Housing Standards 2002/03: Financial Affordability and Attitudes towards Housing

4. People's opinions about the housing cost burden

4.3 Attitudes toward the issues of housing policy and the assessment of the situation on the housing market

Respondents were asked a number of questions concerning their attitudes to the situation on the housing market in the Czech Republic and general attitudes related to housing and the housing policy. One of the questions aimed to discover whether respondents believed that housing was an individual matter of the citizen and his family or whether it was a matter of the state and municipality. Generally, relatively the most respondents (46.9%) believed that the responsibility for housing should be shared - it is both a matter of the citizen and his family and the state or municipality where the citizen lives. The percentage of respondents who believed that people should take care of their own housing themselves (or with the help of their family) was only slightly less (43.9%) and clearly it outweighs the percentage of those who place the main responsibility on the state and municipality (7.8%). Figure 23 shows the extent to which the respondents' answer to such a general question is related to the subjectively felt housing cost burden measure (housing cost-to-income ratio). It is clear from the figure that the belief that people should take care of their housing themselves or with the help of their family is significantly higher among people who view their housing cost-to-income ratio as low than among people who view their housing cost burden as high. With an increasing housing cost burden on the family budget, the percentage of those who believe that the state and municipality should be responsible increases. This result is obviously not surprising - people who have problems financing their own housing seek help from the state and municipality and transfer on them more responsibility than people whose housing costs do not have such an impact on their family budget.

The response to the question who should be responsible for the housing of people is also significantly contingent upon the tenure, i.e., whether a respondent lived in his own, co-operative or rental flat or whether he was in the category "other" mostly consisting of people living in sub-leased places and guesthouses (see Figure 24). People living in their own homes (in the Czech Republic this tends to be houses rather than flats) think far more frequently that the responsibility for housing is a matter of each individual and his family. These people undoubtedly mirror their own life experiences in their responses - most house and flat owners in the Czech Republic had to take "care" of their ownership themselves, whether by financing the construction (purchase) or investing their own work into the construction. Some people may have indeed secured ownership housing without their own personal contribution (e.g., inheritance) but in this case it was their family predecessors and not the state or the municipality who "took care" of their housing. On contrary, a large portion of today's tenants acquired housing with the aid of the state and municipality and it is therefore understandable that they attribute greater importance to the state and municipality than people living in their own homes. The attitudes of people living in co-operative flats are located somewhere between owners and tenants. By far, people living in guesthouses and sub-leased places rely the most on the state and municipality. In their case it cannot be assumed that their attitude comes in reaction to their own experience because the state and the municipality do not help these people much (or not at all) in the solution of their housing situation. Their position on the housing market is clearly the worst of all the compared groups - they pay relatively the most for the poorest quality and least secure housing - and therefore it is likely that they place great hopes on the state and municipality precisely because they and their families did not manage to resolve their housing problems using their own resources.

Another general question aimed to discover the satisfaction of the respondents with the current housing situation in the Czech Republic. Sceptical attitudes prevailed among the respondents: 43.2% of respondents are quite dissatisfied, additional 18.6% are very dissatisfied while only 25.2% are quite satisfied and mere 1.5% are very satisfied (the remaining 14.1% of respondents either did not know or did not answer). Although the question was intentionally formulated in very general terms and did not ask the respondents to assess their personal housing situation, the responses received show that in their mind respondents do not make a difference between housing "in general" and their own personal housing situation. Therefore, the evaluation of the housing situation in the Czech Republic was greatly contingent upon the respondents' housing cost-to-income ratio and the type of housing (tenure). As was the case before, both the above-mentioned factors influence respondents' answers statistically significantly and independently of each other. Figure 25 shows the correlation between the assessment of the housing situation in the Czech Republic and the subjectively felt housing cost-to-income ratio.

It is clear from the figure that satisfaction falls with increasing housing costs. Respondents who view their housing costs as very high in relation to their income are the least satisfied with the housing situation in the Czech Republic - 85% of them are quite or very dissatisfied. On the other pole of the satisfaction scale are people who consider their burden low in view of their income. It is, however, pertinent to note that although these people are relatively more satisfied with the housing situation in the Czech Republic than the other groups of the respondents, most of them (64%) are dissatisfied.

People living in their own flat or house are relatively most satisfied; less satisfied are people living in co-operative flats, even less people living in rental flats and the least satisfied are people living in sub-leased flats and guesthouses. The size of the sample and the construction of the question related to the type of housing allowed us to differentiate between respondents according to whether they themselves were owners or "only" members of the owner's household. A more detailed analysis showed that owners were statistically significantly more satisfied than owners' household members. The same type of relationship was discovered in other types of housing as well. Members of housing co-operatives were more satisfied than their household members; shareholders in a legal entity owning a block of flats are more satisfied than household members of such shareholders and even lease contract holders in municipal or private rental housing (i.e., a person whose name is stated in the contract) are more satisfied than their household members. It is obvious that the degree of "legal security" related to the use of existing housing has a great impact on the general satisfaction with the housing situation. Satisfaction falls in direct proportion to the measure of risk that the existing housing will change, which can mean a charge for the worse. This risk is of course greater in groups of respondents who do not have a direct legal relationship to the occupied dwelling.

From additional detailed analysis based on a factor analysis and linear regression it was discovered that respondents who viewed their housing costs as high were less willing to support rent deregulation than respondents who viewed their housing cost-to- income ratio as low or adequate. It appears that rent deregulation is most supported by those who will not be affected by it at all. Support for rent deregulation falls with the growing housing cost-to-income ratio, even among people living in their own or co-operative flat/building in whose case the rent deregulation will not directly affect their housing costs. In this case, we are probably seeing some sort of solidarity of the poorest owners and co-operative owners with tenants who, in their opinion, could find themselves in financial difficulties after potential deregulation.

An interesting relationship came to light between the evaluation of the respondents' housing cost-to-income ratio and their opinions about the usefulness of various housing policy instruments. Figure 28 shows the percentage of the actual and potential users of mortgage credit according to a subjective evaluation of the housing cost burden in the respondent's household. It is clear that people who do not consider a mortgage credit at all predominate in all categories. It is also clear that mortgage credits are used or were used more by people who view their housing costs as low. These are especially financially well established people because the fact that they have to repay the mortgage credit did not increase their housing costs so much that they would come to view their housing cost-to-income ratio as high. The percentage of potential applicants for a mortgage credit, i.e., people who would like to take advantage of this credit, is approximately the same in all the studied categories.

Questions that were included in the questionnaire made it also possible for us to ascertain to which degree respondents considered mortgage credits to be affordable. Here we have to note that the fieldwork was done in June 2001. In view of the fact that since 2001 the average interest rates of mortgage credits have decreased and at the same time real income has increased, it is likely that the percentage of people who consider mortgage credits to be financial affordable is higher in 2003 than two years before. On the other hand, it is true that the Czech Republic has experienced a great boom on the real estate market, resulting in the growth of the real estate prices, which has forced potential buyers to apply for greater credits than before. Figure 30 shows to which degree respondents' opinions about financial affordability of a mortgage credit depended on their subjective evaluation of the housing cost burden measure of their household.

It is clear that people who view their housing cost-to-income ratio as low consider mortgage credits to be affordable. People whose housing cost-to-income ratio is high do not expect anything from mortgage credits because almost all consider mortgage credits to be financially unaffordable. Respondents quite clearly assessed their solvency and realistically evaluated their chances of getting a credit for housing on mortgage. The figure also proves the generally widespread idea that mortgage credits are a tool that can help only the relatively wealthy.

In the portion of the questionnaire dedicated to the evaluation of selected housing policy instruments, respondents were asked a series of questions where they were asked to declare whether they knew various housing policy instruments of the state and to evaluate in each individual case whether the instrument, in their opinion, can or has already helped efficiently with the solution of various problems related to their housing. Therefore, it was also studied how the respondents' housing cost burden affected their opinions about the usefulness of individual state housing policy instruments. Because the housing situation greatly differs according to whether a respondent lives in the countryside, a smaller town or a large city, let us look at the respondents' answers separately in these three categories.

We analysed respondents' attitudes toward four state housing policy instruments: income tax reduction of the interest paid on a housing credit (tax relief), state premium to the construction savings schemes, housing allowance and support for housing construction of rental flats by municipalities (subsidy 320,000 CZK for a flat and 80,000 for an infrastructure).

Figure 31 shows the percentage of respondents who consider the tax relief to be a useful help in the solution of issues related concretely to their housing situation. When we work only with average figures, we find that respondents from the countryside do not differ statistically significantly from respondents from small towns, middle-sized towns or large cities in the opinion about the usefulness of the tax relief. When we divide respondents into groups according to how they view their housing cost burden, we get a different picture. Generally, people with low housing cost-to-income ratio consider the tax relief on the housing credit to be useful more often than people with a high ratio - the former can afford to apply for a credit far more than the latter; moreover, they have on average higher incomes and therefore a higher income tax basis. Differences between people with low housing costs and people with high housing costs also depend on the size of residence of the respondent. While in the countryside the attitudes of "the poor" and "the wealthy" do not differ as much, in large cities differences are pronounced: "the wealthy" living in large cities have the highest absolute income and therefore the greatest potential for tax reduction; "the poor" living in large cities do not really believe that they could afford any housing credit in view of the real estate prices and therefore do not consider the potential tax relief to be useful in their concrete situation. Respondents showed a great deal of realism in this respect. It is clear that the tax relief of interest paid on a housing credit is one of the state housing policy instruments from which high-income households benefit more, which is something the general population is well aware of.

Similarly, Figure 32 captures the confidence of people in the efficiency of the state premium to the construction savings scheme in relation to their concrete housing situation. The confidence is generally higher than for the other housing policy instruments. It is not, however, completely clear whether the high figures do not only reflect the general popularity of the construction savings because it is a relatively safe form of savings bearing a relatively good interest and because if a person has saved for a long time, s/he does not have to use the saved amount for housing purposes. This can also be gleaned from the fact that most respondents (58%) of those who have a construction savings do not intend to use it for housing or do not know how they will use the money. As was the case with the tax relief of the housing credit interest, there are no differences between respondents living in the countryside, in smaller and middle-sized towns and in large cities. Although construction savings schemes are more affordable than mortgage credits and therefore a far greater portion of people can take advantage of the state premium than the interest subsidy for mortgage credits or the tax exemption of the mortgage credit interest, it is clear that this instruments also tends to help the more affluent and is seen as such by the general public.

While the tax relief and the interest subsidy of mortgage credits are instruments which, in principle, tend to help people with higher incomes, the housing allowance is intended especially for low-income people. The data contained in Figure 33 confirm that people also perceive this fact.

Unlike the two previous figures we can clearly see that people whose housing cost-to-income ratio is high have greater confidence in the housing allowance. The confidence in the efficiency of this instrument is not, however, generally very high - somewhere between 18% and 35%. In this case as well respondents' opinions largely reflect the real situation. People with a high housing cost burden living in the countryside have the greatest confidence in the housing allowance. This is also a group of the population whom the housing allowance can help the most. In view of the fact that the housing allowance is derived from the household income and does not take account of housing costs, which are higher in large towns and especially in cities than in the countryside, the same amount paid out to two households with the same income of which one lives in the countryside and the other in a large town helps the former far more. The percentage of people whose housing cost-to-income ratio is the lowest, who have a relatively high income and therefore do not qualify as housing allowance recipients and who believe that the housing allowance can help them efficiently in the solution of problems related concreted to their housing is surprisingly high - around 20% of this category. It is likely that these respondents do not have much actual experience with the housing allowance. It appears that the relatively high confidence in the efficiency of the housing allowance is, in this case, a by-product of a generally more optimistic opinion about the situation on the housing market in the Czech Republic.

Figure 34 shows the confidence in the efficiency of the state subsidy for the construction of municipal rental flats. Although it could be expected that Figure 34 will look similar to the previous figure capturing the confidence of respondents in the usefulness of the housing allowance, the answers do not correspond to this expectation. There are two possible explanations of the paradox consisting in the fact that people who have a low housing cost-to-income ratio and therefore do not need such rental flats for the solution of their housing situation have greater confidence in the efficiency of the support for the construction of municipal rental flats than people with relatively high housing costs, people living in sub-leased flats and guesthouses, for whom the programme supporting housing construction of municipal rental flats has been created. Either the programme does not meet its intended goal or respondents' ideas about the functioning of this instrument are inaccurate. In view of the fact how the programme supporting the construction of rental flats worked in reality, the former explanation is more likely to be true. Since the state subsidy of CZK 320,000 is not enough for the construction of one flat and the rules, moreover, say that the subsidy can cover a maximum of 50% of a price of a flat, the model was amended to allow a financial co-participation of future tenants, which obviously excluded all potential interested parties from the low-income categories. Often, municipalities offered tenants to buy the flat into their personal ownership after twenty-year lease as a compensation for the required financial co-participation. Thus, the financial contribution for the payment of the construction costs of newly constructed rental flats de facto changed into an investment into future ownership housing and the rent into the like of a mortgage credit repayment. No wonder, then, that this housing policy instrument is appreciated more by people with a low housing cost-to-income ratio (i.e., people with high income), as was the case with the interest subsidy for the mortgage credit or the tax exemption of the interest paid on housing credit because for them it is, in a way, "a different type of subsidised mortgage". It is symptomatic of this instrument that the least confidence in the efficiency of the state subsidy for the construction of municipal flats is recorded among people with the highest housing cost burden measure who live in the largest cities. In view of the fact that housing construction is the most expensive in large cities, the demanded financial co-participation of the future tenants was the highest. This reduced the chances of people from the low-income groups with the highest housing cost-to-income ratios to obtain a new state-subsidised municipal flat to an absolute minimum.