Housing Standards 2004/2005
Financing Housing and Refurbishing Housing Estates

6. The Refurbishment of Prefabricated Housing Estates in the Czech Republic

6.2 The Effectiveness and Efficiency of Refurbishment Programmes in the Czech Republic

The effectiveness and efficiency of the refurbishment programmes was evaluated by looking at four aspects of refurbishment programmes that are also emphasised in advanced countries - how targeted they are, the participation of inhabitants, multi-source financing and efficiency auditing. In the Czech Republic at present there are three programmes aimed at the refurbishment of prefabricated housing estates (they differ, among other things, in terms of how broadly or conversely narrowly they defined refurbishment, that is, they are either targeted exclusively technically at repairing problems in the prefabricated structure, or more broadly target the overall residential environment). Evaluating how targeted the Czech refurbishment programmes are in the sense of how much the programme is directed to address specific refurbishment needs, it can be claimed that the individual programmes in this regard are targeted according to a logical structure and the individual programmes complement each other. If we understand targeting to mean the concentration of resources on residential complexes with the most serious problems, we find then that the Czech refurbishment programmes are not very targeted. Because the ownership structure of Czech prefabricated housing estates is mixed, some public sources that are set aside for complex refurbishment projects bring an advantage and capital gain to members of cooperatives and private owners of flats.

Participation of the inhabitants of prefabricated buildings in the refurbishment process is a core part of only one of the three state programmes that exist to support the refurbishment of housing estates, but it is limited to just the obligation to reform the inhabitants of the dwelling units about the prepared refurbishment and conduct some sort of poll among them on their opinions and requirements regarding the specific form of the refurbishment project. The request for the subsidy must include an evaluation of this survey and an assessment of the influence of the citizens' opinion on the final plan of the project. However, the approaches municipalities take to fulfilling this requirement vary considerably, and often they see this requirement as simply a formality. On the whole it could be said that there is little demand in the Czech Republic for the participation of inhabitants in the refurbishment projects, not even from below, on the part of the inhabitants of the affected areas, and not from the top, on the part of the state. When the inhabitants do in some way participate in the projects it is more in the way of simplified forms of participation involving fewer opportunities to really have an influence on the course and outcome of the refurbishment process.

Like in other EU countries, in the case of the refurbishment programmes in the Czech Republic the costs of refurbishment are not covered in full by the provider of public financial resources (the ministry, and the State Fund for Regional Development). Multi-source financing is limited, however, especially in terms of concentrating the public resources that individual ministries and other institutions have available into projects of a larger scope, as is customarily the practice in a number of European countries.

Auditing the effectiveness of the public resources put into the refurbishment of housing estates is usually done through technical and accounting audits, and as such they can only prevent patent errors like the malversation or the misuse of public funds for other purposes. The effective use of public funds itself, capable of responding to questions like "Wouldn't it have been possible for the same amount of money to better achieve the set goals by different means?" (or: "Were the public funds really used where they were most needed at the given time?", "Wouldn't it have been possible to achieve the same goals in a different way but at less expense?"), is not something that is systematically monitored. The refurbishment programmes also as such are not evaluated by independent auditors, as is the practice in advanced Western countries; much of the information about the final recipients of support is not generally available (or is not even recorded at all) and no indicators on how targeted or effective the state support is are made public and are probably not even measured.

In 1998-2004 around 6500 prefabricated buildings with a total number of 97 621 flats (ÚRS, 2005) underwent some manner of repairs. With a total number of 1.26 million flats in prefabricated buildings altogether this means that thus far only roughly 8% of the total number of prefabricated flats have undergone some form of repairs. At the current pace of refurbishment then complete reconstruction of the housing fund in prefabricated buildings should take roughly 80 years, which is obviously far too long.

The scope of reconstruction work conducted and its financing are affected by various factors and obstacles (ÚRS, 2005):

• the considerable level of housing fund indebtedness owing to inadequate maintenance and repairs;
• unresolved relationships in the sphere of rental housing, resulting in the existence of various rent levels;
• post-privatisation mixed ownerships in many tenement buildings, encumbering the decision-making on how to invest the resources;
• limited management of housing cooperatives in the sphere of housing construction and the creation of funds;
• limited resources from public sources;
• delayed introduction of financial capital into housing construction and into the reconstruction of the housing stock.

Conversely, there are a number of factors that are favourable to carrying out the refurbishment projects, for example:

• low inflation, which lowers the cost of loans and increases the willingness of inhabitants to invest in housing;
• a change in the social climate and a growing standard of living, which increases the willingness of people to invest in housing;
• a lowering of the VAT on construction work connected with housing construction to 5%. This low rate is an exemption from EU rules and will only apply to 2007 (unless the exemption is extended).

What must be done to accelerate the pace of reconstruction of the existing housing stock? In the interest of maintaining or raising the pace of construction work aimed at the refurbishment of prefabricated buildings, and not just those buildings, it would be useful to retain the exemption allowing a reduced VAT on construction work connected with housing so that it applies beyond 2007 (the current government is seeking its extension to 2015). It is necessary to specify the segment of social housing (for example, within the segment of communal flats), carefully monitor the social and income structure of the population in prefabricated housing estates, and improve the targeting of public support towards areas were for social reasons public assistance is needed most.

The current system of involving the participation of inhabitants in refurbishment projects is for the most part inadequate and does not correspond to trends in advanced countries or to the requirement of ensuring the most efficient use of support. The construction of prefabricated buildings was already subject to closed-door decision-making once before by the countries main architects with "the exclusion of the public", and several generations will still have to face the consequences of that decision-making approach. Let's not repeat obvious mistakes, and let's try to achieve the most effective form of participation of inhabitants in the renewal of the living environment of housing estates and buildings; for the formation of participation programmes it is possible to call on the experience of many NGOs and to take inspiration from a handbook for civic participation that was developed as part of the SUREURO project (available for downloading at: http://seb.soc.cas.cz).

It is necessary to continue in the more fundamental process of rent deregulation and the transition to a new system of second-generation rent controls, because only then is it possible to ensure the provision of more financial resources for use in refurbishment. For the purpose of low-cost financing of the refurbishment of buildings in cooperative ownership or buildings managed by owners' associations it would be more effective to use indirect state support aimed at making commercial loans more accessible. Surpluses in the accounts of building savings banks could be used as part of private-public partnerships conceived in this manner and thus even the system of building savings could become far more efficient than it is today.

It is necessary to dramatically improve the current system of audit and feedback relating to the use of public resources, especially in the sphere of measuring the efficiency and effectiveness of the use of support (to this end it would be useful to develop several basic indicators capable of monitoring the refurbishment projects as they go along and upon their completion). Accelerating the pace of work on the refurbishment of prefabricated buildings will certainly benefit if from 2007 it will be possible to draw on support resources from the EU structural funds.

At present Czech housing estates still strongly feature a socially heterogeneous population structure. The deterioration of the housing estate environment would however lead first to the departure of the middle classes and then to the development of problem areas and eventually ghettos. The refurbishment of housing estates is currently a public expense, but the effective use of resources can in the long run spare the country the many times higher expense of covering other costs, as witnessed in the situations in countries like France, the Netherlands, Sweden and so on.