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Housing privatisation in the transformation of the housing system – the
case of Tartu, Estonia
ANNELI KA
¨HRIK
Ka¨hrik, A. 2000. Housing privatisation in the transformation of the housing system – the case of Tartu, Estonia. Norsk Geografisk
Tidsskrift–Norwegian Journal of Geography Vol. 54, 2–11. Oslo. ISSN 0029-1951.
The article deals with the process of housing privatisation during the 1990s in Estonia and its impacts on social inequalities. The
transformation of the social system has resulted in a changed pattern of housing occupancy and new bases for social inequalities.
The major causes of change are related to the privatisation process. Briefly, it will be argued that in Estonia the opportunities of
households to privatise were not related to their socio-economic status. Rather, their gains were related to their housing situation at
the beginning of the privatisation process. As an impact of the privatisation, the gap between the rental and ownership sectors, as
well as the social segmentation across different housing submarkets based on form of occupancy, are increasing.
Keywords: Estonia, housing privatisation, social inequalities, social segmentation
Anneli Ka
¨hrik, The Institute of Geography, The University of Tartu, 46 Vanemuise St., 51014 Tartu, Estonia. E-mail: kahrik@hot-
mail.com, akahrik@ut.ee
Introduction
The transformation from the Soviet-type social system with
command economy and strong state regulation to the
capitalist social system with liberal market economy and
minor state intervention has brought about radical changes in
the Estonian housing sector. These changes involve a
considerable modification of social structures through
legislative and executive activities, activity of owners and
tenants, as well as private and public entrepreneurs. The
importance of state authorities has decreased whereas the
role of households has become more significant in influen-
cing the outcomes of housing-related practices. Private
entrepreneurs have been new agents in the system. Devel-
opment practices in the Estonian housing sector have similar
features to the other post-Socialist countries, although the
changes in Estonia have been among the most radical.
This article emanates mostly from a quantitative study of
inhabitants of Tartu in 1998 (Tartu University & Tartu City
Government 1998). Additionally, the data from two national
surveys carried out in 1994 (Statistical Office of Estonia &
Fafo 1994) and 1997 (Statistical Office of Estonia 1997) are
used in the analyses. I will examine some social conse-
quences of privatisation, with a particular focus on its impact
on social inequalities. The main question to be answered is
thus: are there signs of deprived opportunities for some social
groups, as well as inequalities in the housing sector due to
housing privatisation?
First, the theoretical approach, the background, concepts
and objectives of housing privatisation within the Estonian
context are presented. The procedure of housing privatisation
and the extent of the process will also be described. Second,
the preference of home ownership and the opportunities
households had in the privatisation process will be analysed.
Third, it will be argued that the gap between homeowners
and tenants in terms of access to different housing
submarkets by households, as well as advantages related to
ownership and rental sector, has increased, and it provides a
favourable basis for social segmentation. The different
access to housing submarkets by households has also its
territorial expression.
Housing as an expression and reinforcer of
social inequalities
Housing may be viewed as a contested resource in society.
As the housing market consists of segments of various
quality, the stakes are higher in some parts and lower in
others. In a market economy, the price expresses the value of
housing, and, thus, income is the major factor that enables
access to different types of housing. In other social systems,
access can be limited by other factors: in the Soviet system,
for instance, certain professions were guaranteed access to
better quality housing. In this paper, the unequal distribution
of socio-economic groups between housing market segments
based on form of occupancy is defined as segmentation (see
Lindberg & Linde´n 1986, Wessel 1996b).
The unequal distribution of social groups across forms of
occupancy, types of housing and different locations is an
outcome of choices people make within the framework of
opportunities and constraints they have. The opportunities
and constraints are the result of interplay between the social
and material resources people have and rules existing in
society (Fig. 1). The choices people can make are, thus, to a
large extent limited by social constraints. These social
constraints are also an expression of existing inequalities in
society (see Ringen 1995). Segmentation can be the
expression of people’s freedom and preferences, but it is,
however, also influenced by social and material resources
households have, such as financial resources, knowledge,
skills, housing conditions, etc., which are in turn influenced
by social structures such as social norms, values, traditions,
power relations and legislative acts.
Following the same model, it is possible to explain the
change in the positions of households in the housing market
Norsk geogr. Tidsskr. Vol. 54, 2–11. Oslo. ISSN 0029-1951
as a result of privatisation. In this case, it is the interplay
between the rules, predominantly the changes in legislative
acts, and household resources, predominantly their housing
conditions at the beginning of the privatisation process and
financial resources (e.g. vouchers), that influences the
subjective choices and determines the outcome. According
to Bodna´r (1996, 633): ‘Recognition of privatisation oppor-
tunities, quick reactions to legal changes and, most of all, a
good starting position explain new housing inequalities and
unequal urban privileges.’
Housing privatisation in Estonia
During the last 60 years, most of the housing units in Estonia
have undergone a twofold change of ownership. The land and
nearly all of the dwellings that had previously belonged to
private owners were nationalised during 1940–1950 without
any compensation to the owners, and de-commodified. The
state achieved control over housing distribution and housing
construction, as well as maintenance. In 1991, prior to the
beginning of the privatisation process, public dwellings made
up approximately 65% of the housing stock in Estonia. While
one- or two-family houses constructed during the Soviet time
were mostly privately owned already before the privatisa-
tion, the majority of multi-flat dwellings belonged to the
public sector. The co-operative housing established the third
type of ownership. It contained both private as well as public
investments.
The housing privatisation process cannot be observed
independently from other socio-economic changes that the
Estonian society has recently experienced. There has been
a rejection of collective solutions, responsibility and state
control characteristic of the Soviet system in favour of
individual solutions, responsibility and liberty (Ka¨hrik
1999, see also Lauristin 1997). The command economy
has been transformed into a market economy. The state
had failed to satisfy efficiently the housing needs of people
and maintain the housing units, so the market economy
was expected to improve housing conditions. The Estonian
state budget had reached a very poor state and the
investments in housing were greatly reduced. The most
significant reasons and objectives of the privatisation have,
thus, been financial, ideological and psychological (Table
1).The objectives of the Estonian government regarding
housing privatisation are: to minimise public expenditure on
the housing sector (e.g. administrative costs, renovation,
subsidies on housing) (see also Clapham & Kintrea 1996b,
Struyk 1996); to encourage people to invest more in their
housing; to return to the pre-Soviet institutional organisation,
in which the private ownership was dominant (as the
government has declared the continuation of the Estonian
national state during the years of ‘Soviet occupation’, the
meanwhile existing ‘Soviet institutions’ were also consid-
ered to be ‘false’); and to establish social justice in returning
the ownership rights to those who had been deprived of them
during the Soviet time (Ka¨hrik 1999).
For the households, the objectives and expectations of
privatisation were related to gaining a greater degree of
security in an insecure social system (see Daniell & Struyk
1994, Clapham & Kintrea 1996a, Clapham & Kintrea
1996b), privacy and liberty to act according to their own
judgement – to carry out thorough renovation and rebuilding
works, or to sell their housing in the market (see also Struyk
1996). One of the most important objectives of the
individuals was related to the investment value of property.
As people could get the property almost free, most of the
households who privatised are able to earn profits selling the
housing unit or renting it out in the market (see Daniell &
Struyk 1994). The interests of the state and people can also
be intertwined, as in the case of investments into housing.
The state is interested in better maintenance of the housing
stock, and private owners invest in housing as it is a possible
source of capital accumulation and can improve their living
conditions (Ka¨hrik 1999).
Fig. 1. Households’ position in the housing market as an
expression of households’ opportunities and choices, which
are influenced by households’ resources, preferences and
rules existing in society.
Table 1. The objectives of housing privatisation.
Type Government Household
Financial To cut down the governmental expenditure on housing To become property-owner
To promote private investments in the housing sector To invest in housing with the purpose of improving housing conditions and raising
property value in the market
Ideological To re-establish the pre-Soviet social institutions
To compensate for the injustices of the Soviet period
Psychological To return to the pre-Soviet norms and values
To gain a sense of security
To gain more freedom
NORSK GEOGRAFISK TIDSSKRIFT 54 (2000) Housing privatisation in Tartu, Estonia 3
The meaning of ‘privatisation’ and ‘private
property’
In general terms, housing privatisation in Estonia is legally
defined as ‘the transference of state- or municipally owned
property to private ownership …’(RT (State Gazette) 1997,
884). The supposed result of privatisation is that ‘the role of
the public sector in housing will be limited and the role of the
private sector will increase’ (Young 1986, see Clapham &
Kintrea 1996a, 5).
In order to understand the impact of the process on social
inequalities, we should, however, explain the concept more
thoroughly. It is argued that ‘property is a bundle of rights
which are relations among persons and institutions with
regard to a thing’ (Marcuse 1996, 122), and that changes
related to ownership and property rights ought to be
described as ‘the substitutions of one set of rights for
another, with substantial and differential impacts on different
groups in society’ (Marcuse 1996, 144). Furthermore,
property relations can be split into rights and duties (Wessel
1996a). To put it another way, public tenants in the Soviet-
type public housing enjoyed many property rights – they
could rent the property, exchange it, bequeath it to certain
family members, etc. However, the legal owner – the state
authority – bore the main responsibilities and duties for the
maintenance of housing and repairs. As public tenancy was
highly subsidised by the state (only about one quarter of the
housing expenses were met by rent) (UNDP 1998), the
tenants of this type of housing were in a much more
favourable situation than private owners. ‘The status of the
state as the owner of the apartment houses was actually never
consciously conceptualised by the tenants’ (Paadam 1995,
288). After privatisation, the owners enjoy more property
rights, e.g. the right to sell the housing unit, but their
responsibilities have also considerably increased – including
the duties regarding housing repair and maintenance. The
shift of ownership does not mean that all the rights
concerning the property have automatically been transferred
to the private owner. The legislative and executive autho-
rities continue to define and monitor what one may or may
not do with one’s property. Thus, the aim should be rather to
identify the impact of the substitution of ‘one set of property
relations’ for another than to evaluate the changes in terms
of transference of property rights from public to private
hands.
Owners, tenants, public authorities and real estate com-
panies are the main actors involved in and influenced by the
process. While the impact of housing privatisation on
authorities and companies has mostly been expenditure- or
profit-oriented, the impacts on households are many-sided –
these might be emotional, perception-, behaviour- and profit-
related.
Procedure and extent of housing
privatisation in Estonia
The housing privatisation reform in Estonia (started in 1991)
gave the right of first refusal to pre-nationalisation owners or
their successors with respect to the property taken from them.
In cases where there was no ‘pre-war’ owner or where the
former owner was not applying for the property to be
returned, the sitting tenants had the right to privatise (UNDP
1998). The process of returning the property taken over by
the Communist regime to its former owner or his/her
successors is called ‘restitution’. Therefore the tenants who
had occupied housing units subject to restitution did not have
the right to privatise, unlike other public tenants. According
to an estimate of the National Union of Tenants’ Association,
the number of such tenants in Estonia may reach 150,000, i.e.
approximately 10% of the total Estonian population.
Sale and purchase took place on favourable terms for
tenants. The purchase of apartments occurred for the most
part through vouchers, i.e. all individuals permanently living
and working in Estonia were entitled to privatisation cheques
(public capital vouchers) (UNDP 1998).
1
In 1994, 98% of the
compensation for privatised housing was paid in privatisa-
tion cheques (2,337.5 million Estonian kroons) (Statistical
Office of Estonia 1996).
The privatisation of housing is having a direct impact on
half of Estonia’s population (UNDP 1998): as an outcome,
67–68% of non-Estonian families, i.e. mostly the Russian-
speaking population, and 43–44% of Estonian families are
becoming owners of apartments (Sillaste & Purga 1995, see
Ko
˜re et al. 1996, 2153–2154). It is estimated that by the time
the housing reform is completed (within a couple of years),
approximately 90% of Estonia’s residents will be private
owners and 10% tenants.
The case of Tartu, Estonia
The following analysis concerning the privatisation-related
attitudes and perception, as well as the impact of housing
privatisation on social inequalities is mostly based on the
data of a quantitative survey carried out in Tartu (Tartu
University & Tartu City Government 1998). Tartu is the
second largest town in Estonia with ca. 100,000 inhabitants
(in 1998). The town consists of housing districts of various
age and quality (Fig. 2). In and around the centre there is
older housing stock, often made up of low-quality housing
(Fig. 3). In the suburbs there are quality-housing areas of
small-scale housing (Fig. 4) and districts of high-rise
dwellings constructed during the Soviet period (Fig. 5). In
Tartu, the housing privatisation started in 1991 and by 1998
the process was almost completed (Figs. 2–5).
The sample was designed according to the stratification
method, based on national groups, age groups, gender groups
and sub-areas (town-districts). A proportionate stratification
was used for age groups, gender groups and national groups,
whereas a disproportionate stratification was used for sub-
areas. Later on, the data for the whole town was weighted
according to the proportions of the population in different
sub-areas. The total number of respondents was 1,518.
Preference for home ownership
Prior to describing the attitudes, perception and impacts
related to privatisation, it is important to note that some of the
4A. Ka
¨hrik NORSK GEOGRAFISK TIDSSKRIFT 54 (2000)
Fig. 2. Dominating types of housing in districts of Tartu, 1998. Source: Tartu University & Tartu City Government 1998. (1 – Supilinn, 2 – Vaksali)
Fig. 3. Multi-flat housing with partial or no facilities (Supilinn district, Tartu). Source: U. Alakivi photo collection.
NORSK GEOGRAFISK TIDSSKRIFT 54 (2000) Housing privatisation in Tartu, Estonia 5
Fig. 4. Detached housing (Tammelinn district, Tartu). Source: U. Alakivi photo collection.
Fig. 5. Multi-flat housing with all facilities (Annelinn district, Tartu). Source: U. Alakivi photo collection.
6A. Ka
¨hrik NORSK GEOGRAFISK TIDSSKRIFT 54 (2000)
objectives of privatisation outlined above have been brought
about by changes in the social system. These are related to
the process of marketisation, privatisation and new ideolo-
gies. For instance, public tenants could enjoy a great degree
of psychological security under the Soviet system (as regards
the fear of eviction and their property-related rights) whereas
in the new system their future would become quite unsafe if
they were to continue as tenants. In short, each social system
prefers and supports certain types of forms of occupancy.
The Soviet system supported public tenancy. Private owners
were left in a relatively unfavourable situation, as their
housing was not subsidised in the same way as public
housing. In capitalist society, on the other hand, private
ownership is the favoured type of tenure. Thus, according to
Boddy (1980, see Saunders 1990, 67): ‘The “desire” for
private property springs not from individuals but from the
socio-economic system.’ Short (1982, see Saunders 1990,
67) claims that ‘people desire owner occupation as it is more
financially attractive because state policies have made it so’.
In view of the above, the high rate of preference for home
ownership under the new conditions is not surprising.
According to the results of the survey carried out in Tartu,
91% of the respondents considered home ownership as the
most preferred type of occupancy. As 93% of all the
households who privatised their housing also preferred to
become owners, then only 7% would have preferred to
continue as tenants. The decision to privatise can be
explained by the facts that privatisation was carried out on
extremely favourable terms – with practically no costs for
households – and the period of privatisation was limited.
Privatising was rather a ‘taken for granted’ than a deeply
considered decision. The central arguments which led
households to privatise seemed to be related to the insecurity
of the rental sector caused by the new social system (the
growing rent levels, fear of eviction, etc.), the financial
benefits people would gain through privatisation (through
selling or renting out in the market), and achieving a greater
control over housing maintenance and management. The
negative aspects of privatisation were related to the increas-
ing responsibility and duties. According to Paadam (1995,
280), the negative side of the opportunity to privatise was
related to ‘the low motivation to privatise the present housing
for its low standards (as to building quality, planning,
maintenance, etc. and poor residential qualities)’. The main
arguments for and against privatisation seem to coincide with
the case of Moscow (see Daniell & Struyk 1994). As the
survey data from Tartu indicate, most of the households are
able to perceive some kind of changes as a result of the
privatisation. Whereas privatisation has encouraged 44% of
all privatised households to invest more into their housing or
to take better care of it, for 33% it has given more security in
respect of their future. However, 25% perceive more
responsibility and duties concerning their property as a
result of privatisation, and for 25% the privatisation has not
changed anything (Table 2).
Privatisation – equality in opportunities?
Next, I will analyse in more detail whether all the public
tenants were entitled to equal privatisation opportunities or if
some households were placed in a more favourable situation
as compared to others. I will discuss the participation of
different social groups in the privatisation process and give
an overview of the kind of housing stock that has most
extensively been transformed from public to private owner-
ship.
As briefly explained above, the law that has provided the
basis for housing privatisation has enabled the government to
carry out privatisation on favourable terms with almost no
financial costs for the households who have been living and
working in Estonia for a sufficiently long time. As a result,
one might assume that there are no major differences in the
extent of privatisation by households at different levels of
economic welfare. The empirical data shows that among
households who have privatised there is almost no differ-
entiation relating to different incomes and educational levels.
In relation to the whole population, the share of elderly
people (60 and more years) is slightly lower among those
who privatised (21% privatised, whereas the total percentage
of this group makes up 25% of the whole population).
Middle-aged people (40–59 years) are over-represented. This
difference could be explained by the fact that the elderly
people were over-represented in the housing stock, which
was subject to restitution (UNDP 1998). Estonians privatised
less than other nationalities (mostly Russians) (Table
Table 2. The impacts of housing privatisation on households who have
privatised, according to their own evaluation, in Tartu, 1998 (%).
Encourages to take better care of housing 36
Encourages to invest more into housing 28
Makes the future more secure 33
Improves communications with neighbours 10
Brings tensions between neighbours 5
Brings more responsibility and duties 26
Has changed, other impacts 2
Has not changed anything 25
Source: Tartu University & Tartu City Government 1998.
Table 3. Comparison of the level of housing privatisation between Estonians
and non-Estonians in Tartu, 1998 (%).
Privatised Whole population
Estonians 70 79
Non-Estonians 30 21
Total 100 100
Source: Tartu University & Tartu City Government 1998.
Table 4. Comparison of the level of housing facilities between those who
have privatised and the whole population in Tartu, 1998 (%) (one- or two-
family housing is excluded).
Privatised Whole population
Flats with all facilities 85 78
Flats with partial or no facilities 15 22
Total 100 100
Source: Tartu University & Tartu City Government 1998.
NORSK GEOGRAFISK TIDSSKRIFT 54 (2000) Housing privatisation in Tartu, Estonia 7
3).There are two reasons for this: (1) Estonians tended to live
in private houses already prior to privatisation, and (2)
Estonians exceeded non-Estonians in older parts of housing
stock which were restituted and which tenants in most cases
could not privatise.
The privatised or restituted housing units were mostly
located in multi-flat buildings and they contained all facilities
(i.e. washing amenities, WC, etc.) (Table 4, see Figs. 2 and
5). As most of the one- or two-family houses were
constructed by means of private capital and were already
owned privately, this type of housing made up only a
negligible share of all the privatised housing (around 1%). To
take the level of facilities and the age of housing as the only
indicators of housing quality, the privatised flats tend to have
better quality when compared to all flats in the town – these
are not as old and contain more facilities.
The main reasons for not privatising public apartments
were that the flat was returned to its legal pre-war owner
(5%), that the quality of the flat was very low (1%) or that the
household did not have enough privatisation vouchers (1%).
Among the least favoured households in the privatisation
process were thus the tenants living in housing subject to
restitution. These tenants have usually lived in their home for
longer than other public tenants. Every second tenant has
been living in his (her) current housing for more than 20
years (UNDP 1998). There are some advantages given to
these tenants by the state or local governments in buying or
renting a new apartment, but often issues related to the
problems of these households remain unsolved. Favourable
loans have been offered by the authorities, but a large
proportion of the tenants do not have access to these as their
income is not high enough.
The status and prospects of the rental sector
Since the great majority of the housing stock has been
privatised, it might be interesting to look at the status and
future prospects of the remaining rental sector. Saunders
(1990) has argued that in Great Britain (where a large-scale
privatisation programme has been implemented) the general
trend is that tenure divisions are reinforcing and expressing
existing social divisions. It is gradually becoming more
difficult to enter the ownership sector, and the inequality gap
between tenants and owners seems to grow as the former
group is forced to pay high rents to landlords or authorities
while the latter group is mostly enjoying financial gains from
their status of ownership. As a result of privatisation,
marketisation and reshaped ideologies, similar developments
might be expected in the Estonian housing sector. The
procedure and outcomes of privatisation have a remarkable
influence on the structure of remaining tenants and the
filtration of the rental housing stock.
As pointed out earlier, in Socialist society there were
differences in urban space not unlike those in the capitalist
world. Still, the basis for differences tended to be qualita-
tively different from those in capitalist countries. While in
the capitalist world the differences have mostly developed
out of a great variation in income levels, being associated
with occupational as well as educational structure, the
differences in Socialist countries emerged more from a
political than an economic background.
As demonstrated by the data, the form of occupancy was
not related to income even in 1994: the segmentation index in
two major cities of Estonia – Tallinn and Tartu – was then 1.0
(Statistical Office of Estonia & Fafo 1994) (Table 5). The
distribution of social groups between types of occupancy was
not correlated with the household’s income, as the meanings
of ‘owning the housing’ and ‘renting the public housing’
were not qualitatively different. Further, the occupational
and political position of those receiving housing, as well as
need, were usually far more important than income. In
comparison, the segmentation index by income in different
tenure sectors in the three major cities of Norway was 22.4 in
1995 (Wessel 1996b). During the transformation in Estonia,
an emerging correlation has become noticeable between
income level and form of occupancy. A very small
correlation was already registered in 1997 (the segmentation
index in Tallinn and Tartu was 4.1) (Statistical Office of
Estonia 1997) (Table 5). Households with high earnings tend
Table 5. Segmentation indexes for income quartiles by housing submarkets
based on form of occupancy, Tallinn and Tartu, 1994 and 1997.
1st
quartile 2nd
quartile 3rd
quartile 4th
quartile Weighted
index
1994 0.1 1.7 2.1 0.3 1.0
1997 8.0 0.2 8.1 0.3 4.1
Source: Statistical Office of Estonia & Fafo 1994, Statistical Office of
Estonia 1997.
Fig. 6. The distribution of housing submarkets by form of
occupancy in Tartu in 1998 (%). Source: Tartu University &
Tartu City Government 1998.
8A. Ka
¨hrik NORSK GEOGRAFISK TIDSSKRIFT 54 (2000)
to live in self-owned housing, while those who earn less are
more represented in the rental sector. The privatisation
process has created a basis for a private rental market where
the rent levels are usually uncontrolled. In a situation where
property prices have increased and the public rental housing
stock is only a few percent (and access to fairly limited), low-
income families are able to afford only the lowest quality
private rental apartments (see Fig. 3).
While the socio-economic status of tenants and owner-
occupiers is not yet considerably different, the percentage of
tenants in multi-flat houses with partial or no facilities is
higher than that of owner-occupiers, whereas owner-occu-
piers exceed tenants in multi-flat housing with all the
facilities (Fig. 6).
Thus, housing conditions are worse for tenants as
compared to owner-occupiers, and tenants occupy older
and depreciated parts of the housing stock. To make a
comparison: 60% of the tenants in Tartu have only a wood-
heating system in their housing, while the corresponding
percentage in other tenure sectors is 23%; only 33% have
running hot water, as compared to 76% in other sectors;
washing amenities such as a shower or bath have been
installed by only 48% of the tenants, compared to 85% of
others. The lower quality of the rental housing stock is
affected by high rent levels in the private rental housing
market (the tenants’ inability to pay high rents), as well as by
the owners’ unwillingness or lack of possibilities to occupy
those housing units (in case of restituted housing). Mostly
tenants occupy the pre-war housing stock (constructed before
1946). The reasons are: (a) most of this stock had belonged to
private owners before nationalisation and is therefore subject
to restitution, but, as the law does not allow the eviction of
tenants if they do not have a substitute apartment, the tenants
remain there on the same conditions for some time; (b) as
some parts of this housing stock are of very low quality and
highly depreciated, some tenants decided not to privatise
their apartments but chose to continue as public tenants; (c)
as the rent levels of this housing are relatively low compared
to other parts of the housing stock (mostly because of
inexpensive heating), some social groups who are not able to
pay higher rents are interested in renting apartments there
(e.g. students).
Such an uneven distribution of tenants is also noticeable in
the territorial organisation of the city. The lowest quality and
oldest neighbourhoods, located next to the city centre, have a
higher percent of tenants than the other parts of the city (Fig.
7, see also Fig. 2). The best examples are Supilinn district
and Vaksali district. The concentration of the worst quality
housing and tenants to certain areas may easily lead to the
formation of slums.
Conclusions
The extent of housing privatisation in Estonia has been one
of the largest among post-Socialist countries. Most of the
public tenants, however, seemed to be willing participants in
the privatisation process. While in the Soviet social system
public tenancy was the preferred type of occupancy due to its
advantages over private occupancy, the transformation of the
social system has resulted in a changing preference because
there are more advantages related to private ownership in the
new system. The success of privatisation might be explained
by the following reasons:
1. The privatisation was carried out on favourable terms for
public tenants. Households, having privatised their hous-
ing units, have acquired a property practically for free.
Even if the values of the privatised housing units vary
largely, it is, nevertheless, possible to exchange each
property unit for a charge or to rent it out in the market. It
gives a certain material feeling of security to the house-
Fig. 7. Correlation between presentation of flats with low level of facilities* and tenants in the districts of Tartu, 1998.** Source: Tartu University & Tartu City
Government 1998. * Flats, where at least one of the following facilities is missing: electricity, sewerage, shower/bath/sauna, WC, central/gas/electric heating
system. ** Over- or under-representation rates are calculated by dividing the percentage of tenants and the percentage of flats with low level of facilities in given
district by the same percentages in the whole city.
NORSK GEOGRAFISK TIDSSKRIFT 54 (2000) Housing privatisation in Tartu, Estonia 9
holds who have privatised their housing. Other important
aspects in favour of privatisation were related to the
growing insecurity of the rental sector and to the
achievement of better control over the housing unit in
terms of maintenance, management, and bequeathing.
2. The negative aspects of ownership were not much
discussed prior to privatisation.
3. Home ownership was type of occupancy preferred by a
majority of the population at the beginning of the process.
Many motivations for privatisation can be related to the
changing social system. While during the Soviet period
public tenants did enjoy a lot of rights concerning the
apartments they were living in, some of these rights were
abolished in the new social system. Whereas the Soviet
system supported public tenancy, the new system finds
measures to reduce such a huge public housing stock and
supports private ownership. Thus, tenants in fear of losing
their right of disposal preferred to become owners.
The households’ position in the housing market depends
on their choices within given opportunities. The opportu-
nities are an outcome of interplay between the resources
people have and the rules existing in society. On the one
hand, the legislative acts related to privatisation have had a
significant role in influencing the choices people could make
and the outcome of the privatisation process. On the other
hand, the households’ housing conditions (quality, location,
etc.) and their financial resources were relevant in influen-
cing the households’ gains and losses in the privatisation
process.
As for privatisation opportunities, the process has brought
along both equalities and inequalities. The privatisation
procedure used in Estonia secured relatively equal privatisa-
tion opportunities as regards the socio-economic status of
households. Unlike most of the other East European
countries, it enabled most of the tenants of public housing
to privatise. Thus, there has been an immense growth of
home ownership. The transformation of the social system
and the inherent privatisation, however, have created a new
basis for social inequalities. The inequalities relate to the
following three aspects:
First, the housing conditions of those who gained the
opportunity to privatise varied greatly from low-value old
apartments in run-down neighbourhoods to highly valued
quality dwellings in desirable locations (see also Bodna´r
1996). As housing of good quality in many cases was
occupied by the so-called ‘nomenclature’ (those in higher-
level or favoured occupations) during the Soviet time, this
group continued to benefit from the privatisation (see Daniell
& Struyk 1994, Marcuse 1996, Ka¨hrik 1999). Whereas some
of the households received large financial gains from the
process, the gains for other households have been minimal
and they have incurred major expenditure maintaining their
dwelling. ‘Privatisation, while placing some in the ownership
of great wealth, traps others in their very private misery and
despair’ (Bodna´r 1996, 634). Thus, the tenants of quality
housing were more eager to privatise than those in low-
quality housing (see also Daniell & Struyk 1994).
Second, perhaps the greatest inequality relates to the
different situations of those public tenants who had the
opportunity to privatise their housing units or who got their
property back and those public tenants who were deprived of
the right to privatise their housing as the property was to be
restituted to the former owner. These tenants usually suffer
emotionally when being compelled to move out from their
homes to which they have experienced a deep emotional
attachment.
Third, the younger generations and those households who
did not occupy public housing have gained little or nothing
directly from the privatisation process. Among them, we find
residents of private houses and members of co-operatives,
who had incurred much higher housing-related expenses
already in the Soviet time.
Despite the fact that the institutional-legal context of
housing privatisation in Estonia did not create unequal
distribution of socio-economic groups across occupancy
sectors, it has, however, established a good basis for such
segmentation in the future. The gap between owners and
tenants has increased as a result of privatisation. Those
households who have not entered the home-ownership sector
are now put in a situation where they find it difficult to cope
with high rent levels in the housing market, as the share of
public housing is close to zero after privatisation. The
situation is especially difficult for young, newly formed
households and for low-income households. Even if the
tenure divisions do not yet clearly indicate social divisions
now, i.e. one cannot find clear evidence of the concentration
of a marginalised population in the rental sector, they will
probably become apparent in the near future if the current
trends continue. The first steps towards an unequal distribu-
tion of socio-economic groups across these sectors can
already be observed. The remaining rental housing stock
tends also to be of a lower quality than in the owner-occupied
sector. Thus, it can be assumed that it will often be beyond
the powers of both tenants and owners to improve the quality
or even to sustain the present quality of the housing. As these
depreciated housing units are often territorially concentrated,
there is a danger of slum-area formation.
Notes
1
The value of the privatisation vouchers depends on the length of time
worked in the Estonian territory since 1945 and is linked to the privatisation
price of the apartments. Besides the privatisation cheques (EVP), the
securities issued in compensation of illegally expropriated property and the
employment shares issued to collective farm workers during the agrarian
reform, can also be used for privatisation. The financial cost to the purchaser
of an apartment is low and mainly consists of legal fees for the transaction
(the latter do not exceed 1% of the total value of transaction). In case of
property that do not belong to restitution nor privatisation to sitting tenants,
the sale occurs in the form of a public auction. (RT (State Gazette) 1994;
UNDP 1997).
Manuscript submitted 16 August 1999; accepted 1 October 1999
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