#Allforprofit: The negative impact of World Bank involvement in the politics of housing in Romania

#Allforprofit: The negative impact of World Bank involvement in the politics of housing in Romania

Position paper of the Block for Housing (Blocul pentru Locuire)

I. The Block for Housing is critical towards the 2018 edition of the Bucharest “Housing Forum” and the housing policy proposals presented there.

II. The WB contribution to privatization, commodification and housing precariousness in post-socialist Romania

III. Main shortcomings of the WB Forum Proposal

IV. The perspective of the Block for Housing on the need for public housing

Spurred by the World Bank’s recent restatement of commitment to anti-social policies (during Bucharest Housing Forum 2018), in this document we aim to highlight how the typical World Bank (WB) approach to housing pursues housing market efficiency rather than effective social housing policies. We also analyze the shortcomings of the policy advocated by WB representatives during this year’s Forum and briefly discuss the historical contribution of the World Bank to the privatization and commodification of housing in Romania. We end with a list of positions and proposals on housing. We propose to Romanian stakeholders a new politics of housing, one which departs from WB-advocated market orthodoxy and builds instead on the principles of social justice and antiracism by placing a robust public housing policy at its forefront. This brief paper aims to contribute to the public and political debate on housing in Romania in order to identify solutions to what we call a housing crisis which affects the vast majority of the country’s population[1].

I. The Block for Housing is critical towards the 2018 edition of the Bucharest “Housing Forum” and the housing policy proposals presented there.

On September 12, 2018, in Bucharest, Habitat for Humanity Romania held the “Housing Forum” event. This is the second year when Habitat organizes a forum on housing where representatives of private interests – multinational corporations in the areas of banking, utilities and construction materials, as well as World Bank (WB) representatives – are notable invitees. These guests from the multinational private sector share their opinions about housing needs and the future of housing, advocating of course in favor of public strategies/political measures/profitable programs for their corporations and keeping quiet about problems they helped create.

Such events show the interest of the WB to engage with the topics of the two workshops organized at the forum: (1) the legalization of informal settlements and (2) the need for social housing. We take note of the way in which the two issues are integrated in the dominant discourse and practice of the Bank and subordinated to the core principles of its policy, namely the production of social housing in a way which serves the housing market by furthering the privatization, commodification and financialization of housing.

This year, the housing forum podium was taken over by two WB representatives who, in brief, affirmed the following:

  1. Housing policies must focus on supporting real estate developers and financial institutions, i.e. advocating precisely the view that led to the 2008 crisis and other older social catastrophes across the globe. Despite this ruinous track record, the WB has been imposing such market-oriented policies through their loan agreements for several decades. We are amazed at the forgetfulness of the World Bank in this concern.
  2. Tenants’ protection is blocking housing development. The statement is not only absurd, but also dangerous for the tenants already in vulnerable positions on the unregulated private rental market in Romania.
  3. Housing policies addressed to the poorest, who qualify for (the paltry) state support, ought to be distinguished from policies for the poor people who still have some amount of resources; the latter category are supposed to be left to manage on their own on the real estate and loan market. The proposal pays no heed to the fact that under these circumstances, the second, still precarious, category of persons would contract or go deeper into debt.
  4. The large number of small private owners in Romania stands in the way of the big real estate developers and investors and should therefore be reduced; private companies owning buildings to let should be encouraged instead. We are once again amazed by the World Bank’s positioning. After all, in the 1990s and 2000s, the institution imposed on Romanian governments housing privatization policies and the channeling of public money towards property owners. Now however, the Bank strongly prefers big real estate owners, corporations whose room on the market they consider to be limited by small owners.

In general, the WB’s reports and public interventions argue that the welfare state no longer functions. They fail to mention how WB loan agreements progressively undermined the welfare state in the past couple of decades.

WB’s reports and interventions tell us we cannot expect social and public housing from the state anymore, without mentioning that WB discourages the development of national/local programs for public social housing, because public housing limits the profit margins of real estate and other private interests the WB supports.

Using their authority, the WB and other international organizations define the dominant discourse on housing, naturalizing it quickly by presenting it as neutral and self-evident.

The core principles of this discursive and ideological frame are:

  1. the state should finance housing programs that support real estate developers, securing their profit accumulation objective;
  2. informal settlements should be legally regulated in order to facilitate tax accumulation as well as new contracts for multinational utilities providers (i.e., more profit accumulation).

WB and other international banking organizations call on experts, NGOs, researchers etc. to find technical solutions which abide by these principles and their established discursive, ideological and political frame.

This is what we have witnessed at the forum organized by Habitat. Not only were there no dissenting opinions voiced by the other invited speakers, but the public was not allowed to actually speak. One had to sit quietly, send questions from a smartphone through an online application, and wait for the moderator to choose the “most popular” questions. This ensured an apparent consensus, so that the WB guests would not be disturbed.

II. The WB contribution to privatization, commodification and housing precariousness in post-socialist Romania

Actions undertaken by the World Bank and the International Monetary Fund in the past decades in Central and Eastern Europe (beginning with the 1970s), resulted in the privatization, commodification and financialization of housing. These phenomena reduced the adequacy and the security of housing for a large number of people.

In 1993, through a document called “Hou­sing: Enabling Markets to Work”, the World Bank compelled its Eastern European debtor countries to conduct swift housing privatization, retreat from the construction and development of social housing, and deregulate real estate development. The Bank continued to impose these public policy directions throughout the 1990s and 2000s and to exert pressure towards housing privatization. In the pre-EU-accession period, it insisted on the extension and deregulation of the real estate market[2].

While acting as a consultant for the Romanian government on European money (2014-2016), the WB elaborated the study which formed the base for the National Housing Strategy draft. On that occasion, the Bank reaffirmed its faith in housing market efficiency as solution for housing issues in Romania.

Meanwhile, in the past two decades, the costs of housing maintenance went through the roof, growing by 500% from 2000 until now, while salaries have seen negligible increase. In the meantime, thousands of houses sit empty in areas where people would want to live but cannot afford to and where real estate developers await big profits from their investments in tourism, speculation or financial schemes.

III. Main shortcomings of the WB Forum Proposal

Considering these antecedents, it is crucial to critically assess the World Bank’s proposal to limit social housing distribution only to “the most vulnerable groups”. The main shortcomings of their proposal are:

  1. It suggests that the “vulnerable groups” are exceptional cases and implies that “vulnerability” results from the personal/physical/cultural deficiency of the respective persons/groups who, for these reasons, are not capable to secure on their own the housing they need.
  2. It disguises the fact that the lack of adequate and affordable housing affects a large part of the population: 25% of Romania’s population lives below the poverty threshold, 40% are at risk of poverty and social exclusion, 18% of people experience in-work poverty, 50% of employees live on the minimum wage (according to Eurostat statistics).
  3. Their reasoning hides the fact that “the vulnerable groups” are vulnerable due to high housing costs, due to diminished income caused by austerity policies and generally by keeping labor force cheap, and due to housing inequalities and injustice;
  4. It also covers up the structural causes of this situation: high housing costs are not due to a simplistic supply and demand dynamic, but to the transformation of housing into a commodity, subjected to real estate speculative transactions[3].
  5. Such reasoning stresses that NGOs, private companies or various private-public organizations should distribute social housing, through particular projects. In our understanding, applying this proposal would further undermine the welfare state and the state’s capacity to fulfill its responsibility towards the public interest.

Having learnt nothing from two decades of dysfunctional policy-making, the World Bank and the (anti)social policies it imposes influence the current housing issues in Romania.

IV. The perspective of the Block for Housing on the need for public housing

Having worked for several years on the housing problems, the organizations reunited in the Bloc for Housing support the following stances and proposals on housing in Romania:

  1. Because WB is part of the housing problem, the only reasonable attitude for those interested in housing is to oppose the solutions this institution proposes, promotes and imposes.
  2. Banking corporations, construction, energy, real estate transactions and investment companies aim to extract as much profit as possible from the housing programs – public money and money from groups on the verge of precarity. If public interest was genuinely pursued, there would be no reason and justification for representatives of private interests to be invited to formulate public housing policies.
  3. The NGOs that join the World Bank in carrying out their projects must become aware of being used to legitimize dubious housing policy. Otherwise, NGOs associating with private actors of the housing market and with international loan organizations must acknowledge their role in and take responsibility for promoting the same measures that led to the real estate bubble and to the 2008 financial crisis which endangered millions of lives.
  4. We consider the development of a public housing stock as the main solution for addressing the housing need. In this matter we are in line with those academics and activists who critically address the processes that subsume cities to profit and who defend the right to housing and to the city[4] 
  5. Social housing for people with low income (not only for those vaguely and narrowly defined as “vulnerable groups”) must be ensured as part of a broader public housing policy enforcing the principle of universal right to housing. Such policy must be based on centralized documentation of the need of public housing in general and of social housing in particular; it also must be operationalized through multi annual measures funded by the state (possibly co-financed through European funds).
  6. Social and public housing programs are not only about new constructions, but also about finding ways to convert vacant buildings, to use buildings the state might purchase from the market specifically for this purpose, or utilize real estates that the state might expropriate for the public interest purpose of being converted into social housing.

The Block for Housing (Blocul pentru Locuire, BPL) is a decentralized network of organizations and groups that struggle for the empowerment and for the political organization of communities against housing injustice. BPL sees its role as one of bringing together active groups and movements that advocate for a just and anti racist politics of housing. At this moment, the members of BPL are: Social housing NOW! (Cluj), Common Front for the Right to Housing (Bucharest), Right to the City (Timișoara), and E-Romnja (Bucharest).

Notes:

[1] 80% of the population earns under the medium income, 50% lives with the minimum wage, 25% lives with the risk of poverty.

[2] Between 1990 and 2004, the International Monetary Fund, the WB’s sister institution, concluded several Memoranda (most importantly, the two Private Sector Adjustment Programs) with successive Romanian governments, all of which conditioned lending on privatization of state assets. These led to an even greater reduction of all types of social support for the impoverished. Moreover, the World Bank fully collaborated with the Romanian National Bank on privatization policies, especially bank loan deregulation, thus contributing to the overburdening of many families. Thus, in 2000, The National Privatization Strategy was developed in the spirit of these agreements. The Strategy reiterated the major areas in which the restructuring and privatization process had to be accelerated, thus calling for a fast restructuring of the banking sector, privatization of state-owned companies and state support for the business environment. Romania’s accession process to the European Union (2004-2007) continued this politics of conditionality regarding the privatization of state enterprises. The 2009 Memorandum agreed by the Boc government with the troika of IMF, European Commission and World Bank conditioned loans (destined to “weathering” the financial crisis) on the implementation of austerity policies and “reform of the state” – meaning cuts in social spending (E. Vincze, ‘The ideology of economic liberalism and the politics of housing in Romania”, in Studia Europaea, LXII, 3, 2017).

[3] In the city of Cluj, for example (see “Cărămida” http://casisocialeacum.ro/caramida/), the increase of real estate transactions, from 200 million euros in 2013 to 594 million euros in 2017, went hand in hand with the increase of the real estate prices. It also extended the phenomenon of buying a house to rent or flip (sell further at a higher price). Since housing became the object of real estate speculation on behalf of big real estate developers and big owners of residential and office buildings, it ceased being viewed and provided as a right (see on these developments across different countries for example in D. Madden & P. Marcuse, “In Defense of Housing”, Verso, 2016; or in M. Aalbers’ numerous works on housing financialization).

[4] For example N. Brenner, P. Marcuse, M. Mayer, D. Harvey, The European Action Coalition for the Right to Housing and Right to the City (housingnotprofit.org). Moreover, we align with them regarding the critiques of affordable housing policies based on private-public partnerships or on the public subsidies of private investors. Since the market price or the exchange value of housing keeps increasing (as real estate speculators hunt for more and more profit through this business), and since – due to the lack of public housing – people’s housing needs might be only met through the market, one may conclude that, in Romania, the impoverishment of the laborers, the high rates of overcrowding (almost 50%) and of housing cost overburden (16%, rising up to 46% in the case of private renters and of owner occupiers with bank loans) are also a result of the dramatic low percentage of public housing.

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