Podcast “Reconstruction” with Ivan Verbytskyi: IDPs and the Housing Crisis in Ukraine

Social housing in Ukraine

Private property did not exist in the Soviet Union. After its collapse, private ownership emerged, and the housing stock, which had previously been state or collectively owned, was privatized. Today, individuals can also privatize housing provided by the state—certain categories of people, such as military members, judges, law enforcement officers, etc., still receive housing from the state.

As a result of privatization, over 90% of the housing stock that was state-owned in 1991 transitioned into private ownership. Consequently, the state and municipalities were left without a housing stock that could be used to accommodate people facing challenging life circumstances, including IDPs. 

Where should people who have lost their homes relocate?

At the start of the full-scale invasion, communities accommodated internally displaced persons in various facilities such as schools, kindergartens, cultural centers, dormitories, and more. Many of these institutions have now resumed their regular functions, but some still house displaced people.

This situation presents several challenges. One is not always sufficient number of available spaces. Another is the difficulty of living for years in a space that was once a classroom but has now become a shelter for strangers. Similarly, dormitories and modular housing units often provide rather “Spartan” living conditions.

In many cities, finding available housing has become a significant issue, primarily due to the large number of military personnel and IDPs. The rental market supply has decreased, and housing costs have risen, which has impacted housing affordability. As a result, many people who fled dangerous areas unfortunately lack the financial resources to pay for housing, let alone purchase it.

Unfortunately, due to insufficient support, some people have been forced to return to occupied territories because their previous housing options have become inaccessible. Empathy for the challenges these individuals face is crucial. We must create conditions that prevent them from ending up in such difficult situations.

Any country experiencing such large-scale displacement would face this problem, as it’s impossible to have several million vacant social housing units ready. However, in our case, the issue is that social housing in Ukraine is more of an exception than a rule. In many cities, we’re talking about just a few apartments. There is no systematic approach, no acknowledgment that certain groups of the population always need such housing. In many cities, this problem has been ignored for years and continues to be ignored now. Authorities claim there are no citizen requests or waiting lists for such housing, so they assume there is no demand. Meanwhile, citizens are told, “We don’t have available social housing, so we don’t maintain records.” This creates a vicious cycle.

Social housing policies in other countries

In many EU countries, cities have 10-30% of their housing stock designated as social housing. This is a correct approach that ensures access to housing for the most disadvantaged groups. Providing access not only to those who are entirely unable to pay but also to those who can afford a portion of the market rent makes it possible to effectively mix different social groups within the housing system. Rent payments from those who can contribute help subsidize the housing costs of those who cannot afford to pay anything.

This mechanism also allows municipalities to influence the rental market. By setting their own rental rates, municipalities can help reduce private real estate prices, especially when speculation inflates costs. Additionally, municipal ownership of social housing can elevate housing standards, encouraging private landlords to improve their offerings to meet these standards.

This approach could be implemented in Ukraine. Surveys indicate that up to 20% of residents in large cities already live in rental housing. While most Ukrainians express a desire to own their own homes, a significant portion—around a quarter—report being comfortable with living in rented housing as long as the conditions are decent. This means no worn-out furniture or intrusive landlords who show up unannounced.

In many countries, social housing construction is relatively cheaper than commercial housing. This is because the loan for construction is taken by non-profit organizations rather than developers, who additionally factor in their profit margin. Moreover, international credit or pension funds can provide land or money to non-profit organizations on preferential terms. 

Currently, this approach cannot work in Ukraine due to numerous issues with developers, trust, and manipulations in the housing market. However, in general, a social housing system, when it serves not only the most vulnerable people, can be economically sustainable in the long term and not burden the local budget. For many communities, attracting young professionals, teachers, or doctors to their institutions is essential, and having social housing available to accommodate these people is a valuable resource that can be effectively utilized.

How can the state “find” social housing?

Since the 2000s, Ukraine has had legislation addressing housing in public ownership. Until 2011, developers were required to participate in developing settlements, which sometimes involved contributing in kind—such as handing over one or more apartments to the municipality. These apartments were either allocated to individuals on housing waiting lists or converted into social housing. Additionally, a separate fund for temporary housing emerged, intended for people needing housing for a specific period, such as IDPs.

After 2014, dormitories or other buildings in cities closer to the eastern regions began to be used as temporary social housing for IDPs. By 2021, Ukraine’s temporary housing fund included approximately 3,000 apartments. However, this number is far from sufficient, considering the millions of internally displaced persons in need of housing. 

How prepared is Ukraine to address the issue of social housing, considering the current budget deficit?

There is the Ukraine Facility program with a specific focus on housing (the program allocates €450 million to provide housing for internally displaced persons (IDPs) and their families who fought for Ukraine, as well as for the families of fallen defenders. An additional €600 million will be spent on compensating people whose housing was destroyed by Russia – ed.). Ukraine must decide whether to use these funds for mortgages or to develop social housing.

The mortgage program is one of the initiatives currently being developed. “eHousing” has issued approximately 12,000 loans, with IDPs receiving a minimal share. (As of October 23, only 19 IDP families had utilized the affordable mortgage option. The number of applications from IDPs is gradually increasing. Under the program’s terms, IDPs can acquire housing on favorable conditions—with a fixed interest rate of 7% per annum in hryvnia for up to 20 years – ed.). Mortgages are more commonly used by individuals who can afford the repayments. Prioritizing such citizens over those who are completely without resources— this remains an open question. The Ministry of Economy oversees mortgages, while the Ministry of Infrastructure and, to some extent, the Ministry of Social Policy handle social housing. Their political influence may be lesser, affecting decision-making.

What is the role of local authorities, and what approaches should be adopted at this level?

Social housing is primarily the responsibility of local authorities. The role of the state and national government is to establish a legislative framework. However, local leadership is crucial.

The experience of the past two years shows that many communities have unused premises that can be converted into temporary housing, at least for internally displaced persons. While there are technical, financial, and administrative challenges in this process (e.g., if the building is a former educational institution, there may be restrictions on its purpose of use), it is feasible in principle. Additionally, the so-called escheated property is one of the existing methods of increasing social housing stock. Municipalities have the right to take over properties without living owners or heirs and repurpose them as social housing.