Institute of Sociology of the Academy of Sciences of the Czech Republic

The project is supported by the Grant Agency of the Czech Republic. The project started in 2009 and ends in December 2011. The head of the project is Ing. Mgr. Martin Lux, Ph.D.

In the Czech Republic the housing sector has undergone profound changes since the start of the post-communist economic transformation, both in terms of how the housing market functions (influenced by the development of macroeconomic stability and the emergence of access to mortgage financing) and in terms of the forms and scope of state interventions. Although these changes have been partly analysed from the perspective of housing affordability (Lux et al. 2002, Lux 2002, Lux, Sunega 2006), the housing attitudes and preferences (Lux et al. 2003, Lux 2005), the way the supply side of the housing market and mortgage credit operates (Lux et al. 2005, Sunega, Lux 2007), technical and architectural changes (Kuta et al. 2007, Sýkora 2004), and the effectiveness and efficiency of selected housing policy instruments (Sunega 2005), the field still lacks a synoptic, theoretically and wider context grounded, comprehensive account of the transformation of conditions in the housing sector, which would not just describe the current state or previous developments but would also shed light on the causes behind this unique process and especially would provide a description of the consequences the process holds for social inequalities and systemic market risks in the CR; including the applied implications for the architects of fiscal and monetary policy.

Social inequalities in the area of housing consumption are interpreted in this project not just as inequalities in the financial burden connected with expenditures on housing (housing affordability), but also as:

• inequalities arising from unequal distribution of the property in the form of residential real estate (the sharp rise in the price of owner-occupied housing in the CR clearly contributed to increasing the inequalities between owner-occupiers of housing and others, and yet this often overlooked increase, with a significant regional dimension, was probably sharper than the increase in actual income inequalities);
• inequalities in housing accessibility (for example, unequal access to the advantages derived from explicit or hidden public housing subsidies); and
• extreme types of inequalities in the form of actual or potential social exclusion (spatial segregation) of certain types of households.

Here, inequality is not interpreted as a phenomenon that is a priori negative or has (must have) a negative impact on sustainable economic development and social cohesion; it is interpreted in value-neutral terms. Understood as such, inequalities can be created both by a functioning market and by means of state intervention. Inequalities are understood as the “unequal” distribution of housing consumption.

Systemic market risks are however understood as only those economic risks that can have a negative impact on the Czech economy’s sustainable growth, and that are the result of:

• the growing rate of homeownership and the integration of lower-income households in the owner-occupier housing sector;
• the way the mortgage market works (risks arising from the development of a specific system of housing financing and indebtedness of Czech households as such);
• and interventions in the housing and mortgage markets by monetary and fiscal (housing) policies.

We refer to these as “systemic risks” because we are interested in observing the risks that by nature relate to the system (they relate to the economy or society as a whole). Systemic risks are risks that arise as soon as the aggregate of individual risks begins to have a substantial impact on a country’s economy overall, the entire social and economic system (Wilcox, Ford 1998). Property in the form of residential real estate constitutes one of the most important components of a household’s wealth; both debt in the form of mortgage loans and the “wealth effect” can affect household consumption and general macroeconomic development. The housing market – as the global effects of the recent mortgage crisis in the United States have so graphically illustrated – today has a much bigger effect on the development of the national and the world economy than ever before. Despite of this fact, the potential market risks have not been analyzed in the Czech environment up to now. Inequalities and risks, as indicated above, can be a consequence of functioning markets or of state interventions, or of combinations of the two; therefore, of interest here is not just how the market itself functions but also the form and scope of state intervention.

The main objective of the project is:

• to follow up on former successful but more selective projects and conduct a comprehensive description of the transformation of housing conditions since 1990 with the aim of identifying the main causes of this specific development and analysing its consequences for social inequalities in housing consumption and systemic market risks; such description should be set in wider social, economic and political contexts, use the appropriate theoretical framework and should be well documented by empirical findings;
• to evaluate the existing instruments of the state’s fiscal (housing) policy and partly also its monetary policy, whether these policies effectively limit the growth of social inequalities that threaten long-term sustainable economic growth and social cohesion, and the growth of systemic market risks, and to formulate general recommendations for changes in this area.