1. 20th ERES Conference 3th - 6th July 2013 Vienna Potential of Housing Private Finance Initiative Implementation in Polish Circumstances Magdalena Zaleczna, PhD Department of Investment and Real Estate University of Lodz

2. Introduction: The British housing system is in the process of long term modernisation and evolution of some ideas and instruments is visible. The adjustment to changing socio- and economic conditions gives the possibility to evaluate implementation of various solutions and their acceptance by citizens.

3. Introduction: The privatisation of council (municipal) housing stock was one of the main points of housing policy in the past in UK, it has had different forms: – Sale to sitting tenants (Right to buy and similar programs), – Large-Scale Voluntary Transfer (sale to Housing Associations),

4. Introduction The privatisation of council (municipal) housing stock was one of the main points of housing policy in the past, it has different forms: – Privatisation of management in form of: Arms Length Management Organisations, Private Finance Initiative.

5. The aim of the paper: Specification of the problems with implementation of housing PFI in the UK; Consideration of the possibility and legitimacy of use of this solution in Poland.

6. The research hypothesis: Potential of solutions based on public-private partnerships seems to be enormous, but this formula for Polish projects in the sphere of housing is extremely difficult to implement. The reasons are rooted in the lack of an active housing policy of the state, poor state of public housing stock, specific attitude to PPP presented by local governments, private investors and citizens.

7. The summary of British PFI Housing private finance initiative (PFI) schemes are used for cooperation of local authorities with private partners to build, improve, manage and maintain social housing stock in UK. These schemes should enable a transfer of risk from public sector to the private sector and give good value for money. After some years of British experience with housing PFI there is possible to evaluate results and analyse where there are some bottlenecks.

8. The summary of British PFI The experience of the use of public-private partnership shows that despite many benefits, this formula is difficult to use in practice. Summary PFI in Housing (National Audit Office 25.06.2010): indicates that the most projects have suffered significant cost increases and delays: – In some cases the cost increase was over 100 per cent, – All signed projects were delayed.

9. The summary of British PFI The component that affects the implementation of PFI initiatives is the area - the housing market. The specific dependence on local political, economic and social factors, creates assumptions, which in practice - are not realistic. Disappointment at the lack of quick results, reduces the social and political support. Moreover, the current observation of activities of entities performing PFI contributes often to a negative assessment from the point of view of inhabitants. According to them savings are not real (movement: defend council housing).

10. The summary of British PFI Additionaly, the private entity wants to participate in the project if it is beneficial. Often, however, the implementation of such assumptions creates resistance of inhabitants. Despite the problems, many projects can be successful during next years. It will be expressed in reducing public costs and increasing inhabitants satisfaction, although the preparatory period is often much longer than originally anticipated.

11. The Polish housing stock

12. The Polish public housing stock (in total and substandard)

13. The Polish public housing stock (the period of construction)

14. The Polish public housing stock (the size of dwelling)

15. PPP in Poland In the 90-ties the use of the full potential of PPP in Poland was not possible due to the lack of regulation. In October 2005, the principles were eventually defined. However, the law was not used in practice. In 2009 the new law about PPP was implemented. During next years (2009-2012) there was 177 calls for private partners (in fact the number of calls was bigger because in some individual cases there were 2 or even 3 announcements). The number of signed contracts was 31.

16. PPP in Poland and housing Only 5 calls were in the area of public housing construction. Only 1 contract was signed referring to this subject. In contrast to the case of the British PFI there is no calls for management of existing housing stock. There is no central government financial support. 3 case studies as evidences of current problems: – a failure (Łódź), – a work in progress (Kraków), – a possible success (Oława).

17. The first case study - Łódź In 2008 during the best PPP project’s competition one of the winners was the city of Lodz with public housing and regeneration project. The main idea was to exchange the old tenement houses owned by city for apartments for current inhabitants, provided by private investor. It was assumed that an investor, selected by tender, will construct new blocks and then transmit the ownership to the City, and in return he receives old houses for commercial function. The project needed many new apartments, because the regeneration should be performed on the entire street, which means the need for resettlement of the inhabitants of 421 old tenement houses. The project’s cost was estimated by the city of approximately EUR 348,9 million.

18. The first case study - Łódź The idea of resettlemet of rather poor inhabitants and introduction of commercial function was not welcomed by tenants and obtained negative public opinion. The city did not look for the investor in an active way, it just made proposal to 2 developers-investors in the neighborhood. Money won in the competition was spent on economic analysis in the last moment and the analysis was rather useless.

19. The second case study - Kraków This city had the first PPP project in Poland (parking space), The idea is that a private partner will construct and manage of the houses for council tenants on the public land. There will be more than 300 dwellings, the cost is about PLN 92 million (EUR 21,4 million), the time – 17 years, there will be commercial spaces in the building. The tender was in March last year, there were 5 private partners - big companies, interested in taking part but till now there are only negotiations.

20. The third case study -Oława The project is about social housing (in Poland social housing is for the people in need, when the municipality must help them), The first attempts were not successful, some conditions were changed, The private partner will build on the public land a house, manage it and than transfer it to the city, The cost is PLN 5,73 millin (EUR 1,3 million), the duration of PPP about 10 years, no commercial function in the building, The private partner was chosen in Dezember 2012.

21. Conclusions: In both countries the common problem is low standard of public housing stock and great needs of new housing construction. Private Finance Initiative seems to be a very interesting and important way to solve housing problems. The housing policy in the United Kingdom has created a favorable climate for the use of PFI, however due to a very difficult matter, projects are realised slowly. There are 2 forms of PFI: – Improving standard and management of public housing stock, – Construction of new public housing stock.

22. Conclusions: In UK there is an institutional framework for implementation of such projects on the State level (financial support, standard contracts, legal help). However, the problems are still present what is the evidence that this subject is very complicated, complex and needs individual elaboration. The local support is very important for success. It can be assured by dissemination of ideas and information.

23. Conclusions: In Poland public housing stock experienced huge negligences during the socialist period and the currently suffers lack of financial resources. There is no understanding of the significance of the problem, no consistent strategy and proactive housing policy on the State level. The local government needs to find money for housing, a privatisation in form of sale to sitting tenants decreases the stock but new constructions are very rare. Nobody knows real needs of council tenants.

24. Conclusions: In Poland attempts of public-private partnerships are rare, preparations continue for years, and the effects are not always positive. There is still a problem of understanding the idea of PPP. For local governments it is a panacea. They create conditions which are not beneficial enough for private investors so only few are interested in taking part. There is common distrust in relations between tenants and local governments. The introduction of PPP in housing needs public debate about housing policy and then creation of institutional framework.

25. Thank you Magdalena Zaleczna mzaleczna@uni.lodz.pl