TopicalIssues of Distribution and Use of Housing

<p style="text-align: right;"><a href="https://search.crossref.org/search/works?q=10.52340%2Feab.2024.16.02.03&from_ui=yes">doi.org/10.52340/eab.2024.16.02.03</a> <p style="text-align: justify;">The goal of the state housing policy is to create conditions that will allow each person to have decent housing at an affordable price. Due to high prices and growing demand, there may be market failures, which necessitates government intervention in the functioning of the housing market.<br />When we talk about the involvement of the state in the policy of providing housing, we must also consider the activities of the market. The high demand for housing resources determines the high price of residential areas. There are often cases when housing prices rise and exceed average wage growth, making own housing an unaffordable luxury for many people. The distribution of housing in the world is mainly carried out by market forces. More than 90% of the 1.1 million households in Georgia own their homes. The majority of housing, as the graph shows, was built during the Soviet Union in the 50s, 60s, 70s, and 80s, while the construction and distribution of residential areas was mostly done through state intervention. After gaining independence, constructions in Georgia are mainly carried out with private funds, and the number of houses built during this period is within 9% of the total residential area.<br />It is worth noting that after the end of the Second World War, the rented social housing sector in many European countries grew at a rapid pace, as the states tried to solve the housing problems in the shortest possible time. Although Georgia was a part of the socialist system, where the main economic activity, including housing construction, was carried out by the state, the main residential buildings in the country were in the hands of private owners. After the collapse of the Soviet Union and gaining independence, the state-owned houses became the property of the population, and today only 10% of households live in rented or mortgaged apartments (Georgian National Statistics Service), while 90% own their own homes. According to European standards, this is a higher than average rate (70% of households in the EU own their own home).<br />In general, the market system has several important advantages compared to state regulation, however, in the case of housing, an unregulated market is unlikely to be able to distribute resources efficiently and fairly for a number of reasons. The reasons for this are externalities, imperfect information in the housing market and inelasticity of demand.<br />Without government intervention, the housing market will operate inefficiently. Government regulation is necessary to address the problem of externalities that arise as a result of individual decisions to buy or rent housing. In addition, some form of government intervention is needed to help people who cannot afford to buy or rent housing.<br />Consumer awareness in the housing market is often not enough. The decision to move to a new place may be dictated by a change of job, which requires a quick decision to buy a home in a foreign area. An individual may not have the necessary information (or the time to gather it) needed to make an informed decision. Landlords also face information problems since they cannot determine the characteristics of potential tenants in advance. Deposits and letters of recommendation are a form of solution to the problem of information asymmetry for renters. However, some population groups may not have the means to meet such requirements. Therefore, only a narrow segment of this market will be available to them. This leaves them with a very limited choice of poor quality housing that greedy landlords rent out at inflated prices.<br />A situation in which developers build buildings wherever they want would be undesirable for the community. Unregulated construction, taking into account the externalities arising during housing construction, will lead to excessive housing density and environmental pollution. Government intervention may be necessary during construction in already established development areas due to the reluctance of private companies to operate in such problematic areas. At the same time, the construction of new fields may require state intervention to ensure the availability of necessary infrastructure (roads, schools, etc.).<br />For these reasons, the housing market needs state regulation, which allows for a more efficient distribution of resources. In particular, the state regulation of land use allows determining the purpose of individual plots and showing which of them should be reserved for agricultural activities, recreation, and which should be allocated for construction in each specific year. The area of land allocated for construction is usually determined according to the projected number of households in the district, which, in turn, depends on population projections, joint or separate housing assumptions, and estimates of the number of migrants. However, forecasts may turn out to be wrong, since unlike other consumer goods and services, the amount of land allocated for construction does not depend on price changes. The process of allocating lands is decided not by market but by politics. The availability of land for construction is often determined according to annual or five-year plans and does not reflect changes in demand conditions. <p style="text-align: justify;"><strong>References:</strong><br />• Carter G. R. 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(2003). Moving to Opportunity for Fair Housing Demonstration: Interim Impacts Evaluation. National Bureau of Economic Research.<br />• Popkin S. J., Leventhal T., & Weismann G. (2010). Girls in the ’Hood: How Safety Affects the Life Chances of Low-Income Girls. Urban Affairs Review, 45(6), 715-744. doi:https://doi.org/10.1177/1078087410361572<br />• Sanbonmatsu L., Katz L. F., Ludwig J., Gennetian L. A., Duncan G. J., Kessler R. C., Lindau S. T. (2011 ). Moving to Opportunity for Fair Housing Demonstration Program - Final Impacts Evaluation. U.S. Department of Housing and Urban Development | Office of Policy Development and Research.<br />• Sanbonmatsu L., Klin J. R., Duncan G. J., & Brooks-Gunn J. (2006 Oct ). Neighborhoods and Academic Achievement. Journal of Human Resources, XLI (4), 649-691. doi:10.3368/jhr.XLI.4.649<br />• Wolfers J. (2015 04 05). Why the New Research on Mobility Matters: An Economist`s View. The New York Times.<br />• Vardosanidze V. (2017). sakartvelos sakalako satskhovrisis speros sistemuri kontseptsiis zogadi monakhazi. [General Outline of the System Concept of Urban Housing in Georgia] (in Georgian). https://civilin.org/pdf/n218.pdf (retrieved 05 22, 2024)<br />• Namicheishvili S. (2014). usakhlkaroba, sotsialuri satskhovrisi da sotsialuri mushaoba. tbilisi: UNDP. [Homelessness, Social Housing and Social Work. Tbilisi: UNDP]. (in Georgian).from https://www.undp.org/sites/g/files/zskgke326/files/migration/ge/GE_UNDP_POV_Social_Housing_Geo.pdf (retrieved 05 22, 2024).<br />• Sakartvelos Mtavroba. (February 7, 2014). t’eknik’uri reglament’i - miusaparta droebiti tavshesapris punktsionirebis minimaluri st’andart’ebis damt’k’itsebis shesakheb. [Government of Georgia. Technical Regulation - on the Approval of the Minimum Standards of Operation of the Temporary Shelter for the Homeless]. (in Georgian). from https://www.matsne.gov.ge/ka/document/download/2240289/0/ge/pdf (retrieved 05 22, 2024).<br />• Sakartvelos Okupirebuli Teritoriebidan devnilta, shromis, janmrtelobisa da sotsialuri datsvis saminist’ro. (July 11, 2023). kalta mimart dzaladobis an/da ojakhshi dzaladobis mskhverp’lta droebiti satskhovreblis (tavshesapris) mots’q’obisa da punktsionirebistvis autsilebeli minimaluri st’andart’ebis damt’k’itsebis taobaze. (brdzaneba №50/n). Tbilisi. [Ministry of Internally Displaced Persons from the Occupied Territories, Labour, Health and Social Affairs of Georgia. (July 11, 2023). Regarding the Approval of the Minimum Standards Necessary for the Arrangement and Functioning of Temporary Housing (Shelter) for Victims of Violence Against Women and/or Domestic Violence. (Order No. 50/N). Tbilisi]. (in Georgian). from https://matsne.gov.ge/ka/document/view/5830803?publication=0 (retrieved 05 22, 2024).<br />• Sakartvelos Statistikis Erovnuli Samsakhuri. (t. g.). shinameurneobebisa da sasoplo meurneobata gamok’vlevebis monatsemta bazebi, samokhmareblo pasebis indeksebi. monatsemta baza. mop’ovebuli 2024 ts’lis 30 03, https://www.geostat.ge/ka/modules/categories/127/monatsemta-bazebi-დან [National Statistical Service of Georgia. Databases of Household and Agricultural Surveys, Consumer Price Indices. Database]. (in Georgian) (retrieved 03/30/2024) <p style="text-align: justify;"><strong>Keywords:</strong> Housing policy, construction, land, distribution, externalities, equity, market failure, dignified housing, household, private property, inelastic supply, request.<br /><strong>JEL Codes:</strong> P25, P26, R21, R31