus, and Hungary. In the year 2016, the estimated population in the country was 42.5 million. The country is fairly large with a land mass covering over 600,000 km square. The capital city of the country is Kyiv. Ukraine has a GDP per capita of $3,133 and GDP purchasing power parity of $9,683, which is the second lowest in entire Europe. Following the country’s independence from Russia in 1991, Ukraine’s political environment has been turbulent. Ukraine has experienced revolutions, political instability and territorial disputes that saw Russia annex part of its territory, Crimea. During the Soviet era, the Ukrainian economy was the second largest in the Soviet Union. However, since Ukraine’s independence, the country has faced many economic challenges, including the hollowing of its industrial base, and a decline in population. As at 2017, Ukraine’s government debt was 75 percent of GDP. Despite its demographic and industrial challenges, the country still has a fairly robust transport and energy sector as well as public sector infrastructure.
Ukraine has a dynamic macro-economic environment that influences corporate, social, and political aspects. Thus, a review of the country’s profile using PEST analysis is important in addressing the problem of this study. According to Ramona et al., PEST analysis is an assessment tool that is applied to analyze the Political, Economic, Social and Technological elements of a region’s macro-economy. As a strategic tool, PEST analysis will put into perspective the current market conditions in Ukraine. It will establish economic indicators which can help determine whether the economy is growing or declining, the business environment and the future direction of the country and its implications on the development of the housing industry and home ownership in Ukraine.
1.1.1.1 Political Factors
Ukraine is subject to policies, measures and regulations that govern various aspects of the economy. The government of Ukraine is run at various levels right from the national to the local governments. All these levels of government have constitutionally mandated roles. Ukraine is a democratic country whereby the change of governance is done through democratic processes. There is also a regulatory framework that guides the various sectors of the economy. There is also sufficient legislation to ensure good government and adherence to justice and the rule of law.
Ukraine has a presidential-parliamentary system that has separate judicial, executive and legislative branches. The president makes key appointments that are subject to approval by parliament. There is also the Prime Minister who forms the government. Ukraine adopted a new constitution in 1996 that guarantees a political system that protects the basic liberties and human rights for its citizens and foreign residents. Ukraine also has no formal state religion, and the country’s constitution guarantees its citizens the freedom of speech and press freedom.
Economic factors
Following the scrapping of the Soviet Union, the management of Ukraine economy shifted its approach to capitalism and privatization, thus enhancing the efficiency and effectiveness of the economy significantly. Hence, the region has experienced economic growth at modest rates and significantly increasing the per capita income of the country. The post-soviet economic climate in Ukraine enhanced the flow of Foreign Direct Investment (FDI) into the country, especially in the development of housing and homes through various cooperatives and companies. The benchmarking of Ukraine with other countries has also made significant changes in many aspects such as the ease of doing business, protecting investors, paying of taxes, trading across borders, enforcing contracts and dealing with construction among others. However, when comparing Ukraine with its neighbors and peers, the country scores lowly on the above aspects despite the improvements. Inflation levels in the country have been high and sometimes they get to double digits like in 2008 when it was 22 percent. However, in recent years, modernization, privatization and enhancing efficiency of the economic systems have been the focus of the region. For instance, according to Terterov, Ukraine had made a number of reforms in the banking, taxation and major economic sectors with the aim of liberalizing them and making them more competitive. Economic management, accountability, and anti-corruption efforts have been enhanced through regulatory frameworks. Above all, Ukraine is well-endowed with natural and mineral resources. According to Schmitz and Meyers, the agricultural sector of Ukraine has fertile soils, a temperate climate and flat topography that is ideal for food production and development of related industries.
Social factors
There have been efforts to improve the general literacy levels in Ukraine through education initiatives and the increase in the number of Universities in the country. Hence, Ukraine has a fairly literate workforce. The average monthly income for the country was $211 in 2008 and has significantly increased to about $415 at present. Salary variations are high between the rich and the poor. Ukraine has two major ethnic groups whereby the Ukrainians make 78 percent of the populations and Russians make 17 percent. In the 1980s Ukraine had the highest mortality rates in entire Europe because of a high death rate than the birth rate. The country also loses significant populations to immigration to Russia and elsewhere and the annexation of Crimea. High mortality in Ukraine is mainly due to the neglecting of the health sector by the successive governments. However, the government has made measures to encourage population growth like incentives for mothers to give birth.
Most Ukrainians are Christians and they have a big influence on the culture of the people. The Christian culture is some entrenched in Ukraine in that fathers are regarded as heads of families and grandparents have a big influence on their grandchildren. The population demographics in Ukraine indicate that the county has a population of about 45 million people. Due to immigration the older generation of over 65 has significantly remained the same and is expected to hit 7 million people by 2020.
Ukraine has a few medium-sized cities. Most of the country’s citizens reside in small cities of 55,000 people and below and big cities with over a million people. About 70 percent of the country’s population resides in urban areas.
Technological Factors
Just like the rest of Europe, Ukraine has experienced significant changes in technological advancements. Following the privatization of many sectors of the economy, rapid development has been enhanced. Industries have sprout and the adoption of new technology has been immense. Following the orange revolution, the interaction between the government and the citizens has increased significantly, making the entrenchment of new technology easy. The government is gradually developing information and transportation technologies. The use of electronic commerce is also increasing at a gradual pace with its usage approaching about 20 percent at present. Through European Union programs the government is adopting technological programs such as e-learning. The government is also making more efforts to enhance the computer skills of the citizenry and adopting modern technology.
1.1.2 Home Market in Ukraine
The housing stock in Ukraine is 93.7% private. This is mainly due to the privatization of the housing industry. On that note, 3.4 percent of households in Ukraine live in privately rented houses. The small share of rental housing in Ukraine, however, does not accurately depict the industry because of the informal nature of the industry and the need to evade taxes by those involved. However, this segment is believed to account for about 14 percent of the housing stock in Ukraine. The housing stock in Ukraine is relatively old, as only 7 percent that has been developed after 1991. This implies that housing in Ukraine is dilapidated and old with most houses being between 30 to 50 years old and therefore they urgently need renovation. The consumption of housing in Ukraine indicates that the country has one of the lowest housing spaces per capita in the rest of Europe, and this problem is high in the capital, Kyiv. The country also lacks official records of housing needs in the country. Planning and management of the housing sector are mainly based on statistics on the waiting lists of citizens waiting to be given housing by the government. Data from 2010 indicated that over a million Ukrainians needed housing and over 800,000 of this people have been on the housing queue for over 10 years.
Transitioning of Ukraine into a market economy was marked by a sharp decline in the development of new housing. Investment in housing by the private sector increased substantially while investment by the government almost disappeared. The decline of the housing output reached its bottom in the year 2000 when partly 1.5 percent of total housing was built by the government. Between 2003 and 2007 there was a steady growth of the industry. It then slumped in 2008 following the global economic recession. With the privatization of the industry, there have been significant increases in housing development. However, affordability of housing is also a concern to many Ukrainians. For instance, the current housing income does not match with the prevailing market prices for housing products in the markets. Since 2000, the prices of new houses have increased significantly. Further, the interest rates have also been increasing while the mortgage maturity of loans has also been giving people problems. In addition, dealing with the impact of urban and social economic activities has proven a big challenge to the government. This is evidenced by the regional disparities, environmental degradation, and unbalanced urban development. However, the Ukrainian government has in recent years come up with strategic financing and social-economic planning and the implication of urban planning which may solve these problems. The development of housing in urban centers has prompted a high demand for housing. With the high demand, the pricing for houses has increased significantly making it out of reach for ordinary Ukrainians. On the other hand, there are declining urban areas due to immigration. The same areas also have negative implications for the home market in Ukraine. Therefore, the home market in Ukraine is not stable. Big urban centers that have good markets for homes are faced with challenges in land ownership and registration. For the few available tracks of land the developed housing units are expensive and out of reach for most citizens. The government policy and framework are improving the situation though at a slow pace.
1.1.3 Privatization in Home Market and Ownership: A Global Review
Globally, housing and home ownership is a big problem. This is so especially in the emerging markets whereby over fifty percent of their populations live in informal settlements. The affordability of housing has been a major agenda for policymakers in many countries. The United Nations has departments that work to ensure that global housing and home ownership problem is solved. However, this problem is immense because of the high rate of global urbanization which does not match the rate at which homes are being developed. The imperfections in home markets and ownership are mainly due to the growing disparities between the rich and poor countries on one part and the poor and rich in all societies. Despite government starting programs for affordable housing, bridging the global home ownership problem has been a challenge. However, housing reforms in countries across the globe have seen deliberate attempts to develop mass housing but still, the problem of home ownership still persists. These reforms have mainly been carried through the involvement of the private sector to provide funds and get involved in the development of housing units.
As a result, the privatization of public housing has emerged as one of the main significant market-oriented reforms. Privatization despite not offering immediate solutions to the home ownership problem has enhanced the development of housing units in mass numbers. Privatization has also ensured that there is an efficient allocation of resources and delivery of housing numbers per capita in high volumes as compared to government programs.
Most countries in the world especially those of the emerging economies have turned to private entities to deliver a substantial percentage of the required housing units. The private sector, on the other hand, has been attracted to the industry because of the favorable market forces such as high margins because of high demand and the high costs charged. Privatization has also enhanced the development of housing for the people in the higher status of economic development. However, the government has been giving incentives to private entities to develop housing for the low-income population who form the majority of the populace. Despite the challenge of meeting the demand for housing, the private sector is working against the clock to offer housing units and homes for low-income people in global societies. Though privatization, there has been mass development of housing units mainly in China, India, Africa, Latin America, and the Middle East. The private sector has provided much-needed resources to develop housing. Urban housing has witnessed the development of multi-storey apartments that offer homes to thousands of people. Because of the attracting of the housing industry in the said markets, the developed world has been a source of funds through foreign direct investment because of the good returns that are associated with the investments.
Governments the world over have resorted to privatization when it comes to developing homes and housing with the objectives of reducing its requirements for public borrowing. Privatization has also enhanced efficiency. The incentives in the markets, as well as the constraints available, draw the private sector to maximize their profits while minimizing costs. The incentives enhanced the efficient allocation and utilization of the available resources. The allocation of resources to the industry has subsequently increased the housing per capita delivered by the private sector as compared to the housing units delivered through government or public institutions. Privatization has hastened the rate of delivery for homes in the global markets. This has significantly contributed to the stability of the global markets. Privatization does not work alone to deliver housing in the global markets; it is facilitated by the government through the liberalization of industry. Increasing competition and deregulation have been used as mechanisms for preventing monopolies and the establishment of incentives to ensure suppliers offer home and housing products needed by the society at the true costs of production.
1.1.4 Privatization in Home Market: A Review of Ukraine
Following the dissolution of the Soviet Union, the economic management of Ukraine was restructured to become a free market economy. One of the main components of free market economies is the privatization of major government institutions such as the housing department. House ownership in Ukraine can be transformed into four main stages that include the pre-privatization stage between 1988 and 1992. Then there was the manual privatization stage between 199 and 1994 and the mass privatization stage between 1995 and 1998 and the individual monetary and privatization stage as from 1999 onwards. Following the later stage, many entities have been attracted into the area of housing because the determination of house prices is pegged on the market forces and competition. The government has also been steadfast in the provision of housing through various entities and allocation of resources. The Ukrainian government has launched ambitious plans to provide housing for veterans, civil servants, the youth, military offices, and low-income people.
Following the privatization of the home market, there has been an efficient allocation of resources. As a result, the housing per capita is gradually improving though he backlogs are still high. Support to the building of houses by Ukrainians both in the urban and rural areas has been in the government agent. To this end, the government has been offering incentives and subsidies to home development companies and individuals. For instance, the rural village development initiatives aim to prevent immigration to urban centers, retain employees, and maintain the demographics and creation of new jobs.
Through privatization, the government has improved the provision of urban housing through mainly multi-storey apartments. Privatization has ensured that the number of units completed has increased significantly. The utilization of financial resources allocated to build houses has also become more efficient as opposed to when managed by the public institutions. Therefore, it can be said that through privatization, home ownership in Ukraine has become much easier. For instance, private developers have been making arrangements with local banks to finance mortgages at affordable rates of interest, thus reducing the housing deficits in the country. Privatization has also improved the regeneration of the housing industry whereby old apartments are being improved and rehabilitated. This has significantly increased the housing space for the citizenry. Privatization has also helped the global governments to extend the consumer choices for housing. The private sector has proven to be effective in addressing the various housing needs by consumers. As a result, the private sector has been able to deliver housing products for the rich, the poor and the average people in society as opposed to the government that was keen on delivering standard products.
1.2Problem Statement
The housing and home ownership in Ukraine has been a major issue following the independence of Ukraine from the Soviet Union. The country faces major challenges in the housing sector. Housing as mainly provided by the government before the fall of the Soviet Union. However, after Ukraine got its independence from the Soviet Union, the provision of housing was structured to conform to the free market economy. After that, the provision of housing was mainly relegated to the private sector despite commitments and legislation by the government. To a bigger extent, the present legislation in the housing sector reflects the transitory status of Ukrainian society and economy. The housing problems in the current are a source of demographic problems facing the country such as loss of about 7 percent of the country’s population to immigration. The housing problem has been a source of political problem and social instability. Population in major cities has dropped marginally while in others especially those on the eastern parts of the country have gained numbers though marginally. The general housing conditions in Ukraine can be said to be dilapidated and in need of urgent maintenance and repair.
Over 90 percent of housing property in Ukraine is owned by the private sector. Also, nearly all of these housing properties were developed before 1990. After the year 1990, only 7 percent of new housing developments have been delivered. The statistics imply that housing in Ukraine is dilapidated and old with most houses being between 30 to 50 years old and therefore they urgently need renovation. The consumption of housing in Ukraine indicates that the country has one of the lowest housing spaces per capita in the rest of Europe. This problem is high in the capital Kyiv and many of its major cities. The country also lacks official records of housing needs in the country. Planning and management of the housing sector are mainly based on statistics on the waiting lists of citizens waiting to be given housing by the government. Data from 2010 indicated that over a million Ukrainians needed housing and over 800,000 of these people had been on the housing queue for over 10 years.
The country has developed a number of policy frameworks to guide the housing industry. Some of the urgent problems facing the industry include uneven availability of housing and the presence of substantial population groups without adequate housing. Further, the majority of the available housing is dilapidated, unsafe, and in poor conditions. The housing deficit is big and the government has obligations to facilitate the expansion of housing facilities, which were evident when the economy of Ukraine was centrally planned. However, Ukraine has a number of laws and housing codes that aim at guiding the production of housing and homes to the citizenry. However, most of these laws contain mainly outdated provisions that have failed to provide solutions to the housing problem. The population’s ignorance on the existence of communal property as a separate type of chattels and the treatment given to the subdivision of state property largely contributes to the violation of existing regulations. However, the law is vague on matters pertaining to the privatization of housing apartments.Therefore, there is a need for Ukraine to come up with a lasting framework that will address the housing and home ownership problems once and for all. Housing problems in the rest of Europe and Russia have been effectively managed through privatization. Privatization has many benefits such as efficient allocation of resources due to competition and timely delivery of housing due to competitive bidding. The adoption of privatization strategies will also give the state of Ukraine the required flexibility to optimize on various opportunities to maximize the provision of housing and homes to its citizenry. Through private management of the housing sector, the Ukrainian government will lower construction costs through the use of flexible project management practices, streamlined operations and procedures, and simple procurement. Privatization will also stimulate innovation as competition between private firms will result in more efficient methods of providing housing by keeping costs down through optimal allocation of resources. Further, privatization will allow the government to reduce the time it takes in managing human resources and equipment thus utilizing its time well better service delivery to the citizenry. Privatization will also be effective in removing the bureaucracy that is associated with the government and help the government in the regeneration and maintenance of the existing housing stocks and develop more housing. Through the privatization strategy, the government of Ukraine will increase its housing per capita significantly. By addressing the housing problem, the government of Ukraine will realize its development goals and solve pressing social-economic issues.
1.3 Purpose and Aim
The purpose of this study is to offer an insight into the significance or challenges associated with privatizing home ownership in Ukraine. It is essential to note that various market forces influence the development and purchase of houses in most countries. However, various regulations have a great implication on decisions made by investors in the real estate and housing industry, as well as the experience of citizens. Thus, this study aims at establishing how privatization affects the various dynamics of the industry.
1.4 Research Questions
This study seeks to address the following research questions:
i. What problems are associated with home ownership in the post-soviet Ukraine?
ii. What are the positive and negative implications of the privatization of home ownership in post-soviet Ukraine?
iii. How does privatization affect the housing market in Ukraine?
iv. What policy measures can be implemented to sustain the housing market in Ukraine?
1.5 Research Objectives
This study intends to achieve the following objectives:
i. To examine the extent of the problem of home ownership in post-Soviet Ukraine as from the period 1990 to date
ii. To comprehend the benefits and limitations caused by privatization on home ownership in post-Soviet Ukraine
iii. To critically analyze the moderating effects of privatization of the housing market and the latter’s effects on the economy
iv. To propose a policy framework on home ownership in post-Soviet Ukraine and its future implications to the economy
1.6 Assumptions of the Research
The major assumption of this study is that privatization is a profound aspect in Ukraine, thus forming a solid foundation for this research. Hence, the researcher delves into the various ways in which the privatization has affected home ownership in the country. Another key assumption in this study is that
1.7 Limitations
The location of the study will be limited to Ukraine, which is the geographical location within which the research will be conducted. However, the researcher will refer to various concepts and illustrations that will explain the housing situation in other regions in the world as a back-up for the assertions made in regard to the housing privatization in Ukraine. Secondly, the research will also be limited in terms of financial and time resources. As such, a time and financial budget will be prepared to ensure that sufficient resources are allocated to major activities that will ensure that the work is completed successfully.
1.8 Definition of Key Terms
The following terms will be commonly used in the course of this study:
I. Privatization- Changing ownership of property from the government to private persons
II. Housing- Refers to buildings that are mainly intended for human habitation
III. Government- A group of people and established systems that govern a country or administrative region.
IV. Home- A place or institution where individuals consider to be their residence
V. Economy- The state of production and consumption of goods and services by a country
VI. Regulations- Directives and rules that are put in place and implemented by an authoritative body with the intention of governing decisions and behaviors
1.9 Value of the Research: Scholar, Entrepreneurship & Policy
This study is important as it will create a pool of knowledge that will help fill the literature gaps on various issues such as privatization of housing facilities and programs. The study will also help appreciate and magnify the contributions that have been made by other scholars in reviewing the subject matter and the numerous issues that will be visited by this study, especially the literature review.
The study will also be an essential resource for entrepreneurship in the real estate and property sectors. The outcome of this work will give the entrepreneurs more insight into the various concerns in the industry, and how they can be utilized in maximizing their income. Finally, the study will be an important guiding document for the government, which will be relied upon when developing policies to regulate the housing sector in Ukraine as well as in other countries.
1.10 Dissertation Structure
This study will be organized in terms of chapters, where every section will address various aspects of the study. The first chapter will entail the introduction, which will comprise of the background of the study and the problem being addressed. The introduction will also state the aim and objectives of the study, as well as point out the research questions
The second chapter will entail the literature review, in which the contributions of various scholars on related issues will be discussed. The information from various sources will be synthesized to develop a concrete literature review.
The third chapter will comprise of the methodology, in which the various approaches of obtaining data for this study will be discussed. In this chapter, the researcher will discuss the research approach, design, target population as well as the systematic approach to analyzing the data.
In chapter four, the researcher will document the results obtained from the application of the methods outlined in the previous chapter. The section will present the outcome of the study in the form of tables and graphic illustrations.
Chapter five will entail a discussion of the results using the details of the literature review. In this chapter, the researcher will attempt to answer the research questions using the results and the input of other scholars on the subject matter.
The final chapter will entail a conclusion of the major issues that will have been found in the entire work. In the final chapter, the researcher will also develop recommendations on how the problem can be addressed further.
2.0 CHAPTER TWO: LITERATURE REVIEW
2.1 Theoretical Framework
For many years, privatization has emerged as one of the most vital elements of structural reforms and implementation of programs for both developed and emerging economies. The economic and political policy of privatization is conceptualized as deliberate efforts by the government to transfer assets of state-owned enterprises (SOEs) to private agents of economic management. The British government under the premiership of Margaret Thatcher was the first to try privatization in the early 1980s. Since then, privatization has been used widely by more than 100 countries. Following the privatization of government services, governments have been able to achieve what they would take 50 years under government regulation to just between 4 to 5 years under fully private or government-private partnerships. Economically and theoretically, privatization has helped countries to establish free market economies that have created stiff competition which has in turn given the public greater choices for competitive prices. Based on considerations for efficiency, Cowder argues that enterprises become more efficient besides the privatized enterprises enjoying enormous benefits. Further, the privatized enterprises have become more efficient and the entire economy benefits. Privatization also enables governments to achieve economic prosperity faster which provides the government with a means for maximizing the social welfare of its citizenry and further enhancing its legitimacy. Therefore, through privatization, governments have become more stable because they are able to offer better services to their citizenry. For instance, Boles de Boer and Evans evaluated the implications of the 1987 deregulation and the subsequent privatization in 1990 of Telecom New Zealand on the quality and price telephone services. The evaluation found out that there were significant reductions in the costs of phone services to customers. There were also significant improvements in quality and income for shareholders after the Telco started recording good profits.
Equally, in the face of increased competition in the airline sector internationally, Eckel, Eckel, and Singal investigated the effects of privatization on the performance of British Airways. The authors found increased competitiveness among privatized organizations as compared to its closest rivals mainly US airlines. Similarly, Megginson and Netter emphasized that privatization drives countries to create incorporated economic, political, and social systems that boost the incomes and welfare for all citizens. Privatization is considered to be harmless; however, it may result in enormous failures in circumstances where some dynamics do not work out as anticipated. These failures may mainly be due to the fact that privatization involves a change of institutional archetypes and the economic, societal and government structures. Further, privatization demands behaviors and arrangements that are both problematic and challenging. Privatization in many post-soviet countries has demonstrated that it may result in the decline of the national economy. At present, in the global economy, most economic resources are held by the private sector while the government controls a few. Employment in the world over is dominated by the private sector because of the efficiency and effectiveness associated with it.
In some jurisdictions, privatization is dreaded and may lead to social upheavals for fear of redundancy of people in the public enterprises. This also forms the basis of resistance to privatization because of the fear of the unknown. For example, in Poland unemployment rates increased by 8 percent between 1990 and 1996 when the country privatized most of its enterprises. The former Soviet governments abruptly ended their centrally-organized institutional frameworks under the USSR that held a firm grip on the economy and society for over 70 years. Most of these countries launched massive privatization in 1992 with goals of making all citizens own private property as quickly as possible with a few conflicts.
Privatization does not always result in positive outcomes. For instance, following mass privatization by Russia in the 1990s; its gross domestic product declined by 41 percent between 1992 and 1995. The levels of unemployment also rose from near zero to about 7 percent by the end of 1995. The living standards also declined significantly as inequality increased dramatically, incomes for citizens fell drastically and made necessary for the resurgence of a communist government in 1996. Therefore, privatization is a complicated concept that it is entangled with several factors such as social sensitivities, political concerns and economic matters. When countries make privatization policy decisions with the aid of state-provided measures, they need to consider all these diverse factors that are vital to the failure or success of privatization.
On the other hand, public interest theories have a normative approach from market failures that articulates that economic rationalization, regulation, and intervention should be done by the government. However, the government is prone to bureaucracies, mismanagement, delayed priorities and lack of accountability. As a tasted approach, many civilizations have reverted to privatization as a strategy for achieving faster development. Therefore, because of this, the private approach offers development and provision of fundamental rights the desired momentum. Therefore, because of the failures in government service provision, there is a need to propose changes to property rights of public assets through privatization and privatization which becomes private property. When privatization problems are addressed, the rationalizing of privatization prevails and a subsequent reduction of inefficiency is achieved. Provision of essential government services such as housing to the citizenry is liable to excessive bureaucracy and problems that are associated with a lack of incentives to public administrators to deliver their mandate. These realities justify privatization despite the existence of a critical relationship between the public and private sectors. Therefore, this literature review analyzes the various theories of privatization of public services and goods. As such, this study uses the normative analysis approach, as it intends to establish the trends and values that befit the society on housing matters. It is significant to note that privatization emphasizes equal rationalization in any sector whether public or private. Rationality is informed by the neoclassical economic theories that require that market forces be considered when settling disputes regarding the provision of public services. But the logic of privatization is the need to maximize the benefits to the public under the assumption that privatization promotes greater efficiency and thus better social welfare. Many forces are usually at play especially when it comes to matters of privatizing essential public services such as housing. There are issues of political and economic interests from various pressure groups and the public choice for relationships between the private and the public. The privatization of public products and services is guided by the theory of regulation and government regulation procedures in general as a requirement for privatizing public services. On one hand, there are theories that guide private and public interest while on the other hand there is the new economics of regulation from the perspective of the new institutional economy.
The normative characters of the theories of privatization entail the social choice as a preference by the people to prefer private mechanisms for addressing pressing problems. This is usually the wish of the public on what the state should pursue. This entails considering the possible deviations of efficiency either through bureaucracy or politics or regulators. The main purpose of privatization is to correct market failure which hinders the search for social welfare by the citizenry. The public choice for private interest theory evaluates the various behaviors that make the state to deviate in its pursuit for social welfare with the intention of correcting the potential failures. Through the new institutional economy, the privatization theory is geared to achieving regulation through the control of market failures. Therefore, private regulation is based on public interest, private interest regulation, and the new economic regulation.
Privatization has been used to refer to the sale of publicly owned enterprises’ shares or assets to individuals or private companies. Essentially, privatization is manifested in many forms that inhibit the government from having controls or restricting its roles in putting forwards programs and policies so as to enhance the free market economy. Alternatively, privatization entails the transfer of ownership by more than 51 percent to the hands of the private sector so that the transfer of operations and management is done in a timely manner for efficiency. It also includes the transfer of functions that were previously provided by the government exclusively and turning them to the private sector. Privatization is faced with a number of problems that include planning and timing problems, priority problems, political uncertainty and instability, economic uncertainty and instability and underdeveloped and weak capital markets. Some of the commonly used strategies for privatization include contracting out, decontrol and deregulation, franchising, and change of users, voucher and grant systems, management contracts, joint ventures, leasing, non-profit organization and build operate and transfer (BOT) systems.
The need for privatization of products and services is driven by a number of objectives whose objective is to address the failure by the government. Therefore, privatization hopes to achieve efficiency as it hastens competition which results in the effectiveness and efficiency within various sectors of the economy. Therefore, for the citizenry to get effective and efficient services privatization in the way to go. Privatization also enhances the revelation of the full and true costs of the products and services provided. In most cases, publicly provided products and services are underpriced because of economic and political reasons. The political class wants to maximize their popularity with the electorate while people would like to get services for free. Therefore, public pricing for goods and services may tend to below the market costs of production the provided services. Privatization aims to promote the advancement of technology. When there is competition in the markets, entrepreneurs are forced to introduce modern methods of production that enable them to generate additional outputs using the same amount or less of inputs. Privatization seeks to develop the capital markets so as to get economic resources from private firms and individuals for utilization in productive fields of investment. Through privatization, economies broaden their wealth by achieving wide-scale ownership of property by the private sector. Privatization also helps in managing the economy by addressing vital issues such as inflation. This is informed by the fact that the public corporate enterprises are not effective and efficient enough and require additional funding to execute their mandates. This trend results in cost-push inflation whereby privatization helps in curbing inflation. Through privatization, the governments raise more revenues because of the enhanced efficiency. It also helps the government to prevent and manage crises effectively.
2.1.1 Theories and Models in Privatization
This dissertation will view privatization through several organizational theories such as the systems theory, real options theory, contingency theory, agency theory, institutional theory and transaction costs theory, and resource-based views among others. The use of these theories is informed by their application to the subject matter of the dissertation and the propositioned developed thereafter.
2.1.1.1 Systems Theory
Systems theory is based on the proposition that organizations are classified basing on their common properties and interrelated activities. The system is defined based on internal components and the interactions with the external environment with the aim of correcting errors and enhancing compatibility between systems and the environment. Based on this theory, a country can integrate its social, political and economic systems and relate them to the environment. Country systems are entail linked entities such as the general public, administrative agencies, public and private organizations. In case the system is disabled in any way and consequently changed, everything changes. The perspectives of systems theory are that the government or a country is an open structure that is influenced by external factors such as scientific developments, international competition, demand for resources among others and internal factors such as unemployment rate, domestic failure of the economy, lack of housing and political legitimacy factors. Systems of countries usually import energy that entails the privatization programs, global competitiveness, and knowledge from the external environment such as the international companies and foreign countries. These external factors are essential in determining if the country will privatize or not. Realities in the contemporary world indicate that global competition has increased and most countries may be forced to respond to external pressures through dedicated ownership through privatization. Other motivations include maximizing economic efficiency, competitiveness in the international markets and social welfare and responsibility. Through privatization, countries have increased their revenue multiple times and reduced challenges such as the provision of essential services such as housing. The systems of a country we usually utilize the energy of other countries through knowledge and privatization problems to correct their failures by implementing local privatization programs.
2.1.1.2 Contingency Theory
The contingency theory of privatization observes that for countries to privatize their products and services, the policy makers and government technocrats should interpret the environment accurately and make the necessary changes to maintain fitness. For a country to privatize, its social norms, culture, and resources that entail its internal systems and the external environment that entail the international competitors and the geo-political coalitions must posit critical constraints on the privatization choice. Therefore, according to the contingency theory, policymakers need to examine the environment diligently and understand its holistic nature and how the changes that face it impact it. Just like in the systems theory, environmental factors place more demand to the entire systems of a country on various aspects such as the social, political and economic subsystems. Therefore, this calls for decisions for privatization to be contingent. However, for privatization to be efficient, there has to be a fit between the privatization programs themselves and the country environment and secondly the sub-systems. The government has an obligation of offering a strong commitment politically and solving any conflicts that may arise from the programs. As such, the proposition of this theory is that for privatization to succeed, countries need to develop programs that are contingent upon their environments.
2.1.1.3 The Real Options Theory
The real options theory is a compelling approach that is used by countries to evaluate investment opportunities in environments that deemed to be uncertain. The theory provides that the real option should be a right as opposed to an obligation of undertaking privatization in an uncertain environment so that the privatization programs implemented are able to create social and economic values through operational flexibility. Historical knowledge and experience are regarded as a carrier of wisdom that should guide countries when it comes to privatization. For countries that lack prior experiences in privatization, unpredictability and uncertainty of the outcomes of privatization need to be heightened by chance or choice countries may view privatized programs in other countries successful as options that they can adopt using proposed programs. However, countries should not obligate themselves into such program rather they should evaluate or modify such programs to fit the needs of their environment and taking into consideration the political, social and cultural identity. For instance, these variables are different in emerging and developed economies.
Konig observes that privatization can be wide like deregulation of the entire industry or sale of government assets or narrow like the transfer of ownership in private sector organizations. Therefore, narrow forms of privatization are viewed as real options that governments make out of uncertain environments. The government should thus use this theory to leverage its great flexibility to operationalizing priority privatization programs. The government can gradually increase its privatization scope after evaluating its knowledge on privatization programs for instance after initial programs bear fruits. For instance, the need by the government of Ukraine to privatize the provision of housing for its citizens can be implemented upon evaluation of other privatization programs such as the provision of electricity to the citizens. Therefore, the proposition of this theory is that; when countries engage in a wide range of options in their privatization strategy and manage it with flexibility; they have high chances of success.
2.1.1.4 The Institutional Theory
The institutional theory portrays governments as large organizational structures such as companies, government agencies or counties. These entities are regarded as having the rational and autonomy that is coherent to make decisions that are guided by the social structures such as the constitution of a country, the culture, and its norms. These actors legitimize and institutionalize decisions to carry out privatization programs as long as they conform to their environment. Conversely, they use their autonomy to shape and develop public understanding concerning their alternatives and decisions. For the privatization case, policymakers in government are guided by social structures and the need to correct market failures by legitimizing and institutionalizing diverse privatization programs that reflect the culture and history of the country. For instance, most governments in the world have introduced capitalist and market-oriented enterprises that liberalize the markets and correct the market failures while preserving the social institutions and maintaining legitimacy and protecting their political base. Whenever there is a success in the first rounds of implementation, countries are more likely to embrace subsequent privatization whereas, in case of failure, the government may seek another alternative such as partial privatization or even nationalization. According to this theory, effective and efficient institutional systems are vital to the success of privatization programs. For instance, privatizing of programs such as those of telecommunications has enhanced efficiency through enhanced results due to well administered and developed a regulatory framework. Therefore, the proposition of this theory is that countries that pursue institutionalization and privatization simultaneously succeed more than those that don’t.
2.1.1.5 The Agency Theory
Agency theory is based on the agent-principle relationships. Based on the theory and its application in privatization, the government is the principle while the privatized enterprises are regarded as the agents. The government represents the public interest with objectives of maximizing the social wellbeing of its citizens, fostering the economy and maintaining high levels of employment. When organizations are privatized, they pursue their own objectives that have a focus of maximizing profits and the wealth of shareholders. Agent and principle problems arise when the privatized firms and the government have competing or conflicting goals as well as diverse risk preferences. To manage these relationships, agency theory suggests that governments should have comprehensive regulations and contracts that appropriately address the interests of the public and prevent the opportunistic behaviors of the privatized firms. Furthermore, the existing regulatory framework applicable to privatized firms should be made clear in every privatization deal and the enforcement of such contracts followed. In reality, it may be difficult to identify the potential behaviors which call for a thorough framework to address any of these eventualities. Agency theory assumes that individuals pursue self-interest and thus effective mechanisms should be put in places such as corporate laws, provisions for disclosure, the appointment of non-executive directors and use of external and internal audit systems.
2.1.1.6 Resource-Based Theory
The resource-based approach (RBV) describes the precise features of essential resources in creating and sustaining competitive advantages to entities. The proponents of this theory postulate that valuable resources are rare and can help constitute the competitive advantage of an economy. Secondly, the theory argues that competitive advantages can be sustained over a longer period to levels whereby an entity can protect its resources from being imitated, substituted or transferred. In business, resources are ranked as being tangible or intangible assets and capabilities that are prone to opportunities and threats in the markets. In the context of countries, resources entail the available capabilities and assets that are important in the creation and sustenance of the the competitive position of a country. Countries manage their competitiveness on the basis of capabilities and resources that contribute to enhancing the national competitiveness both socially, politically and economically. From the perspective of RBV theory, to create and sustain national competitiveness, it is not ideal for countries to privatize their essential capabilities and assets, for instance national heritage, scarce resources, valuable human interest, essential and unique services, and the military among others. Therefore, when countries have critical capabilities and resources that are imperfectly mobile and general, the national competitive advantage can be sustained. The proposition of this theory is that public entities that non-critical resources and underperform socially and economically are privatized.
2.1.1.6 Transactions Cost Economics Theory
The Transaction Cost Economics (TCE) theory describes entities such as firms and countries as an administrative instrument that induces efficiency to facilitate exchange between economic actors. Besides production costs, transaction costs related to the completion and facilitation of economic exchanges. From the perspective of TCE, privatization is a financial exchange that involves the sum of total operation and transaction costs that need to be decreased. Therefore, transactions costs are used to account for government choices when making contract decisions. In privatization case, transaction costs entail the additional costs that are incurred in designing privatization programs and establishing the regulatory systems, enforcing and monitoring the implementation of various programs. Further, the costs experienced when scheming privatization agendas need to first establish the regulatory systems and the enforcement framework and monitoring of the implementation of the programs. Moreover, the transaction costs of government intervention income operations may make costs higher as opposed to the private sector. Therefore, this requires the policymakers in the government to carefully examine the transaction costs for privatization programs and take into account the economic, social and political costs.
2.1.2 Challenges in Home Ownership: A model approach
The housing sector in Ukraine was well-defined during the times of the Soviet Union. However, following the fall of the Soviet socialist republics, the country has experienced mixed fortunes with a significant fall in many sectors of the economy including housing. Ukraine faces many challenges in the housing sector. Since the 1990s, the political, social and economic changes in the country have been aligned to transform the country’s economy into a market economy. To a greater extent, the housing framework in the country reflects the new status of the country’s economy and status. The constitution of Ukraine establishes laws under section 47 that gives its citizens the rights to housing. The law also outlines the housing policy for the country. The policy creates conditions that are meant to enable every citizen to buy, lease or lease housing. Further, the law secures the citizen’s rights for social protection whereby it obligates the state as well the local governments to provide housing to citizens for free or at affordable prices. Ukraine’s civil code no. 435-IV of 2003 and chapter 28 sets various fundamental principles that guide the property and home ownership rights. It also gives clarity on co-ownership rights as well as joint property rights on common properties such as apartment buildings. Common property includes equipment and premises required to service more than one apartment while the land where apartment buildings are located is not regarded as common property.
Chapter 59 of the civil code in Ukraine lays the fundamentals and regulations on house leasing. The code gives the tenants priority rights whenever landlords sell houses. Tenants also have preferential rights when it comes to leasing agreements and extensions as well as the rights to transfer the leasing rights to another party. On the other hand, the landlords have rights to terminate lease agreements if his or her family needs the property for housing. Such provisions viewed as challenges to home ownership because they don’t give incentives to either party to formalize their relations. In most incidents, most landlords attempt tax-evasion on their rental incomes while the monitoring and regulation of this problem is fairly weak. Hence3, a significant percentage of lease interactions in the private sector are established on informal interactions. As such, parties in the industry are vulnerable in their particular situations where for instance the landlord may hike rental fees or terminate the lease without prior adherence to the established procedures, or giving the tenant shorter notices.
Despite the significant amends to the housing code in Ukraine, the main provisions and structure of the legal relations through a centralized economy has been retained. There have been limited changes from the amendments on the housing code in addition to the new laws that regulate the specific interactions in home ownership. However, corresponding amendments that support the housing code are not being made. As such the present housing code in Ukraine is grossly outdated. For instance, it ignores the ownership of community properties such as municipalities. It also has separate types of property ownership which treat this as a subdivision of state property at article 4. The law also keeps the concept of apartment buildings that are owned by the local soviets while ignoring the fact that most apartment buildings are owned by the state or municipal governments or non-privatized housing units through privatization. This problem does not directly result in negative consequences directly as long as the housing document is not a working document. To a larger document, the document does not enhance the transparency of relations in the housing industry. This makes the housing policy in Ukraine to remain unclear in the face of the general public since the social obligations in the housing sector draw reference to the state.
Despite the declining population, home ownership in Ukraine continues to face many challenges. Most of these challenges are tied to the regulatory framework that guides the ownership and management of housing resources. Other challenges facing the country include an uneven availability of housing and a presence of population groups that face serious housing and accommodation challenges. Ukraine also has inadequate housing and the available units have poor conditions. For instance, a big percentage of the available housing stocks are unsafe and unsafe making them require urgent repairs. The country also has large and existing state obligations that include those carried from the Soviet times. These obligations exceed the capacity and projected capabilities of the state. Politically, it has become increasingly impossible to declare such obligations void. Other challenges to home ownership include economic challenges whereby a significant size of the Ukrainian population earns low incomes. This makes it hard for them to buy housing properties or get mortgages. The laws in the country on housing are also the problem whereby they categorize the population that is entitled to social housing. The metrics used include the average income per family per capita, less average market rents, and minimum subsistence levels. There are also separate registrations for people with different levels of income which is very discriminatory when it comes to home ownership. This system creates additional waiting lists. Further, the country prohibits subleasing of social housing and privatization of housing. The prohibition of subleasing is seen as a big impediment to the development of home ownership and the housing subsector.
2.2 Empirical Studies
2.2.1 Effects of Privatization on Economic Growth
Countries across the world have pursued various methods of privatization of state assets and programs. The factors that influence the privatization of programs and services include the state of the economies and the need to achieve more efficiency in the use of government resources. Privatization of state assets is mainly done through the sale of state stake to private corporations or individuals. Privatization is sometimes 100 percent or partial mainly at least 51 percent for change of management efficiency. Other privatization methods used include asset sale, voucher privatization, contracting out, franchising, and open competition. Privatization in Ukraine has enhanced economic growth in a number of ways. There has been a rapid growth in the production of public infrastructure and welfare programs. For, instance over the past 20 years, Ukraine has witnessed significant development of railway systems, airports, seaports, and toll roads, housing apartments, tunnels, and bridges. The rapid realizations of these public infrastructures have been through h private-public partnerships and collaborations with the local governments. Through privatization, the Ukrainian government has been to achieve what it could not achieve in 50 years for just 4-5 years. Therefore, privatization, Ukraine has realized many benefits that include improved efficiency. Improved efficiency realized in Ukraine was in the form of good utilization of government resources, faster completion of projects and total value for taxpayer’s money. For instance, the privatization of housing services has increased the number of housing units completed over the years. Privatization had profit incentives for cutting costs and being more efficient. Privatization has also helped the country to reduce political interference in the implementation of housing projects. The completion of projects has also taken a short-term view under the private sector as opposed to publicly managed programs that would take a long time before being completed. There has also been an increased competition through the involvement of the private sector. Due to competition, the government of Ukraine has achieved an efficient allocation of scarce resources. Increased competition also creates an environment with policies that increase the competitiveness of the market and thus allowing more firms to offer essential services.
2.2.2 Effects of Privatization on Home Ownership
Through privatization, the ownership of homes in Ukraine has increased significantly. As noted, privatization has brought efficiency into departments that were formally run by the government. As a result, projects that would take years to realize under the government are not being delivered in a few days. Through privatization, competition initiatives have attracted many players in the industry. As many companies get into the industry, the rate at which housing units are being finished has increased significantly. This has reduced the backlog for delivery of homes to people on the waiting lists of the government. The various private organization has also taken over the construction of houses for various categories of people in Ukraine who need housing such as veterans, civil servants, youth, low-income people and other special groups. Though privatization, there have been incentives by the government to promote home ownership such as catering for 30 percent of expenses required for home ownership.
2.2.3 Critical Analysis of 2.1.1 & 2.1.2
An evaluation of the fundamental laws guiding the housing industry in Ukraine indicates that the home ownership industry has no clear-cut criteria for forming long-term government housing policy. For instance, some provisions of the state housing policy reflect a pattern housing policy that is hedged on the Soviet era. However, with the reforms in the country’s economy that turned it into a market economy has seen significant changes across all sectors. There has been significant privatization of many sectors of the economy. The changes have significantly influenced the efficiency and effectiveness in the production of social welfare services in the country. For instance, following the privatization of public infrastructure and other related industries, the provisions of those services have significantly. For instance, reforms in the housing industry have been aligned to the market economy. Further, the housing policy instead of being long term has been based on the executive and legislative authorities. Short-term plans in the industry emphasis on easing the impact of problems associated with home ownership. On this front, the government has enhanced private participation in the development of homes. Strategies used by the government to achieve these objectives include public-private partnerships, build, operate and transfer systems. Other mechanisms under the privatization of state welfare services include the state interventions in the housing sector such as the decree by the president “On Measures Targeted at Constructing Affordable Housing and Improving Housing Availability in Ukraine” No.1077/2007. There have also been many private sector initiatives that target home ownership for various categories of Ukrainians such as the civil servants, the youth, the old and the poor in society. These initiatives offer affordable and cheap housing which enhances private home ownership in Ukraine.
Under the privatization of the economy and the housing industry, the state is obliged with the provision of housing to the above-mentioned groups with state support or full expense by the state. The regulation of these programs is done under the various legislative acts with the most recent being the State Programme on Provision of Affordable Housing for the period 2010-2017. For instance, through this program, the government plans to cover over 30 percent of apartment costs for all people on the waiting list. Over the years, the government has been allocating substantial funds to different players who offer home ownership under the public-private and private organization. Through financial organizations, the government has also been providing funds for individuals to build their own homes. There have also been incentives towards the construction of affordable housing that is intended for people with low incomes. Other programs by the government include strategies that are aimed at restricting speculation in the real estate industry and markets. For instance, the government has introduced tax incentives that promote the uptake of homes within three years.
The privatization of many services that were initially provided by the government has significantly increased the efficiency and effectiveness in the delivery of services to the public. Over the years, economic growth in Ukraine has significantly improved. The implication of this is that the disposable incomes of people in Ukraine have significantly increased. Priority in consumption by the citizenry has been on home ownership. The government has also been increasing its allocation of funds for the housing sector that are used to build affordable housing mainly for low-income citizens.
2.3. Factors that Determine the Nature of Home Ownership in a Country
Housing is a vital need for human beings. Most governments give housing of their citizenry priority through the provision of social housing. However, because of financial constraints and high demand for housing, the rate of demand and that of the provision is not usually even. As a result, most governments have challenges in housing their citizens. Sufficient housing contributes to the efficiency, health, and social behavior as well as the general welfare of the population. Apart from offering shelter, owning a house is a source of security, an asset that most people in the world spend much of their lifelong investment in housing. In many countries, housing represents the largest proportion of expenditure by households that takes up a substantial expenditure of incomes of people. There are various factors that influence the nature of housing in a country. The provision of sufficient housing in different countries depends on the availability of systems and structures for social housing as well as a functioning system for housing finance. The ability to acquire a house is driven by factors such as costs and the implications of different government policies regarding the monetary and fiscal measures and the economic systems in a country.
Despite the government efforts to offer social housing for different segments of people that include the civil servants, retired soldiers, veterans, the youth, and the low-income people. The rate at which this housing is being provided does not match the demand for housing. As a result, many people in Ukraine have challenges in owning their own homes and a significant majority of them live in rented housing. The financing of housing programs is a major determining factor in the tenure and quality of housing consumption. Other factors that influence the provision of housing include the general financial portfolio that is dedicated to public housing and the effectiveness and stability of the housing systems in a country. A functioning house mortgage market is regarded as being beneficial to domicile national economies that contribute to the standards of living and the growth of the economy. Without a functioning house financing system, alternative market-based provision of housing may also lack. However, in developed economies, housing financing and supply systems are said to be operationally efficient. This situation results in a number of efficiencies whereby there is sufficient intermediation such as credit which makes it easy for citizens to access funds to buy homes. For instance, in countries such as the United States, demark and Britain, the outstanding loans on housing are nearly equivalent to their gross domestic product. Further, about 90 percent of mortgage loans in the United Kingdom and 70 percent in the European Union are obtained from deposit-taking institutions. Despite Ukraine being in the European Union, it’s living standards are very low as compared to other EU countries being the second last in the European Union group of countries. In Ukraine, social housing is not a priority for the government despite many regulatory and policy frameworks intended to address the issue. This leaves the issue of home affordability on the ability of individuals and savings and credit organizations. The main source of home funding for individuals is mainly their income. However, the problem arises when the levels of income by individuals is low. When individuals are unable to raise enough income to buy homes they seek funds from financial institutions which charge an interest rate.
Other factors that influence the nature of housing in a country include the availability of land and sufficient building and construction resources. Land is a scarce and expensive resource in many countries; the cost of acquiring land hinders the ability of many people to own homes. This is because they need to purchase land first and then make plans for building a home. In cases where there are ready built homes, the cost of buying such property is often exorbitant and out of rich for the ordinary citizens. The availability of housing materials also influences the nature of housing. In some countries, they use locally available materials that they use to build temporary houses. There are also semi-permanent houses whereby individuals use both locally available materials and durable materials to build housing shelters that can last up to fifty years. The prescribed durable housing materials are expensive to acquire which makes it hard for people with low incomes to own houses. Housing in countries is also determined by the regulatory framework that guides the type of housing for various areas, land use, and management. Housing is also influenced by the prevailing climatic conditions in various countries whereby housing companies, individuals and the government build housing products that meet the needs of the environment and their societies. Finally, the collective commitment by the government, the private sector and other stakeholders in significant in ensuring that financial resources are pulled together and housing stocks developed.
2.4. Conceptual Framework
The conceptual framework of this study helps to organize ideas and make distinctions on various elements of the research. According to Tuckman and Harper, a strong conceptual framework gives an abstract representation on the goal and direction of the research work, especially on matters data collection and analysis, thus aiding in addressing the problem being studied. In this study, the key variables are as follows:
Independent Variable: The Independent variable in this study is “privatization decision.” The semi-variable elements that make the primary independent variable, in this case, include the policies that effect the privatization as well as the various initiatives used by the authorities and institutions in making private home ownership effective.
Dependent Variable: The dependent variable in this study is the “state of home ownership and housing in Ukraine.” The Soviet era in Ukraine witnessed ownership of property in the country controlled largely by the stare, as socialism was the ideological provision that controlled the country. However, the decision to privatize property, especially ownership of homes in the post-soviet era changed the trends of owning such property, as well as the quality of housing in the country. As such, the study, demonstrated in the conceptual framework, delves in the interaction of various factors within the social, economic and political spectrum that shape the state of home ownership in Ukraine as a result of the post-soviet era privatization policy.
2.4.1. Analyzing the Framework
The decision to privatize home ownership in the country has a direct impact on the public and housing social frameworks that existed during the Soviet era in Ukraine. However, the post-soviet adjustments that took effect in 1992 through respective legislations prompted various industry stakeholders such as government agencies and public companies that controlled and maintained the state of home ownership to comply with the new policies and regulations by introducing a framework that would trigger the privatization. According to the Real Options theory, business choices in the modern economy are made based on logical options in capital investments. The housing sector has real assets, and hence financial decisions can be made without reliance on financial instruments and derivatives. The need to improve the performance of the housing sector in Ukraine was not only intended to ensure people get proper hone facilities, but also make the industry lucrative for investors. A positive performance of the industry would subsequently enhance a better performance of the general economy. For the purposes of this study, the decision to privatize the sector can, therefore, be viewed as a real option.
The public and social housing framework in Ukraine is intended to govern the operations of the sector. As such, the framework is a system of governance that safeguards the interests of investors, residents as well as the government. According to the contingency theory, there is no ideal approach of governing an organization, as the course of action is contingent to the internal and external situations. In this context, the housing framework in the country was historically centralized as dictated by the prevailing circumstances at the time. However, the framework was adjusted as a result of the changing preferences of the stakeholders and the shift in economic civilization. The openness of the housing framework and policies and systems is therefore, contingent to the internal and external conditions.
The socio-cultural elements that depicted the mentality and perceptions on the aspect of home ownership have also changed progressively, as the residents have resorted for owning homes privately as a way of escaping the problems associated with the public ownership and control of the housing facilities. Hence, the adjustments by industry stakeholders as well as the mind-shift by the population invoke the privatization process. However, the socio-cultural mind-shift on matters housing and home ownership can be viewed as a transaction, as the transformation happens at a cost. For instance, owning a home privately requires funding, which an individual has to forego to achieve the objective. The transactions cost theory suggests that costs and difficulties are incurred in the process of making transactions. Thus, the general change of attitude and preferences to acquire private homes entails transaction costs as explained in the transactions cost theory.
The privatization process is also influenced by market forces, in which the elements of demand and supply play out to determine the rate at which individuals acquire private homes. The Resource-Based theory uses the possession of strategic resources to gain a competitive advantage over rival companies. As such, the group of businesses and individuals that control the resources and the means of production determine the aspect of prices. In a free-market economy, which is depicted by privatization, competition generates market forces, which further influence the distribution of commodities and facilities. The housing sector in Ukraine is, therefore, greatly influenced by the market forces, which can be explained by the Resource-based theory. For instance, the market forces determine the prices of acquiring homes privately, an aspect that influences the number of people residing in private homes at any given time.
At the same time, government policies and regulations on the procedure and prerequisites of private home ownership also influence the acquisition of homes. The institutional theorists postulate that the presence of rules, regulations, norms and schemes are important in creating and governing a resilient social structure. For instance, Multinational Corporations operating in a country are regulated through the institutional schemes and provisions that govern the society. In this study, government policies regulate the manner in which various actors in the housing sector in Ukraine perform their operations, thus shaping the activities and nature of the whole sector. For instance, sectoral reforms, the management of houses and transfer of property is conducted in according to the established regulations. All the above factors influence the state of housing and home ownership in Ukraine.
2.5 Gaps in Knowledge
Despite remarkable developments in the growth of the literature on privatization, a significant focus is needed to enhance the existing body of knowledge both practically and theoretically. There is a shortage of studies on privatization, and particularly in the management of this literature. The failure by researchers to focus on an organizational or individual level while researches on privatization are mainly focused on the industry contributes to the gaps in knowledge immensely. Another reason may be due to the fact that researches on management do not follow a systematic framework; therefore, they are not able to address this phenomenon appropriately. This dissertation gives privatization a management t perspective at the national level. The lens of the research is also based on organizational theories that are well established. The specific application of organizational theories of privatization in the study addresses two linked questions. The first question is to address the reason why some countries decide to pursue privatization strategies in some industries as opposed to all. The second question is to establish why some countries succeed in privatizing some of their industries while others fail. The assumptions used in this analysis presume that the government represents the interests of the public and that any decisions to go private by the government are meant to enhance its effectiveness in delivering essential products and services to the citizenry. Further, this dissertation makes many contributions to government knowledge and learning. First, the dissertation approaches privatization from a management perspective. Secondly, the dissertation engages a balanced view through a wide scope of the topic of discussion like the economic, social and political; performance of privatization. Previous research on the effectiveness of privatization tend to put more emphasis on economic outcomes such as profits, reducing costs and revenues. In the recent days, some researchers have been arguing that privatization outcomes need to include both the social, political and economic performance because all these aspects will effectively evaluate whether a country makes lasting, sector-wide and sustainable growth by privatizing its programs. Lastly, the application of many theories of privatization, this dissertation seeks to improve the readers’ understanding of privatization and laying the basis for areas of future studies on the subject matter. The multiple theories also give management and real-life implications that can be used by countries to guide their privatization strategies.
3.0 CHAPTER THREE: METHODOLOGY
3.1. Overview
The chapter explains in detail the various research methodologies utilized to gather data for this study. The choice of the methodology used was inspired by prominent factors within the researcher’s environment and the context of the study subject. While one methodology may have sufficed in collecting the necessary data critical to the development of the report, the researcher’s intention to provide a balanced presentation compelled them to provide additional information collection and analysis streams. As such, each aspect of the methodology presents a set of unique advantages and limitations. They reveal different facets of the study subject, all of which are critical to its analysis. While descriptive research is especially central to the collection and processing of data from renowned works, interviews and authors present information from the primary source. They capture the opinions, feelings, reactions, and inhibitions of the researchers, hence, add to the paper’s qualitative richness.
3.2. Research Philosophy
According to Byrne, a research philosophy entails the manner in which data is gathered on a particular phenomenon, analyzed and utilized. The terms epistemology and doxology are used to describe the philosophies employed in a study. Whereas epistemology entails the truth, doxology, on the other hand, constitutes what is perceived to be true. According to Pring, positivism and interpretivism viewpoint are the two common philosophies in research. Positivists postulate that reality can be observed and explained from an objective perspective. On the other hand, interpretivists employ a subjective approach when analyzing ideas, as they believe that reality can only be understood subjectively. This study adopts positivism as the ideal philosophy.
The subject matter being studied pertains policies and trends in home ownership in post-soviet Ukraine. As argued by Norris, housing is one of the basic needs of human beings and is, therefore, an important element in their welfare. As such, investigating problems and issues pertaining to home ownership ought to be addressed from an objective viewpoint in order to point out the concerns and subject them to research using factual and empirical information. Hence, in this study, the positivist philosophy guides the researcher in collecting information using identified data-collection tools and using the information to address the resulting challenges.
3.3. Research Approach
According to McBurney and Theresa, a research approach is a procedure that outlines the steps and assumptions that are used in collecting, analyzing and interpreting data in a research project. Hence, the approach that is employed in a given study is dictated by the nature of the objectives and research questions being addressed. Based on the stage of the study, a research approach has two facets, that is, the approach of collecting data and approach of analyzing and reasoning data. At the data collection stage, the research approach can be either qualitative or quantitative. The quantitative approach is mainly used for studies that require the use of statistical information, whereas the qualitative approach is employed when studies are dominated by theoretical information. On the other hand, the data analysis takes either the inductive or deductive approach. In qualitative studies, the inductive approach is used to analyze data whereas, in quantitative studies, the deductive approach is used. This study employs both qualitative and inductive approaches.
The rationale of using the qualitative approach for this research is the fact that the study does not heavily rely on statistics to address the problem. The issue of home ownership in the post-Soviet Ukraine is a social and economic issue that is predominantly experienced by the population. As such, the study does not endeavor to establish whether privatization of home ownership in the country is a common phenomenon. Rather, the researcher seeks to assess the implications of the privatization on the economic and social welfare of the population, an aspect that does not require quantitative information to resolve. Consequently, the study also uses the inductive approach because the reliance on theoretical information to derive results and thus, address the problem under study.
3.4. Research Design
This study employs a descriptive research design. The descriptive approach involves the study of information sources to develop substantial evidential backing to support a given set of claims or promote the employment of select evidence-based practice is in a given case. According to Vaus, descriptive research is used to describe situations without determining the cause and effect. The approach features the analysis of existing relevant literature to determine facts that can offer weight to the claims made in a given research project. It is ideal for this project for a plethora of reasons among them being its convenience, minimal cost, and high validity and reliability.
Descriptive research is ideal for this work for a myriad of reasons. For instance, descriptive research written and peer-reviewed literature. Besides, the sources used have often been subjected thorough scrutiny by scholars who have advised extensive revisions and adjustments. The sources have also been refined to enhance their standards and, hence, been made suitable for academic purposes. The fact that literature is fact-checked makes this descriptive research ideal for use in this study. The claims made by a researcher ought to be supported by previous studies. As such, the degree of falseness is minimal as the perspectives presented in the literature can be easily established. Allegations furthered in the paper are presented for scrutiny with evidence being frequently needed before such points can be adopted.
Descriptive research was utilized in the project as it presented the advantage of high reliability and validity standards. Reliability is the virtue of claims made in a given report to be reproduced or established when a similar project is conducted with a similar set of conditions in a totally different setting. It is the ability of two or more scholars to find similar sets of results when the research is repeated in other contexts. In descriptive research, sources are selectively identified. Those with high levels of reliability are identified. As they are already highly valid, the paper will inadvertently contain reproducible claims. Validity is the characteristic of perspectives contained in a select report to present factual assertions. Ideally, research articles can offer any kinds of arguments they desire. There are no restrictions on free expression.
Finally, descriptive research was highly appropriate for use in this research as it significantly cost-effective. Ideally, conventional research involves an intricate and comprehensive process that includes data collection, processing, validation, and presentation, all of which must be conducted in isolation because of the vastness of the individual exercises involved. However, with descriptive research, all these processes have been conducted and the outcome presented in a single report.
Numerous valid sources are commissioned and utilized to support the collected information. Data found to lack evidence in established literature is discarded, leaving only that which can be referenced. The information is then compiled, revised, and presented. Thus, descriptive research presents numerous advantages as much of the procedures have already been completed.
3.5. Research Instrumentation
3.5.1. Content Analysis
Content analysis is a technique used to make valid inferences through the interpretation of textual material such as graphics, oral communication, and documents. The method is normally used on social sciences but has recently been adopted in organizational studies. In this study, the researcher sought materials and publications on the state of home ownership in Ukraine. The researcher sought information such as statistics on the prevalence of home ownership across various classes of people as well as press releases on the economic status of the country. The researcher also sought information on the privatization trends in the country, especially on its implications on the housing sector.
The use of content analysis was beneficial in this study as it enabled the researcher to gather a wide variety of information that was relevant in assisting him to tackle the research problem. Besides, the use of content analysis was a relatively cheap option, considering the fact that transport costs were not involved. Besides, no expenses were involved in searching for and harmonizing participants for the study.
3.5.2 Use of Critical Discourse Analysis (CDA)
Critical Discourse Analysis (CDA) is a division of linguistics aimed at understanding why and how different types of texts affect hearers and readers. The methodology employs a wide variety of tools of grammar analysis to unearth hidden ideologies that may impact an individual’s world view. The methodology was conceptualized based on the study of a wide variety of written and spoken texts including regulations, advertising, and political manifestos. It was designed to demonstrate the accidental or intentional use of language by text producers in a way that is ideologically significant. Critical Discourse Analysis utilizes most of its tools from Stylistics whose primary focus is the way literary texts create meaning. Some of the tools utilized by CDA include negation, opposition, naming, nominalization, transitivity, and modality. As argued by Wodak, Critical Discourse Analysis is an imperative research tool that is applied when studying social aspects such as abuse, power, ideologies, and institutions.
In this study, press statements, policy statements and media reports on home ownership and real estate regulations were sought to gather the information that would be used to answer the research questions. The information was sought online, especially from government and organizational databases. The obtained documents were then analyzed using the CDA approach go gain sufficient insight into the home ownership matter in Ukraine. The information was synthesized and recorded in forms and tables to make it easy for the researcher to establish a trend on the subject matter.
3.6. Data Collection Process
3.6.1. Search Process
The search for the materials used in this study was conducted in online search engines. The researcher targeted publications, reports, press releases and media reports on the issue of privatization of home ownership in Ukraine. Various key-words were used to search the materials in the search engine. For this study the key-words that were used to search the materials include: “Home ownership in Ukraine, Housing in Ukraine, Privatization of Home Ownership in Ukraine, Home ownership regulations in Ukraine, Social Housing in Ukraine, Housing costs in Ukraine, Policies on home ownership in Ukraine, property ownership policies in Ukraine, Mortgage prices in Ukraine and House prices in Ukraine.” The keywords led the researcher to various websites and directories from which the materials were obtained.
In as much as various materials were accessed in the search process, not all were deemed credible and hence, accepted for use in this study. As such, the researcher employed inclusion and exclusion criteria to ensure that only reliable information was relied on. The rationale of using this criterion was to enhance the credibility of this study as well as its outcome.
3.6.2. Inclusion and Exclusion Criteria
The primary criteria that were used to determine the inclusion of material for this study were the assessment of the reputation of the source. In this context, reputable sources entailed databases managed by relevant authorities and corporations known to have reliable information on the subject matter. For instance, data by banks, government agencies, and departments, as well as major media publications were considered reliable. The UNECE statistical database and the National Bank of Ukraine were used as the key sources of the materials. The aspect of “reputation” in this case was intended to ensure that only authentic information was derived and, hence, utilized for the execution of the study. Consistency was also considered an important inclusion criterion for information in the study. The information from the various sources that were accessed online was scrutinized against factual data from real events and official government statistics and statements. The approach was pursued to ensure that data that was based on misstatements and without sufficient citations were not included in the study. As such, performing due diligence in the process of obtaining the information was an essential procedure.
On the other hand, the researcher also had exclusion criteria that guided the selection of the sources. For instance, promotional materials and websites such as those managed by real estate agents and advertising companies were considered unreliable, and hence not included for purposes of carrying out this study. The rationale of excluding promotional materials from the study was the fact that the information therein was intended to boost the sales of real estate products, thus increasing the prospects of misstatements and misrepresentation of facts. Besides, websites whose ownership and information validity would not be determined were not considered reliable.
3.6.3. Extraction of Data/Information
The researcher skimmed through the materials for the relevant information that would help in addressing the problem being studied. For publications, the tables of contents were checked and relevant sections identified. As such, the researcher picked statements, figures, and illustrations that were deemed to give authoritative information on the subject matter. On the same note, sources such as banks and financial institutions were used to provide official statistics and illustrations on trends in the home ownership and housing industry. The information was insightful in assessing the extent to which Ukraine’s population had taken up private ownership of homes over the years. The data was also essential in guiding the researcher in comparing the market response to various economic conditions and incentives regarding home ownership.
3.6. Validity and Reliability
3.6.1. Validity
Validity is the measure of built-in or systematic errors in research data. Qualitative information must always be viable for establishing validity. The analysis of home ownership in Ukraine is largely a theoretical subject. As such, its validity can best be established by experts exploring its theoretical construct. The pundits achieve this by exploring how well the fundamentals of the hypothetical construct has been expressed in the problem statement. It is often alternatively referred to as representational or translational validity. Face validity is a simplistic research technique established when an individual with vast knowledge in the subject evaluates the research data’s comprehensiveness in the measurement of the traits of interest. It involves an expert looking at the research data’s items and confirming that it is indeed, a valid and all-inclusive measure of the theoretical concepts being investigated. Measuring validity is a casual practice in scientific research. On the other hand, content validity evaluates the extents to which the research instrument addresses. For instance, in this study, the researcher is interested in investigating the implications of home ownership in Ukraine. He endeavors to ascertain that the research data items effusively represent the array of attitudes towards the given subject. As such, the researcher obtained content from reliable sources and prepared it for rational analysis. The analysis entailed counter-checking the information by experts in the industry, who scrutinized all aspects of the research data in terms of comprehensiveness, clarity, readability, and the articulation of the content of the research article and reach a compromise on what satisfies the professional threshold to be included in the research instrument. In this study, scholars and researchers in real estate and social welfare were used to scrutinize the data.
The researcher believed that by comparing results from the research data to literature from secondary sources, consistency would be established. The technique establishes validity as it reveals the similarities between works by other authors, hence, ascertains the degree of truth of the derived results. It is the very fundament of criterion-related validity and was especially central to the analysis of home ownership in Ukraine. It measured how findings stacked up against each other or an established predictor (literary sources).
3.6.2. Reliability
Determining the applicability of research responses often requires a considerable amount of data reliability. The fundamental objective of any research expedition is to present feasible alternatives to address the explored problem. As such, it is imperative that the information presented is not only factual but relevant and replicable in another context or sample field with similar research conditions. Reliability often refers to the consistency of a given measure. It is the prospect of realizing similar results when the variables are measured are computed multiple times in a given session. A reliable variable or scale provides similar results with an acceptable margin of error at each point in the exercise.
3.7. Research Ethical Guidelines
In this study, the researcher was guided by ethical guidelines, which formed the basis of collecting data and using it to answer the research question. One of the key ethical principles that were employed in this study was seeking consent from the organizations from which the documents and materials utilized for this research were obtained. The consent was to ensure that the materials were obtained legally and, therefore, would be used for research purposes. Secondly, the researcher ensured that the information that was obtained from various sources was used for its intended purpose, that is, to meet the objectives of this study.
CHAPTER FOUR: FINDINGS
4.1. Obtained Information
In order to address the problem, the researcher sought information on the extent of privatization of home ownership in Ukraine. The researcher also sought information on housing problems in the country. The information is crucial as it would help in establishing the various ways in which privatization has influenced prices as well as the quality of housing in the country. The researcher also analyzed policy documents and publications on home ownership in Ukraine. In light of this, the researcher intended to assess statistics and data on the changes that have been experienced as a result of the privatization of home ownership in the country. The economic performance, especially on housing and social welfare of Ukraine was compared to that of other countries such as the United States, subject to the policies that effected the privatization.
4.2. Disparities in Home Ownership in Ukraine
The end of communism in Ukraine marked the beginning of the transformation of cities in the country. The study found that the country suddenly stopped a top-down approach in managing its cities, as the economy adopted market-driven strategies in the ownership of properties. The post-soviet era also embraced liberal democratic ideologies as well as adopted the global capitalist system of managing the economy.
The study also found disparities in home ownership trends in Ukraine. The poor population in Ukraine cannot afford mortgage loans to buy houses or save enough because their income is low and most are in informal employment. In addition, the houses have become very expensive despite the many finance programs available both from the government and private institutions. The only homes they own are those in the rural areas and live in other less expensive areas apart from Kyiv. They live in rented houses that they can hardly afford with their families with two or three generations back that were bought by institutions and the elite during the privatization process of 1992. These houses were never renovated after the transfer and are far from being properly maintained by the home owners in addition to being very old. Some are even completely homeless because they have moved to the city to search for jobs but cannot afford houses. According to the Ministry of Internal Affairs, more than 40,000 people were homeless in 2005.
The rich population on the other hand which comprises less than 30% have stable jobs or well-performing businesses and are therefore able to afford huge mortgage loans. Some of them can save the money needed to purchase a house in five years or less. They own most of the houses in Kyiv, the second most expensive city in the world despite their huge costs. For those who live in rented apartments, they are able to choose rooms with all the necessary amenities and those who own their own homes have already completed their mortgage loan repayments. These rich people are the same ones who have bought out rented houses that the middle class and poor people live in.
4.3. Influence of Home Ownership Privatization on Economic Growth
The mass privatization law of June 1992 concerning housing stock by the state led to the rapid growth of home ownership rate in Ukraine and allowed people to borrow mortgage loans to further buy these houses which consequently resulted in a steady 8% increase in the growth rate of the economy annually. The government at the time perceived housing as a huge liability because of the high maintenance and repairing costs associated with it and decided to transfer ownership to private companies and home ownership therefore evolved to become a primary characteristic feature of Ukrainians mentality and culture to the extent that some would even forego certain pleasures just to save for years in order to buy a house and borrow the deficit. Houses that were of quality standards in order to beat the competition as preferred by the Ukrainians emerged. They were also better managed because these private companies had a profit-making mentality. These same houses were previously poorly maintained and the state could not keep up with the high maintenance costs and saw this as a way to ease the burden.
The value of mortgages in Ukraine grew in the years 2006 and 2007 almost doubling in 2008, institutions would borrow loans abroad in US dollars and later resell them in hryvnia to mortgage lenders at high-interest rate eliminating the need for securities which further enabled more and more people to own homes. The ‘National Bank of Ukraine Statistics’ reported that as at 2006 mortgage loans compared to growth domestic product was 3.8% despite the few and expensive mortgage loan options that were available at that time from private lending institutions and the global financial crisis of 2008 which led to the almost collapse of mortgage lending. These loans were taken either to buy houses or perform renovations by private companies and sell later.
4.4. State of Home Ownership in the UNECE Region
The UN outlines access to decent and affordable housing to be a fundamental human need. However, social housing in the UNECE region is one of the most expensive human rights. A report on social housing in UNECE found that more than 100 million low and middle-income earners from the region are overburdened by the housing situation, as they are prompted to spend over 40% of their disposable income to secure proper housing. Thus, the lack of affordable housing is a major concern for UNECE countries.
The report also shows that home ownership has become a dominant social and economic feature for countries in the UNECE region. After the economic crisis, most economies unanimously supported home ownership. The trend was supported by easy access to mortgages in the western parts of UNECE. However, on the eastern parts, privatization of public housing facilitated the trend of home ownership. The figure below illustrates the trends of home ownership in UNECE countries.
Figure 1: Number of people over-burdened by housing costs in the UNECE region: Source: UNECE
4.5. Implications of Privatization on House Prices in Ukraine
In the advent of the 21st century, people from within Ukraine migrated from the rural areas to Kyiv and other metropolitan areas. The movement was influenced by the search for employment opportunities especially in the construction industry, as development in the country was greatly uneven. The IT sector, which was becoming popular in the country also influenced young people to relocate to urban areas. The expansion of the urban population in Kyiv and other cities such as Kharkiv, Levin, and Kyiv triggered an increase in the housing stock. Despite the increased construction of houses in the urban areas, the demand for housing has surpassed the demand, thus creating scarcity.
Privatization has influenced individuals and companies to construct houses to meet their growing demand in urban areas. According to the statistics by the National Bank of Ukraine, the housing stock in Ukraine between the years 1995 and 2017 grew by 25%. Hence, housing was turned into a market commodity as many private players were allowed to participate in the industry through the post-soviet period. The graph below illustrates changes in purchase prices per square meter for the newly built stock every year against prices in 2003, as well as the changing rate of the US Dollar against the Ukrainian Hryvnia.
Figure 2: Evolution of House Prices in Kyiv (USD) Source: http://domik.ua/nedvizhimost/ceny-kiev.html
The graph illustrates the changes in prices of newly built housing stock, as well as changes in the value of USD against the UAH. The illustration shows that the value of housing has changed dramatically in spite of the upsurge of housing stock.
4.6. Mortgage Prices in Ukraine as a Result of Private Home Ownership
According to data from the National Bank of Ukraine, the dramatic changes in housing prices in Ukraine are attributed to the fact that buildings are being used as speculative financial instruments. The mortgage loans provided by the banks illustrate the value attached to the housing. Data from the bank, as illustrated in the graph below, demonstrates the value of mortgages in UAH, as indexed against mortgages in the year 2006.
Figure 3: Value of Mortgages in Ukraine. Source: National Bank of Ukraine
From the graph, mortgages in the pre-crisis period of 2008 were issued mostly in USD. However, after the financial crisis, mortgages were issued widely in UAH. However, in 2014, political factors in the country precipitated another economic crisis, which also affected private housing in Kyiv.
4.7. Housing as a Private Commodity in Kiev
Despite the historical economic changes in Ukraine, that is, the economic stagnation in the 1990s, the gradual economic growth in the late 1990s and the early 2000s, the economic boom between 2000 and 2008, the economic crunch between the years 2009 and 2014 as well as the new economic crush between the years 2014 and 2018, private housing has consistently recorded growth, albeit not on a constant scale. Manuel Aalbers’ Financialisation of Housing: A Political Economy Approach views private housing as a capitalist ideology. In his view, Aalbers views private property as a way of wealth accumulation, as well as access to the free market and organizing access to goods. In Ukraine, the mortgage system has been central to stimulating the growth of private home ownership and economic growth. As argued by Aalbers, financialization is a pattern of wealth accumulation in which profit-making takes place through financial channels rather than commodity production and trade.
CHAPTER FIVE: DISCUSSIONS
5.1. The Cost of privatization: Financial Crisis and Expensive Housing
Despite the high rate of home ownership in Ukraine compared to other countries, a large percentage of its total population are homeless or live under very poor conditions. The country faces the greatest challenge of providing affordable and decent housing to its citizens especially the lower income population and still has a long way to go. This has further been fueled by the Privatization of the housing stock since 1992. The costs of buying a house or renting are not directly proportional to the income received as most people live below the average poverty line. Even if they find jobs, they are normally temporary placements limiting their ability to borrow mortgages. Some existing home owners have found themselves in situations where they are unable to repay their mortgage loans leading to increase in the number of mortgage loan defaulters with subsequent increase in its people’s burden debt and total interest. This was further fueled by the national and global financial recession of 2014 to 2015 where the lenders could hardly repay their loans either in euros or dollars which already accounted for two-thirds of the total mortgage debt threating the economy as a result. The depreciation placed a huge strain in many bank’s capital ratios through loses that were generated from its loan portfolios deteriorating quality threating for their immediate insolvency. Most banks and institutions stopped the lending process since then for financing houses.
On the other hand, residents still paying rent in privately owned houses constantly experience rent increases on top of the currently high amount that they are struggling to pay which further widens the poverty gap as most do not have housing allowances. Most households also have two or three generations that cohabit to share the rent burden. A significant percentage of the young population still lives with their parents because they cannot afford to rent out an apartment. This has especially been noted in Kiev, Ukraine’s capital city which has a reported population of more than 2.8 million people was ranked by ‘Bloomberg Global City Housing Affordability Index’ as the ‘second least affordable city for housing in the world’ with price fluctuations of apartments resulting from the depreciation of the dollar and the Hrynia. The city hosts most of the country’s population than Odesa and Kharkiv. Even if these young people get good jobs in the city they are still unable to move there. The home owners comprising mainly of local elites and institutions are simply profit-driven and corrupt with no policy regulations regarding these rent increases set by the state to abide by. They simply view housing as a financial and economic sphere. Most do not even improve or maintain the living conditions of these rented houses despite this being one of the main reasons for privatization because they want to cut costs and keep the profits.
5.2. How Privatization has impacted on the Population of Ukraine
5.2.1. Positive Implications
Therefore, privatization is a significant tool of economic rejuvenation as various countries attest to the progress they attained in a few years especially those that were using a communist paradigm. The main implications of privatization are that enables the government and other stakeholders to generate resources for investing in investments that are associated with the public sector. The main source of funds for the government is mainly taxes. To raise more taxes the government needs to either tax people more money or increase the tax base. However, with the prevailing economic conditions, the ability to increase taxes is minimal. Further, the demand for public sectors investments is high as compared to the rate that financial resources are generated. Therefore, privatization has been essential in bridging the sources of funds gap for the government and other public sector investment entities. Through privatization, economies have been able to optimize the utilization of resources. This is mainly due to the competitive nature of privatization whereby the most efficient entity is allocated the opportunity to utilize resources by offering public services. For many years, various governments have failed to offer public services effectively and have been faced with wastage of public resources, unlike the private sector that optimizes the use of economic resources. Privatization has also enhanced competition in the economy in that it has broken the monopoly that public enterprises enjoyed. The monopoly of public enterprises was characterized by losses and inefficiency and this situation has been overcome by privatization. Privatization has also raised the benchmarks for public entities and helped them to move towards efficiency. Privatization has also lessened the fiscal burden by the government. This has helped counties to reduce the bureaucracy associated with the government hence efficient products and services by the government. Privatization has also reduced the monopoly that is associated with the government. As the government attracts the private sector to supply economic resources, democracy is enhanced because of the participation by the private sector.
Privatization leads to better relations, mainly because of its ability to attract many people to work on various products and projects. As more people are involved in the private sector, the vigilance by the regulatory framework increases which may result in better industrial relations. Privatization also contributes to the reduced influence of the political class and government interference because the private sector is given more representation in managing public enterprises. Further, privatization reduces bureaucracy, increases productivity and is an economical way of doing things. Privatization also motivates individuals to accomplish various tasks that benefit the public because of the profit motive which makes managers enhance efficiency with the aim of maximizing profits. Privatization has also successfully transitioned formally closed economies into market economies. This has enhanced the economic development of individual and economies as a whole. For instance, following the dissolution of the Soviet Union, the Ukrainian economy and its GDP per capita have increased significantly as compared to the level of the economy during the union. Further, individuals now have private registered under their titles. Therefore, the implication of privatization on the economy is that it enhances economic development, productivity by individuals and the general progress of the society. Another significant implication of privatization is its role in developing the financial markets. Privatization has significantly contributed to the rise of the global capital markets. Most importantly, privatization has enhanced the liquidity and capitalization of many national stock markets. It has provided a way for increasing the national wealth for both the government and individuals. Transition to market economy in Uzbekistan during the post-Soviet period has caused essential changes both in the general conditions of functioning of subjects of an economy and in property relations. The private property as a variety of the property of citizens has been legalized for the first time in Uzbekistan in 1990. Unlike a personal property which meant personal consumption, private one served for the purposes of income extraction.
5.3.2. Negative Implications
Privatization has also resulted in the concentration of economic power mainly people and entities that are connected with the government. In developing economies, privatization has become a conveyor belt for swindling public resources. For instance, scrupulous government officials liaise with private entities to swindle government resources through substandard projects and inflated costs. Privatization is associated with industrial problems as the management of public entities seeks to prevent surveillance on their operations by the regulatory authorities. For developing countries, privatization has emerged as a modern source of slavery and bad working conditions for employees. When these problems explode, they result in industrial problems. There is also no guarantee of success as, despite privatization, most countries and societies still have pressing problems that continue to threaten the stability of their governments.
5.4. Systemic Housing challenges in Ukraine and how they affect People’s Livelihoods
The housing challenges in Ukraine include the insufficient provision of social housing by the government. The demand for housing is far much higher than the supply. Being a market economy, the forces of demand and supply have made the cost of housing and home ownership very expensive in Ukraine. The conflict in parts of Ukraine especially the eastern parts has also resulted in damage to available housing resources. This has further made the already bad situation worse. There are also many refugees and internally displaced people in Ukraine who live in squalid conditions due to insufficient housing. Other challenges in the housing sector in Ukraine include the uneven supply of housing in the country. For instance, the government has put more effort in major cities while living out other smaller towns. Private house developers are also concentrating on the urban regions where they are sure to optimize their profits. This has resulted in housing provision asymmetry. Most of the housing stocks in Ukraine are old and dilapidated. This calls for urgent repairs and investment in the housing sector. The government of Ukraine also has many obligations related to the housing sector that dates back to pre-independence times. For example, many people have been waiting intermittently for the government to offer them housing. There are also challenges that relate to the funding of housing programs whereby the state has failed to sufficiently fund housing to meet the needs of the citizenry. For example, over the years funding for the public sector has been irregular. There have also been problems associated with the regulation of housing programs in the country. There have also been challenges in amending the national housing codes and framework which makes it hard for the government, the private sector and other players in the housing sector to offer affordable housing to all citizens. For example, the housing code in use in Ukraine was inherited from the defunct Soviet Union. The code has outdated provisions like that ignoring communal properties or condominium mode of ownership. Further, the country has come with new laws regulating the industry but no corresponding amendments have been made. This reality creates confusion and makes the housing legislation ambiguous. The Ukrainian government also lacks the official records of the housing needs in the country. The government mainly relies on the people on the waiting lists to be provided housing. However, a study on the housing sector in Ukraine in 2010 indicated that up to 1.12 million citizens were in dire need of housing. As a result, the identified challenges have significantly affected the livelihoods of the citizens. Lack of good housing has been a source of disturbance in various sections of the Ukrainian population. Lack of housing has negatively impacted the social fabric of the Ukrainian population. Lack of housing has also been a source of discomfort for the Ukrainian government whereby citizens have been rebelling against the government as a way of showing their displeasure. To the citizens without homes, this issue has affected them negatively in that they are not economically sustainable. Lack of housing has led to crowding which is associated with poor standards of living such as access to clean drinking water, sanitation facilities and access to public transport and government services. Further, this problem results in poor development of the population in terms of the human development index. This is mainly due to the fact that, when people lack housing, they are also likely to lack the most fundamental services and needs such as education and healthcare. Housing is also inseparable with urbanization; this implies that Ukraine has not integrated the elements of urban planning.
5.4. Is Privatizing Home Ownership in Ukraine an Ideal Approach?
Privatization is one of the main economic phenomena to have happened in the world economic history in recent times. Research ion the implications of privatization in many economic jurisdictions indicate that it has resulted in increased productivity and many other positive effects on the global societies. However, the effects of privatization are mainly influenced by the economic institutions that have been put in place, specifically the rule of law, hard budget constraints, competition, the quality of regulation and governance. Since the early 1980s, many countries have embarked on privatization courses that have significantly changed their economic landscapes. Privatization has since spread to mainstream industries even those that have never been private. Through privatization, the command economies in the post-communist countries such as Ukraine have been successfully decentralized. Specifically, privatization has shifted the political balance of power as well as revolutionizing the international financial markets. Despite this, the intellectual debate about the benefit of privatization is yet to be over. Research about privatization indicates that it is influenced by a number of variables that include economic and political institutions. There is also vital complementary between reforms and privatization. What matters is how privatization has been structures and the people managing it. Particularly privatization has brought many opportunities when it is associated with foreign ownership. for instance, in China, there are disparities in what private entities and reformed government entities can do in trying to unravel the issue of whether privatization is an ideal approach or not. For instance, in China privatization has not produced as many benefits as reformed state enterprises. Some countries in Latin America have reform state entropies and recorded impressive results. However, with the advent of privatization, it is hard to imagine the world without it. Economic challenges in the world such as the great depression and world war one and two inspired privatization which enhanced global economic development within a short period. In the socialist countries, the ownership of capital and factors of production was bestowed on the government and those countries such as Ukraine before the fall of USSR managed to achieve significant industrialization. Economies in the west have also demonstrated the role played by public ownership in economic development. Further, the emerging economies adopted the public approaches of state-controlled developed with some degree of success. However, after the 1970s, the disappointment of the dismal performance by the state-owned entities, slow down economic development in the socialist countries prompted the use of the privatization approach. The conservative British government then run by Margaret Thatcher started to privatize many state enterprises with great success. Since then, the privatization approach has been used by over 100 governments that collectively privatized tens of thousands of state enterprises. The monetization of economic growth raised by these firms is in excess of $1.5 trillion. Through this, privatization can be said to have yielded significant fiscal benefits. For most countries, privatization accounts for at least ten percent of their budgets. Governments have also been saved by similar percentages of fund that they would have required in the form of loans or subsidies. This debate implies that the success of privatization depends on the quality of political and economic institutions. Hence, reforms that assure the protection of property rights, openness, and competition, good corporate governance, budget constraints, optimal regulation, low corruption complements privatization. The significant problem with privatization is that it is stronger in countries with less accountable and competent countries. On the contrary, these countries lack mature political and economic institutions. Therefore, governments that cannot manage public firms well are mostly not able to implement privatization programs or carry out reforms that complement the performance of state firms. In such countries, they are faced with problems where, on one hand, they need to build strong market institutions and on the other, they are not ready to provide support for privatization moves. This is the case in most emerging economies and the situation is different in most developed countries. Some countries have had to wait until their institutions come of age before they privatize while others have implemented what is referred to as Machiavellian privatization. In other countries, reforms and privatization have been suspended indefinitely. Countries such as Russia deemed privatization illegitimate because of the perceived corruption. All in all, privatization is the way to go in many economic jurisdictions at least for now.
There are various aspects of privatization that makes it the approach to follow most of the time. For instance, the speed of privatization is a vital policy choice for many countries. To optimize privatization revenues, states find efficient owners of state enterprises. Restructuring and privatization of public enterprises increase the performance of state enterprise and yields better results. The privatization methods used by the government are also ideal for many entities. This is mainly through trade sales, share issues or non-cash privatization. The above discussion thus implies that the success of privatization depends on many variables.
5.5. Efforts to Improve the Management and Organization of Privatized Houses in Ukraine
The radical transformation of the housing sector in Ukraine was initiated to alleviate the challenges that were encountered as a result of the overly centralized system, which significantly altered the ownership of the housing stock in the country. However, the changes that marked the privatization were not initiated comprehensively as the status quo for the pricing policies and household utilities was maintained. As a result, the transformation became chaotic and piecemental as depicted in the numerous challenges that home owners and residents experience in Ukraine. The property rights in Ukraine fail to determine the persons who can utilize the common-pool resources and regulate them, an aspect that results in wastefulness and quicker deterioration. In as much as the housing ministry still exists, the housing system in the country de-facto has been deinstitutionalized. For instance, the absence of organizational and legal mechanisms of interaction has resulted in inadequate regulation of public spaces and shared property between the private apartment owners and the organizations mandated to supply public utilities and provide household services. As such, house maintenance has become a major challenge due to the privatization, but the government has made numerous attempts to establish a condominium to facilitate maintenance activities and solve existing and emerging management challenges.
House ownership in the form of a condominium offers a framework for regulating access to common facilities, an aspect that helps residents to agree on the management of their houses under legal rights that are accorded to them by virtue of ownership. A condominium varies from the cooperative form of ownership, where residents purchase housing stocks from corporations that own the apartments in the sense that they are primarily concerned with the ownership of real property. As such, the owners of the individual condominiums control undivided interest in the area and hence, share the common charges that are billed for maintenance of the facility.
In as much as the legislation on the Privatization of Housing Stock was enforced in 1992, there was no clear elaboration on the organization of maintaining the houses. However, the burden of maintaining the units was taken up by public housing companies. The public companies also kept the technical documentation and blueprints for the maintenance of the buildings. As such, the aspect of privatization was considered a fake illusion, an aspect that froze the necessary maintenance of the houses for many years. As such, it is evident that the initial aftermath of the legislations that allowed privatization of home ownership in Ukraine did not only affect pricing, but also the quality of housing and access to facilities. The disruption of the industry caused widespread confusion among stakeholders on the sharing and delegation of responsibilities regarding the maintenance of the privatized houses. It is essential to acknowledge that the quality of housing is crucial as it influences other elements that shape the livelihoods of families such as access to essential facilities such as water, electricity, and security. The maintenance of the level of hygiene also enhances the health standards of the buildings.
The absence of proper legal and organizational structures in managing the privatized houses, therefore, exposed the residents of Ukraine to both security and health hazards. However, there have been a progressive development in introducing regulatory structures and the delegation of responsibilities to improve the quality of life of residents who live in the privatized houses. The introduction of the condominium is one of such improvements, which are intended to put in place mechanisms for facilitating proper organization and welfare of the residents.
CHAPTER SIX: CONCLUSIONS AND POLICY RECOMMENDATIONS
6.1. Conclusions
From the study, it is evident that housing problems are prevalent in Ukraine as well as other parts of Europe. The findings of this study demonstrate that economic conditions such as financial crises as well as economic forces are the major factors that have influenced the upsurge in housing prices in Ukraine. The study also found that the economic developments in the post-Soviet era demanded a more-free economy, thus resulting in the development of the capitalist ideology of development. Owing to the frequent economic crunches that have been experienced in Europe, investors turned to the housing business, as it was considered a relatively stable investment. However, the migration trends from the rural areas to urban centers such as Kyiv, the capital city, further increased pressure on available housing facilities. Thus, the supply of houses as a commodity was overstretched by the increasing demand, which consequently resulted in their soaring prices. Studies by UNECE support this finding by indicating that a majority of the population in the region do not have access to decent and affordable housing, even though the UN marks it as a basic human need. Thus, there is a need for actions and policies to make housing in the country decent and affordable for the general population.
6.2. Policy Recommendations
Since housing is a basic human need and right, it is essential for the relevant authorities and the administration of Ukraine to introduce policies to regulate and provide proper incentives for home ownership in the country. In as much as privatization was intended to ensure that individuals freely own homes, it is evident that companies and home owners have taken advantage of this policy to hike prices that have made it difficult for residents to secure decent housing. The fact that the residents spend over 40 percent of their disposable income to secure housing mas created a larger economic problem in the country, as a family remains with little to no funds for other purposes such as investments. Hence, the larger focus on housing rather than other aspects of social and economic growth, thus, reduce the general quality of life for the residents. Hence, it is essential for the government to develop policies that will introduce price ceilings for rental facilities in the country.
The financial institutions in Ukraine should also endeavor to provide affordable mortgage facilities for the residents, as this will enhance private home ownership among the middle and low-income earners. Currently, homes are majorly owned by high income-earners, who let their houses to the low and middle-income earners. Hence, the capitalist system in the country regarding home ownership has generated disparities that have further increased the income gap between members of the various social classes. Cheap mortgage facilities will generate an even trend of home ownership, which will further contribute to fair housing prices as the supply of houses will meet their demand. However, it is essential for more studies to be conducted on the housing challenges in the country in order to generate more solutions to the problem.
It is also essential for the government to consider legislative reforms its national housing policies to make the process of private home acquisition and ownership effective. For instance, the management of the sector should be streamlined, especially in the distribution of responsibilities among the regional, and municipal authorities as well as the state. The administrations should identify their roles and pursue them diligently, as this will help in identifying problems and create a framework on how they can be resolved.
The country’s budget policies should also be changed to enhance sufficient fund allocations to the housing sector and provide subsidies to the needy population. The new budget policies should be organized in a manner that facilitates balanced opportunities for housing development between the rich and poor populations. From this study, it is evident that development is largely skewed, with a small population that controls the country’s home properties determining the prices. Besides, the existing loan and mortgage policies are unfavorable for the needy population, thus making it essential for new budget guidelines to improve access to facilitation whenever an individual seeks to own a home.
It is imperative for the government to revise housing development plans such as technical principles and architecture in order to improve solutions to housing challenges such as heat regulations and the development of normative acts on land control. Such aspects will simplify the logistics that make it difficult for private persons to acquire homes, either through construction or purchase.
Finally, the rental system in Ukraine should be reformed to ensure that utilities and service prices determine the actual cost of housing. As such, the reforms on the rental system will control the frequent and unjustified hiking of prices, an aspect that is a common phenomenon in the country. The reforms will also help in the protection of the rights of families that acquire homes through the rental system.
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