ROMANIA Reimbursable Advisory Services Agreement on the Cluj-Napoca City Urban Development Program (P172384) COMPONENT 3. IUDS 2021-2030 – Housing Strategy Output 2. Report with analysis of demand and supply of housing, and recommendations on how to address the gap between demand and supply Supplementary Report: Situation Analysis July 2021 DISCLAIMER This report is a product of the International Bank for Reconstruction and Development/the World Bank. The findings, interpretations and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. This report does not necessarily represent the position of the European Union or the Romanian Government. COPYRIGHT STATEMENT The material in this publication is copyrighted. Copying and/or transmitting portions of this work without permission may be a violation of applicable laws. For permission to photocopy or reprint any part of this work, please send a request with the complete information to either: (i) the Municipality of Cluj Napoca (Moților 3, Cluj-Napoca, Cluj, România) or (ii) the World Bank Group Romania (Str. Vasile Lascăr 31, et. 6, Sector 2, Bucharest, Romania). This report was delivered in month July 2021 under the Reimbursable Advisory Services Agreement on the Cluj-Napoca Urban Development Program (P172384), concluded between the Municipality of Cluj- Napoca and the International Bank for Reconstruction and Development on February 6, 2020. It corresponds to Output 2 under the above-mentioned agreement – Report with analysis of demand and supply of housing, and recommendations on how to address the gap between demand and supply – of Component 3, which refers to the IUDS 2021-2030 – Housing Strategy. Cluj-Napoca Housing Strategy SUPPLEMENTARY REPORT: Situation Analysis July 2021 World Bank Contents Spatial and Demographic Trends ...................................................................................................... 1 Official residency and permanent domicile ............................................................................ 1 Population concentration in Cluj-Napoca Metropolitan Area ................................................ 3 Population density .................................................................................................................. 4 Age distribution and dependency ratios ................................................................................. 6 Spatial development patterns ................................................................................................. 8 Employment, Income, Cost of living ............................................................................................... 10 Employment and Income in Cluj County ............................................................................... 10 Cluj-Napoca: Estimated income and household budgets ..................................................... 11 Housing Stock and Supporting Infrastructure................................................................................. 14 Housing Stock: Quantitative data ......................................................................................... 14 Multifamily versus single family ............................................................................................ 15 Private versus public ownership ........................................................................................... 17 Rental Housing ...................................................................................................................... 17 Vacancy ................................................................................................................................. 17 Age of housing stock ............................................................................................................. 19 Management and maintenance ............................................................................................ 20 Seismic risk and hazard insurance......................................................................................... 20 Energy Efficiency ................................................................................................................... 20 District Heating...................................................................................................................... 21 Physical infrastructure and social services ............................................................................ 21 Urban Planning and growth potential ................................................................................... 22 Housing Market Dynamics .............................................................................................................. 25 Housing completions ............................................................................................................. 25 Housing transactions: frequency and scale........................................................................... 28 Indicators of demand ............................................................................................................ 29 Discussion .............................................................................................................................. 31 Housing Finance .............................................................................................................................. 32 Outstanding mortgage debt .................................................................................................. 32 Mortgage terms .................................................................................................................... 32 Interest rates ......................................................................................................................... 32 Noua Casa Program ............................................................................................................... 33 Prevalence of bank financing ................................................................................................ 34 Housing for Lower Income and Vulnerable groups ........................................................................ 35 Informal Housing ................................................................................................................... 35 Public sector housing assistance ........................................................................................... 40 House Prices .................................................................................................................................... 46 European context .................................................................................................................. 46 National context .................................................................................................................... 47 Cluj-Napoca Metropolitan Area ............................................................................................ 48 New housing developments.................................................................................................. 54 Land market .......................................................................................................................... 55 Housing Affordability ...................................................................................................................... 57 Affordability to buy different types of “average price” units in Cluj-Napoca ....................... 57 Affordability to buy in Cluj-Napoca and surrounding communes ........................................ 58 Cost of living and Shelter poverty ......................................................................................... 60 Legal and Institutional Framework ................................................................................................. 63 Local authority mandates in the field of housing ................................................................. 63 Planning and housing authority ............................................................................................ 66 Housing assistance ................................................................................................................ 68 Institutions ............................................................................................................................ 73 Challenges ............................................................................................................................. 76 List of Figures, Tables, Boxes Figures Figure 1.1 Spatial distribution of the average annual growth rate of the population with official residence. Year 2019 compared to 2010, Cluj county (percentages) Figure 1.2 Balance of change in habitual residence, Cluj County (2018) Figure 1.3 Population density, Cluj County (2019) Figure 1.4 Spatial distribution of the population <18 years (2019) Figure 1.5 Spatial distribution of the working age population 18-64 years (2019) Figure 1.6 Spatial distribution of the elderly, Cluj county (2019) Figure 1.7 Urban area and its expansion in the period 2005-2018 (2018) Figure 2.1 Employment rate at national, regional and county level (2008-18) Figure 2.2 Average monthly net salary at national, regional and county level (2008-2018) Figure 2.3 Cost of living estimator: Cluj-Napoca Figure 3.1 Percentage of people in multifamily housing in the total number of residents in a locality, 2011 Figure 3.2 Percentage of people in multifamily housing by locality, 2011 Figure 3.3 Number of privately owned housing units and their proportion of total housing units in Cluj County, 2018 Figure 3.4 Percentage of unoccupied dwellings in the total housing stock at the level of localities in Cluj County, 2011 Figure 3.5 Average age of housing construction at the level of localities in Cluj County (1900-2018) Figure 3.6 Survey based on opinion polls Figure 3.7 Urban regulation plan of the Sopor area Figure 3.8 New developments in the period 2011 - 2019 and the locations of the largest approved Zonal Plan (in force or not) for the CNMA and the communes of Baciu and Florești Figure 4.1 Housing units at the end of the year - evolution 2008-18 for the localities ZM Figure 4.2 Total number of homes built between 2011 and 2018, in CNMA Figure 4.3 Dynamics of finished housing units - comparative evolution from 2008 to 2019/2018, at national, regional and county level Figure 4.4 Completed housing units - 2018/2017 comparative evolution between growth poles and Bucharest Figure 4.5 Demand for residential properties on sale (houses and apartments) Figure 4.6 Number of residential properties for sale (houses and apartments) in Cluj-Napoca Figure 6.1 Marginalized urban areas in Cluj-Napoca Figure 6.2 Ethnic distribution within Pata Rat Figure 6.3 Housing stock versus public housing in Cluj-Napoca (1990-2004) Figure 6.4 Publicly-funded housing units completed in Cluj-Napoca (1990-2019) Figure 7.1 Average price per square meter for an apartment in the main European cities in the first half of 2019 Figure 7.2 Average monthly rent for a two-room apartment (with utilities included) in major European cities in 2018 Figure 7.3 Annual change of average prices per usable square meter for apartments in Romania Figure 7.4 Average prices per usable sq.mt. for apartments in the main cities in Romania in Q1 2020 Figure 7.5 Values of average monthly rents for a 2-room apartment built between 1980-2000 in Q1 2020 Figure 7.6 Sale price of residential properties per sq.mt. (houses and apartments) Figure 7.7 Evolution of average sale prices per sq.mt. by type of apartments (2013–2019): Cluj- Napoca, Baciu and Florești Figure 7.8 Average sale prices for pre-2000 and post-2000 apartments, by apartment type: Cluj- Napoca, Baciu and Florești communes (H2 2019) Figure 7.9 Average rent (euro / month) in CNMA, by neighborhoods in Q1 2020 Figure 7.10 New residential developments by number of apartments (completed or under construction in 2019-2022): Cluj-Napoca, Baciu, and Florești Figure 7.11 New residential developments by sale price of apartments (EUR/sq.mt.) completed or under construction (2019-2022): Cluj-Napoca, Baciu and Florești Figure 7.12 Average land prices, by parcel size in 2013-2018: Cluj-Napoca, Florești and Baciu Figure 7.13 Average selling price of land (EUR/sq.mt.) in Cluj-Napoca, Baciu and Florești communes, in H2 2019 Tables Table 1.1 Population concentration, Cluj county (2019) Table 2.1 Income levels: Cluj County versus Cluj-Napoca Table 2.2 Non-housing cost of living for five household types Table 3.1 Housing and population dynamics in CNMA Table 3.2 Number of buildings grouped by construction period, in Cluj County Table 4.1 Value of transactions in Cluj-Napoca in 2013-2018 (EUR) Table 5.1 Number of transactions in Cluj-Napoca, 2013-2018 Table 6.1 Youth Housing in Cluj-Napoca between 2015 and 2020 Table 6.2 Social Housing applications and allocations, 2015-2021 Table 6.3 Budget allocated for housing and public development in Cluj-Napoca municipality (2010- 2020) Table 7.1 Annual change in house price per sq.mt. by apartment type (2013-2019): Cluj-Napoca, Baciu and Florești Table 7.2 Change in average sale prices (2013-2019), by type of apartment and floor level (story): Cluj-Napoca, Baciu commune, and Florești commune Table 7.3 Average land prices in 2013-2018: Cluj-Napoca municipality, Florești and Baciu communes Table 8.1(a) Estimated monthly payment for different types of “average” price units based on 15-, 20- and 30-year loan terms Table 8.1(b) Net income, gross income, and savings required based on 15-, 20- and 30-year loan terms Table 8.2(a) Loan amount needed for “average” price units of most commonly traded size 1- bedroom unit (35 sq.mt and 55 sq.mt) in Cluj-Napoca and the 4 communes Table 8.2(b) Estimated monthly payment and savings needed Table 8.2(c) Net income, gross income and savings required, based on 15-, 20-, and 30-year loan Table 8.3 Housing affordability based on household size and cost of living Boxes Box 8.1 Unpacking the Residual Income Method Acronyms ADI ZMC Intercommunity Development Association for Cluj Metropolitan Zone ANCPI National Agency for Cadaster and Land Registration ANL National Housing Authority APR Annual percentage rate ATU Administrative Territorial Unit CNMA Cluj-Napoca Metropolitan Area DRS Department of Regional Statistics DTI Debt-to-Income GD Governmental Decree GDP Gross Domestic Product GEO Government Emergency Ordinance HH Household INS National Institute of Statistics IRCC Consumer Credit Reference Index KG Kindergarten LTV Loan-to-Value MDPWA Ministry of Development, Public Works, and Administration/ Ministry of Regional Development MMPS Ministry of Social Protection NBR National Bank of Romania NGO Non-government organization NHA National Housing Authority NW North-West NZEB Near-Zero Energy Buildings OAR Romanian Order of Architects PAID National Disaster Insurance Pool PPP Public-private Partnership PUG General Urban Development Plan PUZ Zonal Urban Development Plans RAS Reimbursable Advisory Service RIM Residual Index Method TC Transaction cost UNDP United Nations Development Program WB World Bank Spatial and Demographic Trends Key takeaways Moderate population growth, but significant compared to all other large urban agglomerations in Romania that are facing population decline. While most rural areas in Cluj county are facing population decline and aging, CNMA is still relatively young with a strong attraction and retention potential (universities, job opportunities). Topographic constraints (hilly terrain, landslide risk) and height restrictions on the east (due to airport) in Cluj-Napoca have contributed to sprawl and fragmented development in the surrounding communes, with urban planning lagging behind. Official residency and permanent domicile Over the past 12 years, Cluj County has been experiencing a gradual population increase, from 707,647 in 2008 to 732,267 in 2019 (provisional data). This is a count of the official population, which includes both, people who have registered permanent domicile1 in Cluj County, as well as those with a registered residency in Cluj County and permanent domicile elsewhere. This is a reversal from the period 1992-2007, when Cluj county showed a declining population trend – from 735,031 in 1992 to 706,855 in 2007. Starting in 2014, the growth rate of resident population of Cluj County surpassed the growth rate of its permanent domicile population, which suggests that the County is attracting more people from other regions of Romania. As such, the population growth in Cluj County is largely attributed to Cluj-Napoca municipality and its peri-urban areas (see Figure 1.1); much of the rest of the county is experiencing population decline, in line with national trends. Cluj county is home to a large number of people who live outside their places of permanent domicile. By 2011, more than 12,000 people (1.7% of the total county population) had established their residence in a locality other than their permanent domicile, but located within the county. The most significant part of the population is domiciled in Cluj-Napoca, but with residence in Florești commune (approximately 2,700 people), and Baciu and Apahida communes (approximately 500 people in each commune). Conversely, persons residing in Cluj-Napoca but with another domicile in the county come mainly from the other urban centers of the county: Municipality of Turda and the Municipality of Dej accounting for 700-800 people each, followed by Câmpia Turzii, Gherla and Huedin, accounting for between 200-400 people each. 1 The term “domicile” refers to a person’s permanent or primary address, while the term “residency” refers to a person’s temporary address. 1 Figure 1.1 Spatial distribution of the average annual growth rate of the population with official residence. Year 2019 compared to 2010, Cluj county (percentages) Source: Substantiation Study on population, Cluj County Spatial Plan, 2020. The spatial distribution of the balance of internal migration at the level of Administrative Territorial Units (ATUs) shows that Cluj-Napoca recorded the highest balance of migration resulting from change in residence, and Florești recorded the highest balance of migration resulting from changes of domicile. In 2018, some 7,064 persons established their official residence in Cluj-Napoca alone, while 1,848 persons originally domiciled in Cluj-Napoca changed their residence to another locality. In the same year, 6,284 people moved their permanent domicile to the county seat and 5,135 inhabitants left their domicile. It is thus found that the county seat municipality is an important pole of attraction for commuters. In terms of balance in domicile changes, urban areas other than Cluj-Napoca are facing net out-migration, i.e. the persons who change their domicile outnumber those who establish their domicile in these localities. People who leave can have various destinations. Either they choose a suburbanized rural locality as a domicile, or they go to the more central area of the county or another county or another country. In terms of balance of residence changes, most of the rural localities in the county have negative values. 2 Figure 1.2 Balance of change in habitual residence, Cluj County (2018) Source: Substantiation Study on population, Cluj County Spatial Plan, 2020. Population concentration in Cluj-Napoca Metropolitan Area The population of Cluj-Napoca Metropolitan Area (CNMA)is 445,600, 73% of which lives in Cluj-Napoca municipality (327,272). Cluj-Napoca is home to 44.4% of people domiciled in Cluj County.2 Another 10% of the county’s population is concentrated in the peri-urban settlements of Cluj Napoca, of which the most populated are: Florești, Apahida, Baciu, Chinteni, Ciurila, Feleacu.3 2 INS – Tempo database (2019 data) 3 Source: INS – Tempo database (2019 data) 3 Table 1.1. Population concentration, Cluj county (2019) City/town Population % of county population % of CNMA population 327,272 44% 73% Cluj-Napoca 41,503 6% 9% Florești 14,467 2% 3% Apahida 12,282 2% 3% Baciu 3,430 <1% <1% Chinteni 1,507 <1% <1% Ciurila 4,134 <1% <1% Feleacu In the last decade, only 10 of the 81 administrative territorial units (ATUs) of Cluj county recorded population growth. Nine of them are in the Cluj-Napoca Metropolitan Area (CNMA): Florești, Apahida, Baciu localities, Chinteni, Jucu, Feleacu, Gilău, Ciurila and Cluj-Napoca. The larger communes (with larger populations) showed positive growth trends: Baciu (1.54%), Apahida (2.28%), and Florești (5.51%). In comparison, the city of Cluj-Napoca registered an increase of only 0.15% between 1992 and 2019.4 This may be attributed to the continuing suburbanization phenomenon occurring in and around Cluj-Napoca. Florești commune, which is still officially designated as a rural settlement, stands out with an official population of 38,257 (as of January 1, 2019), and is ranked as the largest among all rural communes in Romania. More recently, other destinations in the CNMA that were less popular ten years ago – such as Feleacu, Chinteni, Vultureni or Ciurila – are also becoming more favorable places to live. In contrast, Căianu, Borșa, Petreștii de Jos, Bonțida, Aiton, Cojocna, Gârbău, Sânpaul, Săvădisla, Tureni are losing population. The highest rates of population decline can be observed among the ATUs located at the western, northwestern and eastern borders of Cluj County.5 The urban settlements with the highest negative values of the total growth rate and the average annual growth rate are Turda, Câmpia Turzii and Dej, averaging -0.6-0.7% per annum. Population density The average population density of Cluj county is 110 persons/km2. The county’s agglomerations are mostly concentrated in three distinct areas: center (Cluj-Napoca and peri-urban), S-SE (Turda and Câmpia Turzii municipalities, and neighboring communes), and NE (Dej and Gherla municipalities and part of the neighboring communes). In terms of ATUs, the municipalities of Cluj-Napoca (1,810 persons/km2) and Câmpia Turzii (1,163 persons/km2) have the highest densities, while the city of Huedin has the lowest density (156 persons/km2). Only 10 communes have a population density higher than 100 persons/km2. Florești commune is the most dense (628 persons/km2), and exceeds the density of most urban settlements in the county, the exceptions being the municipalities of Cluj-Napoca and Câmpia Turzii. Apart from Florești, the communes 4 Source: 5 Source: Integrated Urban Development Strategy for Cluj-Napoca Metropolitan Area. World Bank, 2021. 4 with visibly higher densities are located near the big cities of the county – for example, Apahida and Baciu near Cluj-Napoca municipality, Mihai Viteazu near the Turda municipality, and Cuzdrioara between the western border of Cluj County and Dej municipality. Figure 1.3 Population density, Cluj County (2019) Source: Substantiation Study on population, Cluj County Spatial Plan, 2020. Of the six urban settlements of Cluj County, only Cluj-Napoca recorded an increase in population density between 2010-19 (+36 persons/km2). The communes that recorded an increase in density are the ones around Cluj-Napoca: Florești recorded the fastest acceleration of density (+436 persons/km2), significantly higher than Apahida and Baciu (35-40 persons/km2). Municipalities facing the sharpest decline in population density between 2010 and 2019 are: Câmpia Turzii (-77 persons/km2), Turda (-46 persons/km2), Dej (-22 persons/km2), Gherla (-10 persons/km2). At the commune level, the decline in population density is most pronounced in the eastern and southern areas. 5 Age distribution and dependency ratios There are also interesting differences across the ATUs in terms of population distribution by age (children under 18 years, adults aged 18-64 years, retired persons 65 years and older). Both in absolute values and in percentage, most communes in the peri-urban area of Cluj-Napoca have the highest number of children (under 18 years). Figure 1.4 Spatial distribution of the population <18 years (2019) Source: Substantiation Study on population, Cluj County Spatial Plan, 2020. In contrast, with respect to the distribution of working-age adults in Cluj County, variation among the ATUs is less visible. For most ATUs, working age people represents 60-70% of the total population. In areas where the number of working-age adults is close to 70%, the share of the population aged 65 and over is lower and that of young people under 18 is higher. This is also evident in communes around Cluj-Napoca as well as other communes in the county. One of the exceptions is the commune of Recea Cristur, which has the lowest percentage of 18-64 year olds, and the highest share of the elderly. 6 Figure 1.5 Spatial distribution of the working age population 18-64 years (2019) Source: Substantiation Study on Population, Cluj County Spatial Plan, 2020. One of the direct effects of low fertility, negative natural growth, and mass emigration is an aging population. This is a structural phenomenon that indicates an increase in the percentage of people aged 65 and over (or 60 years and over) in the total population in relation to other population categories. The two other age categories used for these calculations are: dependent children 0-14 years in age, and the youth/ adult/ working age population in the 15-64 year age bracket. - The demographic aging index represents the ratio between the total elderly population and the number of dependent children. Although Cluj County has a negative natural increase in population, the ratio between the number of elderly people and the number of dependent children is still in favor of the latter. At the county level, the index shows an increasing trend in urban areas, and a decreasing trend in rural areas. - The dependency rate of the elderly is the ratio of the elderly population and the working age population. In 2019, this ratio was 25:100 in urban areas, and 32:100 in rural areas of the county. 7 Figure 1.6 Spatial distribution of the elderly, Cluj county (2019) Source: Source: Substantiation Study on population, Cluj County Spatial Plan, 2020. - The rate of demographic dependence compares the number of vulnerable people, the elderly and children, with the working age population. Therefore, this is a more complex measure of the profile of the age structure and which cumulates all people in the dependent age categories. Similar to the results of the other indicators at county level, the demographic dependency rate in 2019 was 57:100 in urban areas, and 42:100 in rural areas. Also, the rate of demographic dependence is increasing in urban areas and decreasing in rural areas. Eleven of the 81 ATUs have an elderly population of at least 30%. At the aggregate level, the eastern part of the county has the largest elderly population, and the communes of Florești (6.6%), Apahida (12.2%) and Baciu (12.8%) have the smallest elderly population. Spatial development patterns6 Cluj-Napoca’s topography had a major role in its development and urban expansion, especially in relation to its adjoining localities. With the northern and southern parts of the municipality bordered by hilly areas with steep slopes, Cluj-Napoca’s development has followed a linear pattern in the east-west direction. Topographic constraints (hilly terrain, landslide risk) and height restrictions on the east (due to airport) in Cluj-Napoca have contributed to sprawl and fragmented development in the surrounding communes. Over the past few decades, there has been a boom in real estate development – including a lot of housing 6 Source: Integrated Urban Development Strategy for Cluj-Napoca Metropolitan Area. World Bank, 2021 8 – on (much cheaper) land in the peripheral areas of Cluj-Napoca municipality, particularly the communes of Florești, Baciu, and Apahida. Unfortunately, these developments have been largely unplanned and fragmented, characterized by inadequate infrastructure and social amenities – this will be discussed in more detail in the subsequent sections). As a result of urban planning practices in recent decades, the slow process of restitution of property in central areas, and the absence of coordinated metropolitan planning framework, residential development has intensified in peripheral areas and communes around Cluj-Napoca, while central areas have been largely ignored. In addition, the absence of integrated urban policies (development, land, etc.) and the lack of action on part of the local authority to use existing legal provisions to maximize the use of the current housing stock have contributed to many of Cluj-Napoca’s housing challenges today. These include: increased segregation and social/ residential marginalization, more social inequities and reduced housing access for some population sub-groups, and the expansion of poorly serviced urban areas and informal settlements. Figure 1.7 Urban area and its expansion in the period 2005-2018 (2018) Source: Cluj County Spatial Development Plan, 2020 9 Employment, Income, Cost of living Key takeaways Cluj-Napoca is a city of high-skill intensive services, and higher education levels compared to other secondary towns in Romania. While remuneration scales are relatively higher, Cluj-Napoca also has a higher cost of living. Employment and Income in Cluj County Cluj County is home to approximately 30% of the total number of working-age people in the North-West development region. The National Institute of Statistics (INS) recorded the employment rate in Cluj County at 77.7% in 2018, higher than regional average of 72.7% and the national average of 68.7%. In fact, the county ranks 4th nationally in terms of employment rate, after the Municipality of Bucharest, Alba county, and Arad county. The vast majority (88%) of the jobs in Cluj County are in urban areas, especially in Cluj- Napoca (74%).7 Figure 2.1 Employment rate at national, regional and county level (2008-18) Source: Substantiation study on Natural Resources and Economics, Cluj County Spatial Development Plan, 2020 The average per capita monthly net salary in Cluj County in 2018 was RON 3,026 , which was RON 384 higher than the national average, and RON 607 higher than the regional one.8 Compared to 2008, the average monthly net salary in Cluj county doubled in 2018, and recorded a higher growth rate than reported at national and regional level. According to the National Forecast Commission (2019)9, the average monthly net salary will have a growth rate of 7-8% and will reach the value of RON 4562 in 2022, 50% above the official value in 2018. 7 MB: Source: Substantiation study on Natural Resources and Economics, Cluj County Spatial Development Plan, 2020 8 Source: National Institute of Statistics, 2019 9 Full reference: The National Commission for Strategy and Prognosis, 2019 10 Cluj ranks 2nd nationally in terms of remuneration, after the city of Bucharest. The highest salaries were held by employees in the field of services related to the extraction of metal ores (RON 11,301 ), coking products (RON 7,820 ), air transport (RON 6,898 ), information technology services (RON 6,889 ), publishing activities (RON 5,983 ), insurance (RON 5,235 ), financial intermediation (RON 4,935 ) , computer manufacturing (RON 4,853 ), oil extraction (RON 4,753 ) etc.10 The areas in which the salaries at county level do not exceed the national average are agriculture, extractive industry, transport and storage, real estate transactions, professional, scientific and technical activities.11 Figure 2.2 Average monthly net salary at national, regional and county level (2008-2018) Source: Substantiation study on Natural Resources and Economics, Cluj County Spatial Development Plan, 2020. Cluj-Napoca: Estimated income and household budgets Official salary figures were not available for Cluj-Napoca. Hence, a review of other online data sources was carried out. One website that appears to provide plausible data is “Average salary survey”12, with a sample of 182 self-reported incomes. The comparison between the income levels reported here for Cluj-Napoca and the official figures for Cluj County is stark: the average income in Cluj-Napoca is almost double the county average. This seems plausible, considering that Cluj-Napoca is the county capital, that it generates the bulk of the county’s employment, and has significantly higher remuneration levels compared to the rest of the country. 10 Source: Substantiation study on Natural Resources and Economics, Cluj County Spatial Development Plan, 2020. 11 Source: Substantiation study on Natural Resources and Economics, Cluj County Spatial Development Plan, 2020. 12 Source: https://www.averagesalarysurvey.com/cluj-napoca- romania#:~:text=CLUJ%2DNAPOCA%2C%20ROMANIA%20SALARY&text=Average%20take%20home%20earning%20is,is%20RON %2054%2C783%20(Gross). 11 Table 2.1 Income levels: Cluj County versus Cluj-Napoca Cluj County Cluj-Napoca (Source: Average Salary Survey) (Official figures) RON (Annual) RON (Annual) EUR (Annual) EUR (Monthly) Typical Gross Income - 54,783 11,504 959 Average Gross Income 51,874 101,328 21,279 1,773 Average Net Income 36,312 68,944 14,478 1,207 The ‘AverageSalary’ website also provided a breakdown of income levels13, from which an illustrative income percentile table was derived (see Annex 1). Although this is not official data, it provides a useful proxy for this study to assess housing affordability, considering that official income distribution is not available. Similarly, official information on neither the cost of living nor the household budget was available. So, a proxy was used from another online data source: numbeo-com. Numbeo is a crowd-sourced global database of cost of living, house prices, as well as many other types of information at the city level. It provides a template to calculate the minimum cost of living for different household types/ sizes, with options to consider budgets for different income levels (see Annex 2).14 However, as reflected in the menu selections in the template in Figure 2.3, for the purposes of this analysis, a relatively conservative approach was used that reflects the very bare minimum a person needs for non-housing expenses (food, transport, health, etc.) in Cluj-Napoca. 13https://www.averagesalarysurvey.com/cluj-napoca- romania#:~:text=CLUJ%2DNAPOCA%2C%20ROMANIA%20SALARY&text=Average%20take%20home%20earning%20is,is%20RON %2054%2C783%20(Gross). % people Earn this annual salary (RON) or more… 8% 273,800 13% 214,300 29% 124,151 53% 92,556 82% 54,783 92% 27,308 97% 13,800 14 https://www.numbeo.com/cost-of-living/in/Cluj-napoca 12 Figure 2.3 Cost of living estimator: Cluj-Napoca Table 2.2 provides the non-housing cost of living for five household types. This information is important from the perspective of differentiating housing affordability across these different household types. As shown, households with children, particularly those attending school, face a relatively high cost of living for non-housing expenses, which needs to be factored into housing affordability calculations. This issue will be revisited in the section on housing affordability. Table 2.2 Non-housing cost of living for five household types Household Type/ composition Size of HH Non-housing cost of living (EUR) Single adult only 1 586 Couple (two adults) only 2 939 Couple with infant 3 1,226 Couple with infant and 1 child in KG 4 1,868 Couple with 1 child in KG and 1 in school 4 2,134 13 Housing Stock and Supporting Infrastructure Key takeaways Weak management and maintenance of multifamily buildings: age and hazard risk, weak financial/ technical capacity of HOAs. Poor access to physical infrastructure and social amenities in housing developments, particularly in new neighborhoods but also in old ones. Absence of a comprehensive housing database and monitoring indicators at the household level (#, size, incomes etc.): difficult to discern the imbalances in demand and supply Speculation on land, housing, and vacant/ underutilized properties suppressing the supply of housing, and driving up house prices. Housing Stock: Quantitative data Table 3.1 provides data on the housing stock in the Cluj-Napoca Metropolitan Area. Since 2011, the CNMA witnessed a 6.6% increase in its population and a 23.17% increase in its housing stock. Cluj-Napoca increased it’s housing stock by 12% in the same period, while its domicile population increased by a much smaller percentage (1.28%). The largest increase in housing stock between 2011 and 2019 has occurred in three communes: Apahida (48%), Baciu (54%), and Florești (105%) – see table 3.1. The case of Florești is particularly notable, considering that its housing stock more than doubled over the last decade, while the population increased by 82%. Florești serves as a “dormitory city” for Cluj-Napoca and is inhabited by a large number of commuters who work or study in Cluj-Napoca and live in Florești. Despite this unhindered growth, and with a population of 41,521 (in 2020), Florești continues to be designated a rural commune. Current data on the number of households for each town/city would have been helpful in determining the adequacy/shortage of housing units; however, this data was not available. 14 Table 3.1 Housing and population dynamics in CNMA Source: Census 2011 & INS Tempo online data processing and DRS Cluj data Multifamily versus single family The highest proportion of people living in multifamily dwellings are registered in the largest ATUs in the county: 75% in Cluj-Napoca, 59% in Gherla, 58% in Dej, 56% in Câmpia Turzii, 54% in Turda, 52% in Florești, followed by 35% in Huedin and 34% in Baciu.15 On the other hand, the lowest percentages of people living in multifamily housing are recorded in rural areas – either in the hills/mountains or in the plains.16 15 Source: General Population and Housing Census data (2011). 16 Source: Substantiation Study on Social Impact Assessment. Cluj County Spatial Development Plan, 2020. 15 Figure 3.1 Percentage of people in multifamily housing in the total number of residents in a locality, 2011 Technical information: The centering is on the average of 8.3% individuals residing in multifamily buildings, with the maximum value of 75% reached in Cluj-Napoca. 31 localities in Cluj County have no individuals residing in multifamily housing. Data source: Population and Housing Census, 2011. Rural localities located in the immediate vicinity of Cluj-Napoca have been undergoing changes in their housing typologies: individual housing is being replaced with multifamily buildings.17 Figure 3.2 Percentage of people in multifamily housing by locality, 2011 Source: Own processing according to data from the Population and Housing Census, 2011 / Cluj County Spatial Development Plan, 2020 17 Source: Integrated Urban Development Strategy for Cluj- Napoca Metropolitan Area. World Bank, 2021 16 Private versus public ownership As in the rest of the country, there is a very high proportion of privately owned housing in Cluj County, which increased from 90.6% in 1993 to 97.9% in 2017.18 The corresponding national figure is 96.8%, the highest in Europe, and in sharp contrast to many other Western European countries where publicly- owned housing stock is considerably more. Figure 3.3 Number of privately owned housing units and their proportion of total housing units in Cluj County, 2018 Data source: National Institute of Statistics, Tempo Loc101B. The dynamics of restitution and privatization have gradually reduced the publicly owned housing stock. Since 2008, a total of 500 public housing units have been built in Cluj County. In 2014, there were 2,023 social housing units in Cluj County, of which 1,309 were located in Cluj-Napoca. Also, in the last 20 years, 3 housing complexes were built by ANL, comprising 174 apartments for the youth. Of these, 106 were sold to tenants, and for another 50 ANL homes there are purchase requests. Currently, the housing stock owned by Cluj-Napoca City Hall includes: 616 social housing units, 604 state housing, 29 emergency housing, 31 service housing and 68 ANL housing units. At present, some 3,431 people live in these housing units (cf. Cluj-Napoca City Hall, 2021). This is very small compared to the current needs: the number of applications is approximately 400 per year, which is significantly higher than the 15 or so units that actually become available to eligible applicants.19 Rental Housing Rental housing is an important part of a healthy and dynamic housing ecosystem. However, there is no data on Cluj-Napoca’s or CNMA’s rental market, and much of the rental activity is informal. Vacancy The most recent data available on vacancy rates was collected during the 2011 census. At that time, the vacancy rate at the Cluj County level was 25%, with Cluj-Napoca having the lowest vacancy rates in the county (9%).20 The highest incidence of vacancy is reported in two types of areas at the county level: 18 Source: National Institute of Statistics, Tempo Loc101B. 19 Substantiation study on social impact assessment. Cluj County Spatial Development Plan, 2020: - the only data on households available is the one from the national census 2011 20 Source: Substantiation Study on Social Impact Assessment, Cluj County Spatial Development Plan. World Bank, 2020. 17 - hill or mountain areas with a well-developed tourism industry, with a large number of holiday homes. Examples include the commune of Beliș where 59% of houses are vacant, Băișoara in Mărgău village with a corresponding percentage of 56%, and Mărișel with 50%. Mărișel is also one of the localities with the largest elderly/ aging population in the county. - villages that are either depopulated, or have a large aging population – for example, Recea-Cristur with 38% of homes vacant, Borșa 44%, Cornești 36%. Data on vacant units in Cluj-Napoca is not available. However, according to real estate developers, within Cluj-Napoca city limits, most vacant homes are located in the center of the city, where some apartments have temporarily been converted into vacation rentals. However, since March 2020 and the beginning of the COVID-19 pandemic that resulted in a decline in tourism, some of these vacation units were put back on the rental market.21 Although there are national level regulations to tax vacant units,22 enforcement at the local level has been challenging because there are no systems in place to identify and track these units. Tax on land is based on its size and location, but no penalty is levied on buildable land that may be kept vacant for extended periods of time for speculative purposes.23 Figure 3.4 Percentage of unoccupied dwellings in the total housing stock at the level of localities in Cluj County, 2011 Technical data: The centering is on the median of 25% empty homes, with a minimum of 9% in the city of Cluj- Napoca and the average year of construction with the highest value in 2007 in Florești. The maximum intensity of the color is given by the 1990 value. Data source: Census of Dwellings and Buildings in Romania 2011, number of vacant dwellings compared to dwellings with at least one household. 21 Interviewwith Welt Imobiliare, January 2021. 22 Law 116/2002 on preventing and combating social marginalization 23 Local Council Decision 908/2019. Thresholds for local taxes and fees for 2020. 18 Age of housing stock There is a stark difference between urban and rural areas in Cluj County in terms of the built form. Urbanized areas are dominated by newer multifamily housing stock built after 2000, while rural areas mostly comprise older housing – mostly single-family houses – built prior to 2000. The newest housing stock, at county level, is in Florești commune, where the average year of the construction is 2007. Table 3.2 provides the number and share of buildings by time period at the county level. Most units, were built between 1961-1970, followed closely by 2011-2018. Table 3.2 Number of buildings grouped by construction period, in Cluj County Building period Number Share before 1919 7,371 3.90% 1919-1945 17,995 9.53% 1946-1960 36,841 19.51% 1961-1970 41,655 22.06% 1971-1980 15,289 8.10% 1981-1990 5,676 3.01% 1991-2000 8,485 4.49% 2001-2010 16,273 8.62% 2011-2018 33,571 16.66% Not known 7,753 4.11% Total 188,906 100% Data source: Census of Housing and Buildings in Romania 2011, period of construction of buildings and year of construction after 1970. National Institute of Statistics, Tempo Loc104B. Figure 3.5 Average age of housing construction at the level of localities in Cluj County (1900-2018) 19 Technical data: The focus on the median year 1996, with the average year of construction of the building with the lowest value in 1953 in Vultureni and the average year of construction with the highest value in 2007 in Florești. The maximum intensity of the color is given by the 1990 value. Data source: Census of Housing and Buildings in Romania 2011, period of construction of buildings and year of construction after 1970. National Institute of Statistics, Tempo Loc104B. Management and maintenance In Romania, homeowners’ associations (HOAs) are non-profit, legal entities that represent the interests of the homeowners living in a condominium/ multifamily housing building. An exact number of the active HOAs in Cluj-Napoca is not available. In Cluj-Napoca, there are properties where HOAs have not yet been established, or where some low-income households are not able to pay for basic maintenance or major capital repairs.24 In some cases, members’ monthly contribution are very small, and insufficient to cover basic maintenance costs. In order for apartment buildings to undergo major rehabilitation works, two-thirds of the members of a homeowner association need to agree on the undertaking, and every single member should make financial contributions. Not much information is available on private management companies, but interviews suggest that they are becoming more prevalent, but largely in new higher end housing developments. Seismic risk and hazard insurance In Cluj-Napoca, no building is classified in Class 1 seismic risk and only 5 buildings are in class 2 seismic risk. On the page dedicated to seismic risk on the MDPWAMDPWA website,25 there is no list of buildings that have undergone a technical assessment available for Cluj County. That said, seismic risk is substantial in the country, and yet the concept of building level insurance is largely absent at the national level. There is a subsidized hazard insurance (PAID or the National Disaster Insurance Pool) program targeting individual households, but participation in this program is limited. Further, the information about the technical expertise and the eventual classification of the buildings in seismic risk classes is not public. Energy Efficiency In 2017, the Cluj-Napoca City Hall began collaborating with the Technical University of Cluj-Napoca, SC Servelect SRL and the Center for Resources for Energy Efficiency and Climate Change, in order to develop a plan for improving energy efficiency in Cluj-Napoca. This plan contains energy consumption data at the city level and recommendations for improving energy efficiency.26 According to the 2011 census, 3,000 out of the 3,581 apartment buildings located in Cluj-Napoca were built prior to 1989, and energy audits performed by the City Hall have proved that these older buildings have low energy efficiency. Since 1990, the Cluj-Napoca City Hall took few measures in order to regulate thermal insulation projects, which led to them being managed by HOAs. In some cases, this resulted in poor quality of work and materials, incoherent energy performance, and a lack of an integrated strategy 24 Interview with Vice-mayor of Cluj-Napoca Municipality, November 2020. 25 https://www.mlpda.ro/pages/listacladirilocuitexpertizatetehnic 26 Integrated Urban Development Strategy for Cluj- Napoca Metropolitan Area. World Bank, 2021 20 that would consider other energy efficiency measures besides insulation, such as installing alternative energy production units or considering bike parking infrastructure.27 Since 2011, only 206 apartment buildings in Cluj-Napoca have undergone energy efficiency measures. As of January 1st, 2021, all new buildings in Romania must meet the NZEB standards (“near zero energy buildings”). This also means that 30% of the energy consumption of a building should be provided by renewable energy sources on site or located not further than 30 km from the building. However, Cluj- Napoca City Hall does not have any data regarding renewable energy sources at the municipality level or an estimate of how much annual energy is produced from renewable sources. As of 2016, only 1% of the share of thermal energy generation was coming from renewable sources.28 The new Casa Verde program requires the development of database with information on the amount of thermal energy produced annually from renewable sources. At the same time, there is no information available regarding the implementation of NZEB standards at the local level. District Heating District heating. The district heating system in Cluj-Napoca was founded in 1960, and until 1990 100,000 apartment units were connected to it. However, since 1990 units began to get disconnected from this system, in favor of individual units based on natural gas. As of 2020, only 24,000 units were connected to the district heating system.29 New apartment buildings built after 1990 in neighborhoods such as Buna Ziua, Europa, Becas, Borhanci or Sopor are not connected to the central district heating system, and are using individual or building gas units.30 According to data available at the Cluj-Napoca Municipality level, the consumption of thermal energy provided by the district heating system has decreased from 446,973 Gcal in 2010 to 160,896 Gcal in 2019.31 Cluj-Napoca City Hall has not taken specific actions to prevent housing units getting disconnected from the district heating system. This has resulted in lower heating subsidies paid from the local budget than other cities in Romania. In 2021, Cluj-Napoca City Hall has initiated the District Heating Strategy for the municipality. Physical infrastructure and social services In CNMA, the expansion of new residential developments in rural areas adjoining Cluj-Napoca have mostly occurred outside of regulatory mechanisms (General Urban Plans (PUGs)). As a result, these areas have come to be characterized by individual pockets of development without adequate consideration of the surroundings or to the infrastructure needs (transportation etc.) that are associated with such developments at a macro level. Although in general the new housing units meet the standards (per the Housing Law), little attention has been given to outdoor spaces (parking, playgrounds, public spaces etc.), and some of the most basic components of urban development – for example, mandated setbacks, building heights, rights-of-way, land reserves – are overlooked. All of these factors have negatively impacted the comfort/ quality of life in these areas – figure 3.6 shows the results of a survey conducted recently asking households to identify housing problems. 27 Source: Integrated Urban Development Strategy for Cluj- Napoca Metropolitan Area. World Bank. 2021 28 Source: Cluj-Napoca Municipality Energy Efficiency Improvement Program, 2107- https://files.primariaclujnapoca.ro/2019/02/05/Planul-de-%C3%AEmbun%C4%83t%C4%83%C8%9Bire-a-eficien%C8%9Bei- energetice-aferent-Municipiului-Cluj-Napoca.pdf 29 Source: Integrated Urban Development Strategy for Cluj- Napoca Metropolitan Area. World Bank. 2021 30 Source: INS TEMPO Online, 2020 31 Source: Integrated Urban Development Strategy for Cluj- Napoca Metropolitan Area. World Bank. 2021 & INS TEMPO Online, 2020 21 Figure 3.6 Survey based on opinion polls - the results for the question What kind of problems do you have (if any) with the house you live in now? Range: 1-least severe to 10-worst Source: Survey data based on opinion poll, conducted at the metropolitan level, with a volume of 1832 respondents, from all localities belonging to the Cluj-Napoca Metropolitan Area and in all neighborhoods of Cluj-Napoca: Metropolitan Facilities in the Cluj-Napoca area, Research Report, 2020 At least part of the reason for poor quality of life many be attributed to the absence of trunk infrastructure, which is typically the responsibility of the local authority. Yet, permits for construction are often approved without the trunk infrastructure, passing the responsibility on to the developer who then not only passes these extra costs on to the buyer, but is also likely to cut corners by compromising on the construction quality or in the provision of physical infrastructure or social amenities on-site. This practice of developing suburban and peri-urban areas without factoring in guidelines of sound urban planning is quite widespread in Romania. It spans beyond the CNMA, and includes places like Ilfov county/ Bucharest metropolitan area (Chiajna, Domnești or Popești -Leordeni) and other large cities in the country. In some cases, urban plans exist but are not enforced; in other cases, they are out of date, and do not reflect the realities on the ground. Further, interviews conducted as part of this strategy seem to suggest that the construction permitting process is lengthy and complicated, and this is particularly the case in Cluj-Napoca, more than in the surrounding localities. Certain smaller developers prefer building in the city center as to avoid the even lengthier procedures associated with building on parcels where infrastructure has not yet been built.32 For developers building projects at the periphery of the city, costs are significantly higher due to the fact that they are required to build much of the supporting trunk infrastructure. Urban Planning and growth potential Local authorities in CNMA are beginning to proactively address the problem of unrestricted and unplanned urban sprawl. In 2019, the City Hall of Cluj-Napoca organized (together with Romanian Order of Architects (OAR)) the solution contest for "Developing a MASTERPLAN / Zoning Plan in the neighborhood of Coloniile Sopor in Cluj-Napoca." The competition aims to identify a new way for sustainable urbanization, with the goal to increase the quality of life of people in urban areas through integrative and innovative solutions. Cluj-Napoca City Hall is providing the funding for this initiative: from 32 Interview with Solaris Real Estate Development, December 2020. 22 the competition / master plan to the elaboration of the Zonal Urban Plan and the staged construction of the infrastructure and public facilities. It is expected that this will help increase property values in the area, and at the same time, private investors will benefit from new investment opportunities. It is premised on the collaboration between 3 main urban actors: landowners, real estate developers and the local public authority. Participants are invited through this contest to present not only a spatial vision of development of the area but also a strategy, so that the new development becomes a structured living environment, "stageable", sustainable, also offering sufficient flexibility to private developers who want to build. It is estimated that between 50,000 and 70,000 people will live in the new neighborhood in about 15-20,000 homes. As of April 2021, Cluj-Napoca City Hall is organizing consultations with the various landowners, in order to receive feedback and discuss the future development plans of the Sopor neighborhood. Figure 3.7 Urban regulation plan of the Sopor area Source: https://files.primariaclujnapoca.ro/2019/12/10/Plansa-1-150-dpi.jpg For the municipal authorities, the concern for the development of new neighborhoods is not new. The municipality has initiated in the past 3 different PPP projects but they were not implemented. 23 Figure 3.8 New developments in the period 2011 - 2019 and the locations of the largest approved Zonal Plan (in force or not) for the CNMA and the communes of Baciu and Florești Source: Own processing, based on sources available on real estate sites and on the website of Cluj-Napoca City Hall 24 Housing Market Dynamics Key takeaways Fast-growing market in and around Cluj-Napoca, but accompanied by a lot of speculative activity, making housing expensive for the vast majority. Vacancy and underutilization at the CNMA level not adequately documented or understood. Poor quality of life poor in adjoining communes due to lack of infrastructure and social services. Lack of data, and the inability to estimate actual demand for housing. Limited information available on CNMA’s rental market: demand and supply. Housing completions According to INS Tempo online, a total of 50,648 permits were issued in Romania in 2019, of which 152 permits were for multifamily buildings (there is no data on how many units these buildings constitute), and 42,541 permits for other residential buildings (excluding those for multifamily housing). For Cluj county, 2019 data shows that 1,731 building permits were issued for residential units (single and multifamily), marking an increase of 12% over the prior year, and finally exceeding the peak threshold recorded in 2008. In 2018, approximately 97% of the total new houses in Cluj County were built in the Cluj-Napoca metropolitan area: the municipality of Cluj-Napoca registered 4,169 new units (55% of total new units built in the county that year), followed by Florești commune (27%), Baciu (6.6%), and Apahida (5.2%), with the remaining communes in the metropolitan area accounting for little over 3.5% (287 new homes). The communes of Căianu, Petreștii de Jos, Sânpaul and Tureni recorded no new housing. The year 2018 also brought changes in the construction dynamics: In Cluj-Napoca, 3.5 times more homes were built compared to 2008, entering the 4th consecutive year of growth. Florești commune reached only half of the volume of completed homes in 2008, but registered a significant increase compared to 2017 (55%). In Florești, the spectacular and sudden real estate boom of the early 2000s was followed by a steep drop in new construction during the global financial crisis of 2008-10. Some construction resumed in 2011, but at a much lower level. Although Cluj-Napoca returned to more construction 2014-15, the construction in Florești commune has been stable at best, and relatively slow. 25 Figure 4.1 Housing units at the end of the year - evolution 2008-18 for the localities ZM Source: INS Tempo online data processing Figure 4.2 Total number of homes built between 2011 and 2018, in CNMA Data source: own processing based on data from INS Tempo online 26 Figure 4.3 Dynamics of finished housing units - comparative evolution from 2008 to 2019/2018, at national, regional and county level Source of the data: INS Tempo online and https://insse.ro/cms/sites/default/files/com_presa/com_pdf/constr_loc_tr4r_19.pdf In the period 2008-2018, the regional average of newly completed housing units was well below the national average. Cluj County, followed the same regional trend until 2015, after which the number of new units almost doubled in one year, and continued the upward trend until 2018 (+5% above the reference value of 2008). Cluj County (through its Metropolitan Area) asserts its position as a strong competitor in the NW region, registering the largest number of completed homes. In 2018, Cluj County recorded 6 times more completed units than Bihor County, 11 times more than Bistrița-Năsăud or Maramureș counties. This is attributed to the economic potential of Cluj county, which generated about 41% of the GDP of the North- West development region in 2017, and 5% of Romania's GDP (second only to Bucharest). Overall, however, in 2019, Cluj County registered an increase of 11 new homes per thousand inhabitants, well above the national average of 3. For comparison, the increase was 8 in Timiș County, 8 in the Bucharest-Ilfov region, 6 in Constanța and Brașov, and 4 in Iași. In other words, Cluj County recorded the highest percentage of new house constructions in 2019. At the ATU level, the experience of previous years indicates that 95-98% of new homes built annually in the county are located in Cluj-Napoca Metropolitan Area. Hence, it may be estimated that the number of new homes produced in the metropolitan area was about 7,800-7,900, of which 4,100-4,200 were in the municipality of Cluj-Napoca, and 3,700 in the communes of CNMA. In other words, Cluj-Napoca municipality produced 13 new homes per 1,000 inhabitants in 2019, which is higher than in the Capital. 27 Figure 4.4 Completed housing units - 2018/2017 comparative evolution between growth poles and Bucharest Housing transactions: frequency and scale The analysis of the data available on the ANCPI website for 2009-2020 reveals two distinct trading periods at the national level (total number of real estate transactions at national level by counties): (i) 2009-2015, a period characterized by a 158% increase in the number of transactions, and (ii) 2015-2019, a period characterized by a 61% decrease in the number of transactions. The top 10 counties totaled approximately 40% of the total transactions carried out nationally in 2008, increasing to 57% of the total in 2019. In descending order they are Bucharest, Ilfov, Cluj, Timis, Brasov, Iasi , Constanța, Dolj, Bihor and Mureș, with ranking kept relatively constant for the entire analyzed period (with small variations for the last 3 ranked). There are differences in the types of real estate traded in each of the ATUs - for example, a large number of urban plots were traded in Bucharest, Cluj and Ilfov, compared to other counties such as Ialomița or Călărași, where many more out-of-town (agricultural) plots of land were traded. The number of transactions increased year to year in the analyzed period, with 2.5 times more transactions in 2018 compared to 2013. Apartments constitute the largest share and the highest value of transactions. The year 2017 saw a large number of land transactions (> 600); 2018 brought a higher number of transactions of houses (570) and apartments (> 5,900), marking an increase of 214% and 140% respectively since 2013. Also interesting are the dynamics of financing: as an annual average, 25% of all transactions have been bank-financed, with the lowest share of bank-financed transactions in 2014 (15%) and in 2016 (19%), and the highest in 2018 (33.3%). Table 4.1 Value of transactions in Cluj-Napoca in 2013-2018 (EUR) Property type Financing Total Land House Apartments Other Own Bank 2013 11,816,228 20,511,058 108,590,098 14,606,296 119,112,908 36,410,772 155,523,680 2014 15,842,414 35,992,996 169,411,072 62,703,149 239,924,870 44,024,761 283,949,631 2015 16,089,829 51,424,673 226,021,959 64,040,899 265,751,211 91,826,150 357,577,361 2016 19,861,000 61,336,000 287,362,000 88,114,000 378,968,000 77,705,000 456,673,000 2017 32,707,400 61,733,474 376,987,517 122,767,544 412,446,309 181,749,626 594,195,934 2018 13,256,548 84,776,288 410,504,859 133,525,807 429,123,017 212,940,485 642,063,502 28 The total value of real estate transactions in January-May 2019 was over EUR 214 million, of which the most significant share (64%) was represented by apartments. Land transactions constituted a small share of the total value (<0.5%). House transactions accounted for 8% of the total. The transacted amounts showed an increase of 312% for 2018 compared to 2013, with the largest increase was recorded in transactions related to houses (313%) and apartments (278%). However, as a share of the total transacted amount, apartments registered the highest value. In absolute terms, financing through banks constituted almost 50% of the total transacted value, increasing since 2016. The total number of transactions during January-May 2019 was 2,567, of which 1,899 were apartments (74%) worth EUR 137.2 million. Some 83% of this transacted value was financed from own sources, and the rest through bank financing. The average price/sq.mt of apartments was EUR 1,333 /sq.mt. Over a third of the buyers are from outside the county: Maramureș, Bistrița-Năsăud, Alba, Sălaj, Mureș and Satu Mare, confirming its role at regional level. Cluj Napoca is the second largest university center after Bucharest, and attracts all the students at regional level. It is common practice for buyers to rent out homes to students, or to buy homes for their own children studying in Cluj. Indicators of demand As mentioned earlier, Cluj-Napoca increased it housing stock by 12% between 2011 and 2018, while its domicile population increased by a much smaller percentage (1.28%). That said, without an accurate count of the number of households, it is difficult to ascertain whether there is a housing surplus or deficit. Without sufficient data on the housing stock (typologies, vacancy rates, house size etc.) and at the household level (number of households, household income, household size etc.), it is impossible to do a meaningful housing demand assessment. In the absence of these data, the following have been used as proxy indicators: Potential buyers At national level, the demand for residential properties, according to the real estate advertising site (imobiliare.ro), registered 171,200 potential buyers in the first quarter of 2020, increasing by 4% compared to the same period of 2019. It is important to note that this demand is represented by potential buyers who have expressed interest in a certain property on the imobiliare.ro portal, during a certain period, by registering an action (viewing the phone, sending an e-mail to request more details, printing or saving the ad). In other words, these are the “hits” recorded by the main real estate sites. It does not account for the fact that one applicant could submit multiple applications – for multiple houses. This is used as a proxy as there is no other official data to help discern housing demand. As an annual average, demand has increased by almost a quarter compared to 2018 and has doubled in the last 5 years. The largest share of demand is divided between the most important regional cities and the Capital, where Bucharest retains its top position for 2019 - with 350,100 views / potential buyers, followed by the municipalities of Timisoara and Cluj-Napoca, which record values similar (Timișoara having 8% more requests than Cluj-Napoca). It is interesting that, in this case, the demand does not influence the market decisively, Cluj-Napoca registering, at national level, still the highest value per square meter, for sale. For the Cluj-Napoca area, the quarterly average was around 16,100 applications, increasing in Q1 2020 and with a peak potential in Q3 (the busiest period on the real estate market). For Cluj-Napoca, regarding the age of the houses, the preference of the buyers for the new / built housing after the year 2000 is obvious. Thus, the search structure observes a fine variation of the large share of 29 searches, in favor of homes built after 2000, starting from the maximum recorded of 74% (Q2 2019) to 68% (in Q1 2020). Figure 4.5 Demand for residential properties on sale (houses and apartments) Source: data processing https://www.analizeimobiliare.ro/wp-content/uploads/ 2019/11 / Raport_Q3_2019eng.pdf Housing for rent Regarding the demand for rental housing in Q1 of 2020, there were approximately 64,800 views at national level, of which 38,900 were for the municipality of Bucharest, followed by the municipalities of Timisoara with 6,800, Constanța with 5,900 views, and Cluj-Napoca with 5,000 views. All four municipalities registered substantial increases in the last 5 years, Cluj-Napoca registering the largest increase of +75%. Housing for sale For the 1st quarter of 2020, the downward trend manifested in 2019 continues, namely the decrease of the total number of properties put up for sale in Bucharest and the analyzed regional centers. The national average decrease of -11% (compared to Q1 of 2019) is exceeded by Bucharest and the main regional cities (where Constanța registers the highest loss of approximately -25%), except for the municipalities of Cluj- Napoca (-2.7%) and Timisoara (-8.2%). Figure 4.6 Number of residential properties for sale (houses and apartments) in Cluj-Napoca Source: data processing https://www.analizeimobiliare.ro - Reports on the residential market (Q1, Q2, Q3, Q4 2019 and Q1 2020) 30 The evolution of offers for sale indicates an interesting aspect for the city of Cluj-Napoca (and implicitly of the - area): although the number of units per residential building complex has decreased from 2015 to 2019 (from about 4,100 units to about 2,600 units), the supply of new housing stocks remains relatively in the same range (around 1,500 units). Discussion The actual number of inhabitants / residents in Cluj county is likely much higher than stated in official sources. This is because of the large number of students who study here, occupy homes (mostly rentals), but have their domicile in other counties in the country, and may not be counted in the official population. They represent about 15% of the total population of CNMA, which is double the percentage in Bucharest, and which makes the demographic profile of Cluj more similar to that of Iasi than that of Bucharest. In fact, these two cities are considered among the youngest in Europe, precisely because of the high share of students among total residents. For details on housing and population dynamics, see Table 3.1. For all practical purposes, a house corresponds to a household – e.g. one household per house, Compared to previous decades, the number of single-person households in Romania has increased (e.g. youth, unmarried people, single elderly people). The number of housing units needed for the same population with a larger number of households is clearly higher. This also has implications on the size/ type of housing needed – for example, preference of smaller households for smaller units. Cluj is located in a rather picturesque natural area, and is an attractive place to build holiday homes. While there is no data available to substantiate this, it is likely that a lot of these units are only used during the holidays by the owners, and basically remain vacant for the rest of the year. Counting them as part of the overall housing stock could lead to an overestimation of what may be assumed as the “locally available” housing stock. There is a fair amount of speculative activity in the CNMA occurring in the form of real estate investments and acquisitions, motivated by the steep price appreciation in recent years (sometimes with double-digit increases from year to year). This includes both Romanian and foreign investors to build or buy homes in the Cluj area, which are not always occupied, but are kept, waiting for a better market context for sale or rent. Similar to the holiday homes, these units are largely locked out of the housing market, even though they are included in the official count of the housing stock. Finally, the increasingly dynamic tourist market at the local level, especially in the context of festival-type events (e.g. Untold), but also the growth of business tourism, has increased the appetite for investments in transforming housing units into short-term rentals, e.g. through Airbnb network, which can have negative implications on the longer-term rental stock for the local residents. It is unclear if or how this is factored into the data on housing stock. 31 Housing Finance Key takeaways Mortgages still have a low penetration among individual borrowers. Prices under-declared in cash transactions. Outstanding mortgage debt Data from National bank of Romania (NBR) show that in early 2019, the population had a total debt of about RON 160.7 billion , up 7% from the previous year. This increase was attributed to the increase in bank lending, especially mortgage lending. Real estate lending to the population has continued the upward trend in recent years. At the end of September 2019, it was valued at about RON 90 billion and represented 67% of the volume of total credit exposures in the sector, according to the central bank. The value of outstanding residential loans has also steadily increased over the past few years, from slightly above EUR 5 billion in 2008 to EUR 17 billion in 2019.33 Mortgage terms The new Regulation (No. 6/2018) states that the maximum debt-to-income (DTI) ratio is 40% for consumer credit and also many mortgages. For a first-time home buyer of a primary home (to occupy), the DTI is 45%. The maximum DTI for foreign currency loans is 20%.34 Base interest rates on RON mortgages charged by the ten largest banks in the local market range between 4.51% and 7.8%, plus additional costs and commissions. Loan terms can vary from 15-30 years and have fixed interest rates. Down payments can vary between 15-40% of the property value. Loans are offered in both RON and foreign currency, but the terms for the latter are relatively more stringent – lower debt-to- income ratio, lower LTV, higher interest rate, and so on. Interest rates Below are some illustrative interest rates from the beginning of 2020:35 - CEC Bank, the largest state-owned bank of Romania, charged 4.51% interest on the basic mortgage product, which is lowest interest rate in the market. The interest rate includes a fixed bank margin of 2.15% plus the Consumer Credit Reference Index (IRCC)36 benchmark which was 2.36% for the first quarter of 2020. 33 https://www.statista.com/statistics/1187784/romania-value-of-outstanding-residential-loans/#statisticContainer 34 https://home.kpmg/ro/en/home/insights/2019/01/debt-to-income-ratio-loans-2019-restricted.html 35 Source: https://www.zf.ro/banci-si-asigurari/vrea-isi-ia-apartament-2020-dobanzi-practica-bancile-top-10-creditele-ipotecare- lei-ianuarie-2020-cec-bank-conduce-topul-cea-mica-dobanda-4-51-polul-opus-unicredit-7-8-18779154 36 The National Bank of Romania (NBR) replaced the ROBOR (Romania Interbank Offer Rate) with the IRCC in 2019. The IRCC (consumer credit reference index) is a benchmark interest rate index that is updated quarterly. The interest rate decreased from 2.66% in Q4 2019 to 2.36% in Q1 January.) 32 - OTP Bank Romania, the local subsidiary of the largest banking group in Hungary, had the second lowest interest rate of 5.48%, that included of IRCC plus a fixed margin of 3.12%. In the case of a mortgage loan, the margin can increase to 5.42%, which would bring the interest rate to 7.78%. - Banca Transilvania, the largest bank in Romania in terms of its assets, has an interest rate of 5.61% on standard variable interest loans, representing IRCC + 3.25% margin. - BCR, part of the Austrian group Erste and the second largest bank on the local market in terms of assets ranks fourth, offering credit under its My house program. The interest rate is 5.66%, which is IRCC + 3.3% margin. - Alpha Bank, the local subsidiary of one of the largest Greek banking groups, has a 5.81% interest rate, of which the bank's fixed margin is 3.45%. - Raiffeisen Bank offers the Casa Ta mortgage loan with an interest rate of 5.86%, of which the bank's margin is 3.5%. - Garanti BBVA, the tenth largest bank in Romania, charges an interest of 6.05% that includes a margin is 3.69%. - BRD-Societe Generale, the local subsidiary of the French group, has an interest rate of 6.13%, with a fixed margin of 3.77%. - ING Bank and UniCredit Bank, with interest rates of 6.61% and 7.8%, respectively. Most banks offer preferential interest rates to clients under specific lending conditions and/ or when they are willing to purchase additional products from the bank. The interest may also vary by the size of the loan – below are some examples of preferential rates, according to data aggregated by ZF on the Finzoom platform37 based on a loan of RON 220,000 for a period of 30 years: - Card mortgage loan from CEC Bank: interest rate of 4.26% and APR (Annual Percentage Rate) of 4.87% - Standard mortgage loan from CEC Bank: interest rate of 4.51% and APR of 5.13%. - Casa Mea loan from BCR: interest rate of 5.06% and an APR of 5.19% if borrower signs up for direct deposit of salary into a BCR account. - Standard mortgage loan from Banca Transilvania: interest rate of 5.01% and APR of 5.26% if borrower signs up for direct deposit of salary into a Banca Transilvania account. - Owner loan from First Bank (formerly Piraeus Bank): interest rate of 5.11% and APR of 5.27% if borrower signs up for direct deposit of salary into a First Bank account. Noua Casa Program First-time home buyers have access to financing through the Noua Casa program, updated in 2020 and formerly known as the Prima Casa. The maximum loan available through the Noua Casa program is EUR 140,000 for a new or consolidated home (an increase from EUR 70,000 available through Prima Casa) with an 80% loan guarantee, for a home of maximum 120 sq.mt. The home financing is guaranteed by the Finance Ministry at a maximum of 60%, excluding interest, commission and bank fees, and cannot surpass 85% of the home purchasing prices. First-time buyers can also obtain a maximum of EUR 70,000 loan for purchasing other types of homes, with a 50% maximum guarantee, covering a maximum of 95% of the purchase price.38 37 https://www.finzoom.ro/ 38 BRD Noua Casa guidelines. www.brd.ro/persoane-fizice/credite/credite-locuinta/noua-casa. 33 According to information provided by Banca Transilvania, in 2020 Noua Casa loans comprised only 13% of all mortgages obtained through their financial institution. This might be due to the fact that, although loans obtained through Noua Casa require a lower down-payment (minimum 15% for new homes and 5% for any other types of dwellings) and have lower interest rates, there are several restrictions and additional costs that make the process take longer than that of regular loans. Given these constraints, some developers are reluctant to sell homes through the Noua Casa program.39 Prevalence of bank financing The Guide to Real Estate Transactions, published by the City Hall and the Cluj-Napoca Local Council, provides data on the transactions carried out during 2013-2018. As shown in Table 5.1, there has been (i) a steady increase in transactions for houses and apartments, both more than doubling between 2013 and 2018; (ii) a larger share of buyers – nearly a third of the total – financing their purchases with bank loans in 2018 compared to 2013. Some 95% of all transactions of legal entities (companies, institutions) were financed by banks, while 80% of individual transactions used own-source financing (cash-down). Table 5.1 Number of transactions in Cluj-Napoca, 2013-2018 Type of property Financing Total Year Land House Apartments Others Own Bank Total 2013 296 181 2,455 392 2,656 668 3,324 2014 383 363 3,749 1,860 5,517 838 6,355 2015 410 432 4,536 1,629 5,405 1,602 7,007 2016 369 447 4,920 1,641 6,208 1,169 7,377 2017 610 403 5,641 2,118 6,858 1,914 8,772 2018 346 570 5,911 187 6,521 2,176 8,697 Source: data processing from the Real Estate Transactions Guide, 2013-2018 Notably, the average unit price for apartments financed from own sources was EUR 1,330 EUR/sq.mt., 1.4% lower than the average price/sq.mt. for bank-financed apartments (EUR 1,349/sq.mt.). This may be reflective of the common practice of declaring lower transaction values – to reduce closing costs, and as a tax avoidance tactic – which is undetectable in cash transactions. 39 Interview with Banca Transilvania, December 2020. 34 Housing for Lower Income and Vulnerable groups Key takeaways Difficult for lower income and vulnerable groups to access decent housing in Cluj-Napoca – private (market-based) or public (social). Massive shortage in social housing assistance compared to demand. Homelessness and housing informality are growing, and require creative ways of delivering more social and affordable housing. Technical and financial capacity constraints faced by Cluj-Napoca City Hall in the housing sector. Informal Housing In comparison with other mid-sized Romanian cities that have a population above 200,000 inhabitants as well with the national average, a lower percentage of Cluj-Napoca’s residents live in disadvantaged areas. According to the 2011 census, 21% of the population of Cluj-Napoca lived in disadvantaged areas, and over 10% of the population either lacked electricity, or faced overcrowding or housing insecurity. According to the Atlas of Urban Marginalized Areas in Romania40, disadvantaged urban areas are areas where one or two of the following criteria exist: 1) Poor access to housing, 2) Low levels of formal employment and 3) Low human capital, while marginalized areas are defined as areas where all three criteria apply. Furthermore, in 2011, 1.12% of the population (3,660 people) lived in marginalized areas, of which 1,296 were children. While 1.12% is lower than the corresponding national figure of 3.2% (percentage of persons living in marginalized areas), it is relatively high when compared with the rest of the municipalities in Romania with a population of more than 200K inhabitants.41 Marginalized urban areas are typically poor areas located inside city borders, with inhabitants that usually have low education levels, large (often extended) families, poor health, low access to stable or adequate employment and poor housing conditions.42 Some 37% of the population living in marginalized urban areas in Cluj-Napoca self-identify as Roma; this is the highest share of self-declared Roma among all cities in Romania with a population of over 200K inhabitants. Previous World Bank research identifies five urban marginalized areas in Cluj-Napoca, which according to the 2011 census, include 1,040 housing units. As of 2011, 23.8% of these homes were not connected to running drinking water (compared to 6.3% of all marginalized areas at national level), 28.4% did not have proper sewage system (6.9% nationally), and 3.8% lacked access to electricity (0.4% nationally).43 The five marginalized urban areas are represented below according to population size, and are located on Traian 40 TheAtlas of Urban Marginalizes Areas in Romania, World Bank, 2014. 41 Source: Integrated Urban Development Strategy for Cluj- Napoca Metropolitan Area. World Bank. 2021 42Source: Integrated Urban Development Strategy for Cluj- Napoca Metropolitan Area. World Bank. 2021 43 Source: Integrated Urban Development Strategy for Cluj- Napoca Metropolitan Area. World Bank. 2021 35 Street, Stephenson Street, Byron Street, Pata Rat and one in an unnamed location. The typology of these five locations vary: from informal settlements to social housing apartments and individual homes. Figure 6.1 Marginalized urban areas in Cluj-Napoca Source: Integrated Urban Development Strategy for Cluj-Napoca Four of the five areas are located within the city limits of Cluj-Napoca, while the fifth is on the periphery. The four areas located in the city are smaller and better connected to urban services and infrastructure. The fifth area, however, named Pata Rat, is located on the edge of the city, is isolated from the rest of the city and has a larger population than all other four areas combined. Three out of the five marginalized areas include both individual homes and blocks of apartments, with a variety of ownership types, from homeowners, social housing tenants or residents of informal housing. There are informal homes built in four out of the five marginalized urban areas in Cluj-Napoca. 44 The Social and Medical Assistance Department has identified several other marginalized communities on Platanilor Street, Mesterul Manole Street, Muncii Boulevard, as well as a community in Valea Fanetelor (living in abandoned buildings at the periphery of the city), and a small community in the Faget Forest45. The families living in these settlements face housing insecurity, as they do not own the land or the buildings, and have not obtained building permits for the housing they did build, which in turn puts them at risk of being evicted.46 People currently living in informal communities find themselves in this situation due to having been evicted from former public housing or private and public land or due to lack of access to social housing. The Desire Foundation has identified several instances of evictions in Cluj-Napoca since 1990: tenants being evicted from former collective public housing; people evicted from homes built without permits next to social housing units or apartment buildings where other members of their families live; evictions due to degraded public housing units being renovated; evictions from other occupied publicly owned 44 Source: Integrated Urban Development Strategy for Cluj- Napoca Metropolitan Area. World Bank, 2021 45 Information provided by the Social and Medical Assistance Department 46 Source: Housing in Cluj-Napoca, Enikő Vincze et al, 2020 36 buildings or land; and evictions due to restitutions.47 The Foundation highlighted several patterns, conditions and potential underlying reasons: - Houses lack utilities such as gas or electricity, running water or access to a toilet, and cannot be connected to infrastructure as they also lack building permits. Heating sources are also problematic; as a result, people use whatever they can find, such as plastic, textiles or old furniture. - Residents of informal communities lack identification cards or birth certificates, and it is impossible to obtain them due to lack of proof of address. This in turn causes difficulties when it comes to registering children in school, getting employment, or signing up for utilities. - People living in informal areas are stigmatized and which leads to further difficulties in finding employment, proper housing or educational services for the children. 48 - Overcrowding is a big problem, which can be particularly challenging for families where conflict and tension occur on a regular basis. - Households that decide to build informal / temporary homes often have no other options, lacking access to social housing or other types of support. These temporary housing solutions become permanent over extended periods of time, the situation propagating further when children become adults. Pata Rat settlement The largest and most concentrated informal settlement in Cluj-Napoca is located in Pata Rat, with four distinct communities: (1) Cantonului, (2) Dallas, (3) Verde colony and (4) the community living on the landfill.49 Data collected in 2012 by UNDP and Babes-Bolyai University states that most people living in Pata Rat self-identify as Roma, as shown in Figure 6.2. Figure 6.2 Ethnic distribution within Pata Rat Source: Research Report, Participatory Assessment of the Social Situation of the Pata Rat and Cantonului Area, Cluj- Napoca, December 2012 47 Source: Housing in Cluj-Napoca, Enikő Vincze et al, 2020 48 Source: Housing in Cluj-Napoca, Enikő Vincze et al, 2020 49 Information provided by the Social and Medical Assistance Department of Cluj-Napoca 37 According to the 2011 census, 1% of the Cluj-Napoca’s residents (3,273 persons) self-identify as Roma. At the same time, most of the 1,500 persons (approximately 300 families) living in the Pata Rat community identify as Roma. Among the challenges the Roma community faces are reduced access to proper housing, to quality education, employment, infrastructure, public participation as well as adequate health care. Due to the lack of housing, many people in the community have temporary ID cards that cannot be renewed, which in turn reduces their access to social and medical care or jobs. A large number of the households living in Pata Rat are evictees of formerly nationalized (rental) housing in Cluj-Napoca who were not offered appropriate housing or compensation. Other households that live in the settlement have migrated from nearby villages. Given the close proximity to the heavily polluted landfill in the area, the informal settlements in Pata Rat cannot be connected to public utilities and infrastructure. With the exception of the 40 households (out of the 76 families evicted from nationalized housing in Cluj-Napoca) that benefitted from the 40 housing units built by the local government, much of the housing is informal. About half of the houses are improvised barracks made from materials such as plastic and timber; almost 20% are made of mud or brick, without foundations; and the other 30% are either wooden homes built by an NGO, or trailers, or plastic containers. 43% of the houses have no form of sanitation, 41% have access to shared toilets, and only 24% have electricity.50 Besides the poor living conditions and lack of employment and education opportunities, the individuals living in the Pata Rat community also face health risks, due to the toxic environment of the landfill they live and work in. Moreover, as the area is perceived as a landfill, waste here accumulates not only from the inhabitants of the community, but also from outsiders who bring their garbage here to trash. Several institutions have taken on addressing the housing challenges of the community living in Pata Rat. The UDNP shared its experience on developing an inclusive local development process, and bringing together local authorities and civil society into an integrated participatory planning process aimed at sustainable and inclusive housing in Cluj-Napoca, and eventually the entire Metropolitan Area.51 The Intercommunity Development Association CNMA (ADI ZMC) has done so through two separate projects. The first is the Pata Cluj, which has provided 35 social housing units across CNMA area to eligible households from Pata Rat. Through a participatory methodology, they allocated 12 units in apartment buildings built in Apahida, and 23 units purchased in Cluj-Napoca and the metropolitan area. The 35 relocated families have been receiving support to maintain the units, as well as social and psychological counseling to facilitate a successful transition to the new neighborhoods. The success of Pata Cluj suggests that at least one possible solution for the residents of Pata Rat is to offer them housing in CNMA, together with some social support, to ensure integration and access to education and jobs.52 The second project developed by ADI ZMC for the Pata Rat community aims to purchase a minimum of 30 homes as social housing for families that would be relocated throughout the metropolitan area. The 50 Source: Coordinated interventions for combating marginalization and for inclusive development targeting inclusively but not exclusively the vulnerable Roma through de-segregation and resettlement of the Pata Rat Area using the leverage of EStF. Draft Outline to the De-segregation and Social Inclusion Action Plan for Pata Rat 2014-2023. 51 Preparatory Phase for Model Project: making the most of EU Fund for Sustainable Housing and Inclusion of disadvantaged Roma (explicitly but not exclusively targeted) in Cluj Metropolitan Area 52 Information provided by the Intercommunity Development Association Cluj Metropolitan Area (ADI ZMC), December 2020. 38 selected families will also receive relocation services including support with the moving process, registering for utilities, renewing their ID cards, transferring their children to schools in the new neighborhoods, as well counseling for integrating in the new community. Additionally, the project will facilitate social inclusion services such as psychological and social support, education, health and urban transport services to 1,550 people who are at risk of social exclusion and poverty, and informal educational support to 800 primary school children, aimed at improving skills, increase school attendance and participation and reduce the dropout rate53. While some 65 families did and will benefit from housing support through the projects implemented by ADI ZMC, there are a total of 200 to 300 families living in the Pata Rat community. According to Adrian Raulea, Program Manager ADI ZMC, each situation and family needs will need to be addressed on a case by case basis. Some families need specific social services, while others may be better suited for relocation to rural areas. Impact of the Covid-19 pandemic According to UNICEF monitoring reports on the impacts of the COVID-19 pandemic in Romania, the categories most at risk and affected by the pandemic were children living in poverty, children belonging to the Roma community, as well children whose parents are abroad and those with disabilities. In Pata Rat in particular, the closing of nurseries, kindergartens and schools had a major impact on the families from the community. Lack of access to education, as well as lack of food, as children were receiving one meal and snacks while in school were particularly challenging. Many families also lost their sources of income, especially since people from the community work in the informal sector, and did not receive any compensation during the pandemic. Qualitative research conducted by the World Bank during the 2020 emergency and alert period in vulnerable and non-vulnerable communities alike, including Roma communities, showed several significant differences in community response or impact of the pandemic on certain groups. Since the first round of research (conducted during the state of emergency), an increasing number of people have stated that compliance with hygiene measures to prevent COVID-19 is a challenge, in particular in the vulnerable communities, for Roma and non-Roma alike. Once the state of emergency ended, a large part of the population became more relaxed or no longer complied with hygiene measures. According to Roma experts, NGOs and institutional representatives, when it comes to poor and Roma communities, this is largely attributed to the lack of access to infrastructure, little/no financial resources for purchasing hygiene products, as well as lack of awareness/ trust.54 Members of the Roma communities received unclear messages regarding the pandemic, which resulted in lack of trust and many doubting the existence of the COVID-19 crisis. Lack of information and engagement with the community pose major threats when it comes to public health in vulnerable communities. In order to address informal housing and in particular, the situation of the families living in Pata Rat, the county is in the process of establishing a working group with representatives from Babes-Bolyai University, Cluj County and the Social and Medical Assistance Department. 53 Source: Integrated Urban Development Strategy for Cluj- Napoca Metropolitan Area. World Bank, 2021 54 Source: Integrated Urban Development Strategy for Cluj- Napoca Metropolitan Area. World Bank, 2021 39 Public sector housing assistance Public housing The lack of public social housing options in Cluj-Napoca is contributing to increased overcrowding, lack of hygiene, inadequate infrastructure, insecure tenure, and even homelessness.55 At national level, the number of publicly-owned housing units has been declining since 1990, mostly due to regulations requiring privatization of the public housing stock (Law no 61/1999, Law no. 85/1992, Law no. 112/1995). As a share of the total housing stock, publicly-owned housing units went from 30% in 1990 to 1.78% in 2004.56 Cluj-Napoca displays a similar trend, as shown in Figure 6.3 below. As of 2021, Cluj-Napoca Municipality owns a total of 1,348 housing units, from which 68 are youth housing units, 615 social housing units, 604 state funded housing (housing stock from before 1990), 31 units for public administration employees, 29 emergency/ necessity housing units.57 Figure 6.3 Housing stock versus public housing in Cluj-Napoca (1990-2004) 140000 121808 120000 113241 113495 113594 113846 113936 114038 115232 115464 116026 116884 100000 80000 60000 36542 40000 20000 15853 8445 4458 3390 2612 2313 2867 2281 2271 2092 0 1990 1993 1996 1997 1998 1999 2000 2001 2002 2003 2004 Total amount of housing units Total amount of publicly-owned housing units Source: INS & Housing in Cluj-Napoca, Eniko Vincze 55 Source: Housing in Cluj-Napoca, Enikő Vincze et al, 2020 56 Source: Cluj-Napoca City Hall, 2021 57 Data provided by the Cluj-Napoca Municipality 40 Figure 6.4 Publicly-funded housing units completed in Cluj-Napoca (1990-2019) 1600 1400 1200 1000 800 600 400 200 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 source: INS & Housing in Cluj-Napoca, Eniko Vincze As stated by Housing Law 114/1996 and Law 152/1998, the housing types mentioned above are defined as follows: - Youth Housing represents housing units built through the National Housing Association, available for rent by young individuals, between 18 and 35 years old. - Social Housing are units with subsidized lease, allocated to individuals or families earning less than the national average income, who are unable to access housing on the open market. Vacant social housing can become emergency housing, if needed. - Housing for public administration employees are dwellings for public servants , or senior employees of certain institutions or businesses. These units are allocated as part of an employment contract. - Emergency/ necessity housing is housing that would typically be used for providing temporary accommodation to occupants of housing units undergoing rehabilitation, to victims of natural disasters, or people whose homes have been demolished to permit the construction of public utilities. Youth housing According to Romanian legislation (Housing Law 2020/ Youth Housing Law 1998), youth under 35 is recognized as a social category at risk when it comes to securing housing through purchase or rent. As of 2019, there were a total of 66,922 young people, between the ages of 18 and 35, living in Cluj-Napoca.58 However, there is no data available on the percentage of youth that are living with their families or renting rooms or apartments in the city. In 2020, Cluj-Napoca had 174 youth housing units, down from 282 in 2018 (108 units were sold in 2018-2020). The law states that after one year of renting a unit, the tenants are allowed to purchase it. This further diminishes the stock, which could explain the fact that the number of housing units allocated to eligible youth has diminished from 15 in 2015 to 0 in 2020, as seen in the table below. 58 Source: Housing in Cluj-Napoca, Enikő Vincze et al, 2020 41 Table 6.1 Youth Housing in Cluj-Napoca between 2015 and 2020 2015 2016 2017 2018 2019 2020 Total number of applications 99 74 67 52 57 53 Eligible applications 51 38 41 32 30 36 Ineligible applications 48 36 26 20 27 17 Number of youth housing units allocated 15 8 8 1 1 0 Percentage of allocations 29.41% 21.05% 19.51% 3.13% 3.33% 0.00% Source: Cluj-Napoca City Hall Social housing A large number of the social housing units owned by the City Hall are located in the center of the city, but in buildings that are degraded, where the high rehabilitation costs are not justifiable, and repairs usually occur only when tenants notify the municipality. In some cases, the court has forced the City Hall to restitute social housing units. This further diminishes the already low number of units available. As a result, out of the total public housing stock, 475 housing units are available for social housing applicants. On paper, rental contracts for public social housing are usually valid for 5 years, so long as the income of the beneficiary household stays below the average national income.59 However, in practice, tenants continue to stay for extended periods of time, and often the turnover only happens if the occupant is deceased or evicted. According to Cluj-Napoca Municipality, on average, only about 12-15 social housing units become available annually for eligible applicants. This is extremely low compared to the number of applicants. From 2015 to 2021, Cluj-Napoca City Hall received an average of 384 applications per year, with approximately 70% of them being declared eligible. Out of the total number of eligible applications however, the City Hall was only able to allocate units only to 7.55% of applicants in 2015, and less than 2% in 2020. Units typically become available with the sitting tenant being evicted or deceased. In the last 10 years, 218 households have benefited from social housing. Some 215 households (tenants) left social housing; among them, 68 had court sentences penalizing them for non-compliance with contractual terms.60 In 2021, only two units were made available due to evictions. Three more units were procured by the City Hall through public tenders, and these were reportedly very expensive.61 Table 6.2 Social Housing applications and allocations, 2015-2021 2015 2016 2017 2018 2019 2020 2021 Total # applications 387 468 384 376 375 364 336 # Eligible applications 265 276 253 365 243 264 pending # Ineligible applications 122 192 131 111 132 100 # social housing units allocated 20 17 10 10 6 5 % allocations 7.55% 6.16% 3.95% 2.74% 2.47% 1.89% Source: Cluj-Napoca City Hall 59Source: Housing in Cluj-Napoca, Enikő Vincze et al, 2020 60 Data from Cluj-Napoca City Hall, 2021. 61Data provided by the Cluj-Napoca City Hall data & Housing in Cluj-Napoca, Enikő Vincze, 2020 42 Even so, the number of social housing applications does not truly reflect the number of households in need of housing assistance. First, it is not clear if all eligible beneficiaries are even aware of this program. Second, for many others who are aware and wish to apply, the application procedure can be tedious and expensive. Third, while efforts have been made by the local authorities to streamline the eligibility criteria – such as eliminating the proof of stable income as a guarantee to pay utilities and rent – the system still excludes many very vulnerable households who have ever illegally occupied publicly-owned buildings or land.62 The situation is further exacerbated by the fact that social housing and marginalized groups alike are ill- perceived by many Romanians. Low-income families are not easily accepted as neighbors, as they are seen as disorderly and causing trouble. This is even more problematic if the family belongs to the Roma community. Rental vouchers Starting in 2018, the Municipality introduced a new rental voucher program, that would provide partial or full amount of the rent to landlords who rent their properties to low-income individuals or households. The subsidy amount depends on the income of the eligible renter household, and the maximum amount is RON 1,400 (approx. EUR 270) per month for a period of 3 years. Between 2018 and 2019, Cluj-Napoca City Hall has provided 127 rental vouchers for persons and families at risk of marginalization or social exclusion.63 In 2020 alone, the Social and Medical Assistance Department had 55 beneficiaries receiving rental vouchers, while 19 others are pending approval. While vouchers are a helpful instrument to facilitate access to housing for lower income households, they only work when the supply of housing in the market is adequate at the price point of the voucher. And while on paper the supply in Cluj-Napoca may appear adequate, it is not immediately clear whether there are sufficient number of units available at that particular price point. Besides, in the absence of anti- discrimination laws, and in an environment where verbal arrangements are preferred over legal rental “contracts”, and where speculation and vacancy may be preferred over leasing out a property, it may be difficult for eligible households to actually find a suitable house. This was evident from interviews where some stakeholders expressed their preference to rent from the state (public housing) as opposed to receiving rental vouchers, because of the resistance they faced from potential landlords in accepting their offers. This appears to be particularly problematic for Roma and other minority households. Heating assistance Another related instrument offered by the Cluj-Napoca municipality are vouchers to cover the cost of heating, independent of heating source. People who own housing are not eligible for this type of support, and the total amount offered per year varies from RON 1082 for single persons or 786 Ron/ person in a family connected to the district heating system, or RON 750/person if the heating source is natural gas, electricity or solid fuels. Homelessness According to information provided by the Cluj-Napoca Social and Medical Assistance Department, there are two locations available for homeless persons in Cluj-Napoca: Social Emergency Center, which can host up to 114 people, and the Temporary Housing Center. During the autumn of 2020, 50% of the available 62 Source: Housing in Cluj-Napoca, Enikő Vincze et al, 2020 63 Source: Cluj-Napoca City Hall Activity Report, 2019 43 beds were occupied, however these numbers are likely to change during the winter when the number of people in need of temporary shelter increases significantly. During the cold season, 30 additional beds are available for the homeless at the shelters provided by the Romanian Christian Union and Prison Fellowships. According to the Social and Medical Department, Cluj-Napoca City Hall does not own any housing shelters due to the high costs needed to maintain them. Local government constraints The Municipality of Cluj-Napoca has been unable to address the huge demand-supply gap in social housing. The number of new units being added to the inventory steadily declining (since 1990, with a small exception in 2011-2015), with no new units constructed since 2015.64 In the meanwhile, they are legally mandated to sell off the ANL units to sitting tenants, as mentioned above. The municipality has made several attempts to build social housing but has been overcome by hurdles related to either the land or construction. Cluj-Napoca City Hall does not own any large land parcel suitable for housing construction, and in engaging with developers, it has faced other sorts of challenges, such as the apartment building on Ghimesului street that was meant to be finished in 2019 but was not completed (as of December 2020), despite the municipality imposing penalties.65 There are no detailed public data on the budget allocated to housing by Cluj-Napoca City Hall in the last decade. In accordance with the classifications and rules of the budget chapters, the budget dedicated to housing is not highlighted in the chapter “Housing, services and public development”. Thus, there are no data on the budgets allocated for increasing the social housing stock, or renovations / repairs / administration of the existing stock, or other types of costs related to the housing stock owned / managed by Cluj-Napoca City Hall. Table 6.3 - Budget allocated for housing and public development in Cluj-Napoca municipality (2010-2020) Budget for housing / public development Year Total revenue RON % of total budget 2020 1,126,885,545 139,726,270 12.40 2019 924,762,400 80,257,239 8.68 2018 704,448,637 67,797,377 9.62 2017 934,348,618 68,831,178 7.37 2016 934,348,618 81,473,969 8.72 2015 832,301,469 81,473,969 9.79 2014 731,796,050 65,858,883 9.00 2013 708,760,161 44,738,006 6.31 2012 647,195,785 35,959,800 5.56 2011 642,735,997 55,487,242 8.63 2010 590,752,220 90,010,364 15.24 Source: MDPWA / The situation regarding local budget revenue and expenditures by administrative-territorial units (http://www.dpfbl.mdrap.ro/sit_ven_si_chelt_uat.html) 64 Source: Housing in Cluj-Napoca, Enikő Vincze et al, 2020 65 Interview with Vice Mayor of Cluj-Napoca, November 2020. 44 Another challenge is the fragmented and uncoordinated oversight of the housing sector at the local level. Housing, more generally, is overseen by several disparate departments in the City Hall. Furthermore, there is no comprehensive data monitoring system for housing; even the data on social housing not digitized. The situation could be improved if one department were made to oversee all issues that deal with housing, in particular, social housing, marginalized groups and informality. A social inclusion department was proposed through the Development Strategy of Cluj-Napoca 2014-2020 to coordinate the social inclusion measures now managed by the Social and Medical Assistance Department, Heritage, Urban Planning, Local Police or School Education. However, this Department has not yet been created.66 66 Source: Local commitment for Roma inclusion, Local level study Cluj-Napoca, Enikő Vincze, 2016. 45 House Prices Key takeaways Some of the highest housing costs in Cluj-Napoca compared to other cities in Romania and in Europe. Significantly lower house prices (for rental and ownership) in the peripheries of Cluj-Napoca. European context Average purchase price Figure 7.1 shows the average price per square meter for an apartment in the main European cities in the first half of 2019. Cluj-Napoca recorded an average of EUR 1,690/ sq.mt. Figure 7.1 Average price per square meter for an apartment in the main European cities in the first half of 2019 Source: Romanian residential market, quarter 4, published by analizeimobiliare.ro and imobiliare.ro; data processing https://www.statista.com/statistics/1052000/cost-of-apartments-in-europe-by-city/; and own calculations. Average rent Figure 7.2 shows the average monthly rent for a two-room (1-bedroom) apartment in 2018 in several major European cities. Cluj-Napoca recorded EUR 420 (utilities included). 46 Figure 7.2 Average monthly rent for a two-room apartment (with utilities included) in major European cities in 2018 Source: Romanian residential market, quarter 4, published by analizeimobiliare.ro and imobiliare.ro; data processing https://www.statista.com/statistics/1052000/cost-of-apartments-in-europe-by-city; and own calculations National context Figure 7.3 shows the annual change of average prices per usable square meter of apartments in Romania between 2014 and 2020. After rising to its peak in 2016-17, the average price showed a steady decline until 2018, when it stabilized, and then increased by about 6% between the second quarter of 2019 and the first quarter of 2020. Figure 7.3 Annual change of average prices per usable square meter for apartments in Romania Source: data processing https://www.analizeimobiliare.ro/wp-content/uploads/ 2019/11 / Raport_Q3_2019eng.pdf According to imobiliare.ro, in the first quarter of 2020, Cluj-Napoca was the most expensive city in Romania – both for purchase (EUR 1,760/ sq.mt.) and for rent (EUR 410/ month for a 2-room apartment) - see Figures 7.4 and 7.5, respectively. As suggested by the earlier figures from 2018, the prices have increased faster in Cluj-Napoca than in Bucharest over the last few years, such that in 2020, Cluj- Napoca’s average house prices and rents exceeded those in Bucharest. 47 Figure 7.4 Average prices per usable sq.mt. for apartments in the main cities in Romania in Q1 2020 Source: data processing https://www.analizeimobiliare.ro/wp-content/uploads/ 2019/11 / Raport_Q3_2019eng.pdf Figure 7.5 Values of average monthly rents for a 2-room apartment built between 1980-2000 in Q1 2020 Source: data processing https://www.analizeimobiliare.ro/wp-content/uploads/ 2019/11 / Raport_Q3_2019eng.pdf Cluj-Napoca Metropolitan Area In CNMA, the second half of 2019 saw a fairly large variation in the average price per square meter for apartments: Baciu commune recorded an average price of over EUR 1,000/sq.mt. (above average values in municipalities such as Galați or Ploiești); the communes of Apahida and Florești registered similar values- slightly below EUR 900/sq.mt.; Gilău, which is further out, registered values less than half that of Cluj-Napoca – see Figure 7.6. 48 Figure 7.6 Sale price of residential properties per sq.mt. (houses and apartments) Source: data processing https://blog.napocaimobiliare.ro/2019/10/04/cartierul-sopor-cluj-napoca-oportunitati- pentru-investitii/ and analizeimobiliare.ro Figure 7.7 presents the average prices per square meter of housing in the city of Cluj-Napoca and the communes of Baciu and Florești, by types of apartments (1-bedroom (BR), 2-BR, etc.). Overall, between 2013 and 2019, there has been an increase of 66% in the average house price. By types of apartments, the highest increase was registered in 1BR apartments – from EUR 922/sq.mt. in 2013 to EUR 1,557/sq.mt. in 2019, an increase of almost 69%. This was followed by studios (68% increase), 2BR apartments (66%), and 3BR+ apartments (64%). Figure 7.7 Evolution of average sale prices per sq.mt. by type of apartments (2013–2019): Cluj-Napoca, Baciu and Florești Source: Integrated Urban Development Strategy for Cluj- Napoca Metropolitan Area. World Bank, 2021 49 Tables 7.1 and 7.2 present the change in house sale price per square meter, by type of apartment, and by the floor level, in Cluj-Napoca, Baciu, and Florești communes. Table 7.1 Annual change in house price per sq.mt. by apartment type (2013-2019): Cluj-Napoca, Baciu and Florești Studios 1BR apt. 2BR apt. 3BR+ ap. 2013 (baseline) 0% 0% 0% 0% 2014 1% 1% -1% 5% 2015 7% 9% 10% 5% 2016 13% 11% 11% 8% 2017 14% 10% 7% 12% 2018 14% 12% 12% 12% 2019 2% 4% 8% 9% Source:: Integrated Urban Development Strategy for Cluj- Napoca Metropolitan Area. World Bank, 2021 Table 7.2 Change in average sale prices (2013-2019), by type of apartment and floor level (story): Cluj-Napoca, Baciu commune, and Florești commune Ground floor / top floor average selling Intermediate floor average selling price price EUR EUR / sq.mt. EUR EUR / sq.mt. Studio 2013 S2 €30,130 €942 €33,958 €977 2019 S2 €51,213 ( +69.9%) €1,605 €51,352 (+51.2%) €1,559 1BR apartment 2013 S2 €46,308 €881 €48,665 €937 2019 S2 €76,773 ( +65.8%) €1,520 €79,375 ( +63.1%) €1,559 2BR apartment 2013 S2 €63,814 €895 €67,179 €928 2019 S2 €103,296 ( +61.9%) €1,487 €109,258 ( +62.6%) €1,546 3BR+ apartment 2013 S2 €98,828 €892 €87,389 €919 2019 S2 €160,116 ( +62.0%) €1,521 €136,417 ( +56.1%) €1,398 Source: : Integrated Urban Development Strategy for Cluj- Napoca Metropolitan Area. World Bank, 2021 The residential neighborhoods of Cluj-Napoca may be classified as follows: - Central area - the central nucleus of the city, characterized by high architectural and historical value, and mixed-use developments (cultural, financial, commercial, administrative and recreational). - Established residential neighborhoods or large complexes: (i) those built during the years 1960-1980 – e.g. Grigorescu and Gheorghieni, with a lower density and varied height (from G+4 to G+10) but lesser public/green spaces per the policies of that period (which later suffered from congestion); and (ii) those built after 1980 – e.g. Mănăștur (with a population of approximately 160,000 inhabitants) and Marasti, with high density housing and mostly tall buildings (G+8 to G+10). - Residential areas developed over time, with a mixed character (predominantly individual housing, interspersed with some multifamily buildings), such as Gruia and Andrei Mureșanu neighborhoods, and Între Lacuri or Dâmbul Rotund. - Recovered or urban mixed-use/ industrial areas that were developed more recently, often without adequate access to urban facilities e.g. Bună Ziua, Europa, Făget, Borhanci, Iris or Someșeni. 50 In Cluj-Napoca, the difference between the old and new stock, in April 2020 was about EUR 80, with average values of EUR 1,882/ sq.mt. for new apartments (a 22% increase since April 2019) and EUR 1,804/ sq.mt. for old apartments (a 14% increase since April 2019), according to the real estate index. ro. Figure 7.8 presents the average house prices per square meter in the different residential neighborhoods. It is interesting to note that the average unit (per sq.mt.) price in some of the older housing stock (pre-2000) is higher than the newer (post-2000) units. This may appear to be counter-intuitive, considering the poor state of maintenance of many of the older buildings. However, in this case, it may be attributed to the fact that the post-2000 units are less spacious, perceived to be not of very good quality, and developed in areas not close to amenities such as schools or parks. The pre-1990 neighborhoods, on the other hand, are relatively better designed with green spaces and easy access to all facilities. Figure 7.8 Average sale prices for pre-2000 and post-2000 apartments, by apartment type: Cluj-Napoca, Baciu and Florești communes (H2 2019) 51 52 Source: own database calculations / own processing Figure 7.9 shows the average monthly rent by neighborhood in the CNMA. The overall average was EUR 250 in 2020, with the most expensive area being Zorilor (EUR 508), and the cheapest being Fanete (EUR 187). Figure 7.9 Average rent (euro / month) in CNMA, by neighborhoods in Q1 2020 Source: own processing, according to the survey data of the 2020 survey 53 New housing developments The distribution of new residential projects seems to suggest a renewed interest in the urban area of the municipality, possibly a reaction to the long hours of commuting and limited access to services (education, health and culture/ leisure). Initially, Florești provided a cheap alternative to live, but as the wages have increased in and around Cluj-Napoca, the demand for better located and better-quality houses has increased. Therefore, unlike in the past, investments in Florești commune appear to be on the decline. With respect to apartment blocks in Cluj-Napoca, the bulk of the new development is taking place in the periphery, where the parcels are larger. The newer developments offer more apartment (300-400), and tend to be cheaper, but are typically deficient in urban infrastructure, schools or public spaces. They include neighborhoods such as Bulgaria, Iris, Hello, Europe, Făget or Borhanci. Apartment blocks in the older, established areas tend to be smaller (with upto 100 apartments) and more expensive (see Figures 7.10 and 7.11). Figure 7.10 New residential developments by number of apartments (completed or under construction in 2019- 2022): Cluj-Napoca, Baciu, and Florești Source: own processing, according to data available on real estate sites 54 Figure 7.11 New residential developments by sale price of apartments (EUR/sq.mt.) completed or under construction (2019-2022): Cluj-Napoca, Baciu and Florești Source: own processing, according to data available on real estate sites Land market According to the City Hall of Cluj-Napoca, in 2018, 346 plots of land were traded, with a total value of EUR 13.3 million. Over 62% of the value of transactions were in Borhanci, Sopor, Mănăştur and Iris neighborhoods; and the most numerous land transactions in neighboring areas, Borhanci, Gheorgheni, Mănăştur and Sopor. In terms of the size of land parcels, the largest number of transactions were for land between 500-1,000 sq.mt, and the highest value transactions were for land over 1,000 sq.mt. However, the most expensively traded land parcels in the 300-500 sq.mt range. With regards to financing, 99% of the value of transactions were done from own sources, not loans from banks. Table 7.3 Average land prices in 2013-2018: Cluj-Napoca municipality, Florești and Baciu communes Average price per sq.mt. 2013 S1 2013 S2 2014 S1 2014 S2 2015 S1 2015 S2 2016 S1 2016 S2 2017 S1 2017 S2 2018 S1 2018 S2 2019 S1 2019 S2 (EUR) Overall 157 133 126 130 130 137 154 172 184 195 210 214 222 247 300 and 500 sq.mt. parcels 262 183 184 192 198 214 219 268 291 303 285 270 306 383 500-1,000 sq.mt. parcels 130 113 105 101 120 145 166 184 203 230 252 257 265 292 > 1,000 sq.mt. parcels 163 138 128 122 120 134 155 166 175 178 181 182 183 191 Source: Own calculations based on sale offers from real estate databases The values for sale registered a small change in 2014 when the average price per square meter decreased by 12%, and then increased until 2019 when it exceeded the 2013 value by 11%. The price change in land between 2013 and 2019 with regards to the size of the parcel is as follows: 55% increase for 300-500 55 sq.mt. parcels; 129% increase for 500-1,000 sq.mt. parcels (most frequently traded size), and of 24% for the parcels larger than 1,000 sq.mt. Figure 7.12 Average land prices, by parcel size in 2013-2018: Cluj-Napoca, Florești and Baciu Source: Own calculations based on offers for sale from real estate databases The price of land varies by location, availability, infrastructure, and degree of urbanization. For example, land in Baciu cost about 1/12th, and that in Iris or Florești is nearly 1/7th that in Cluj-Napoca city center. In areas of high investment interest, such as Mănăștur or Borhanci, the values remain high despite the lack of adequate infrastructure. It is expected that the investments proposed by the City Hall, such as the one in Sopor neighborhood, will increase these values. Figure 7.13 Average selling price of land (EUR/sq.mt.) in Cluj-Napoca, Baciu and Florești communes, in H2 2019 Source: Own processing, according to data available on real estate sites 56 Housing Affordability Key takeaways Both, the cost of living and the cost of real estate are extremely high. Higher remuneration may somewhat compensate for this, but for the vast majority of “average” families with dependents, it is unaffordable to live in Cluj-Napoca. Lower initial housing costs may be driving the rapid growth on urban periphery. No official data unavailable on income distribution, household size, cost of living etc. which makes it difficult to accurately assess housing affordability. Affordability to buy different types of “average price” units in Cluj-Napoca In the affordability calculations below, average house prices in Cluj-Napoca have been extrapolated from Table 7.2: i.e., an average price studio costs EUR 51,213, a 2-room (1BR) unit costs EUR 76,773, a 2- bedroom EUR 103,296, and a 3-bedroom EUR 160,116. For simplicity of calculation, the following are assumed: 5.58% APR (annual percentage rate), 85% LTV (loan-to-value) ratio, and 10% transaction cost (TC). In addition, a maximum debt-to-income (DTI) ratio of 40% is taken into consideration. The monthly loan repayments are then calculated for a 15-year, 20-year, and 30-year mortgage loan, together with the amount required at closing, which includes the down- payment (15%) and the transaction costs (10%) – see table 8.1(a). These repayment values are then worked back to calculate the income requirement of the potential borrower, again using the same three loan terms – see Table 8.1(b). As illustrated, in order to buy the EUR 51,213 studio with a 15-year loan, the borrower must have a gross monthly income of EUR 1,277 or a net monthly income of EUR 894, and savings of at least EUR 12,803 to cover the down-payment and transaction costs. Similarly, an average price 2BR unit in Cluj-Napoca to be purchased with a 15-year loan will require a gross monthly household income of EUR 2,576, or a net income of EUR 1,803, and savings of at least EUR 25,824. 57 Table 8.1(a) Estimated monthly payment for different types of “average” price units based on 15-, 20- and 30-year loan terms Type of Avg price down transacti DP+TC Loan Est monthly loan repayment unit payment on cost amt (@5.58% APR) (DP) (TC) needed 15% 10% 25% 15 yr 20 yr 30 yr EUR EUR EUR EUR EUR EUR EUR EUR Studio 51,213 7,682 5,121 12,803 43,531 (358) (301) (249) 1BR 76,773 11,516 7,677 19,193 65,257 (536) (452) (374) 2BR 103,296 15,494 10,330 25,824 87,802 (721) (608) (503) 3BR 160,116 24,017 16,012 40,029 136,099 (1,118) (942) (780) Table 8.1(b) Net income, gross income, and savings required based on 15-, 20- and 30-year loan terms Type of Avg NET Income needed to qualify GROSS Income needed to qualify Savings unit price for 5.58% interest loan (with (with DTI of 40%), assuming tax needed DTI of 40%) rate of 30% for DP+TC 15 yr 20 yr 30 yr 15 yr 20 yr 30 yr EUR EUR EUR EUR EUR EUR EUR EUR Studio 51,213 894 754 623 1,277 1,076 891 12,803 1BR 76,773 1,340 1,130 935 1,914 1,614 1,335 19,193 2BR 103,296 1,803 1,520 1,257 2,576 2,171 1,796 25,824 3BR 160,116 2,795 2,356 1,949 3,992 3,366 2,784 40,029 Affordability to buy in Cluj-Napoca and surrounding communes This section compares the affordability across the four communes surrounding Cluj-Napoca. Tables 8.2 (a), (b) and (c) present the case for an average 1-bedroom (2-room) apartment unit in Cluj-Napoca and each of the four communes. The average house prices were extrapolated from average price per sq.mt of a 1BR unit (from Table 7.2). Given that 35-55 sq.mt is the most commonly traded house size,67 two sets of calculations are done to illustrate the requirements for the bottom and top end of the range for 1BR units. These calculations also use a debt-to-net income ratio of 40%,and a tax rate of 30% (to convert net income into gross income). 67 https://www.veridio.ro/en/real-estate-transactions-cluj-napoca-2018/ 58 Table 8.2(a) Loan amount needed for “average” price units of most commonly traded size 1-bedroom unit (35 sq.mt and 55 sq.mt) in Cluj-Napoca and the 4 communes avg price range of 1- down payment Transaction cost Loan amount price/m2 BR (15%) (10%) needed EUR 35m2 55m2 35m2 55m2 35m2 55m2 35m2 55m2 unit unit unit unit unit unit unit unit EUR EUR EUR EUR EUR EUR EUR EUR Cluj-Napoca 1,690 59,150 92,950 8,873 13,943 5,915 9,295 50,278 79,008 Baciu 1,075 37,625 59,125 5,644 8,869 3,763 5,913 31,981 50,256 Florești 893 31,255 49,115 4,688 7,367 3,126 4,912 26,567 41,748 Apahida 885 30,975 48,675 4,646 7,301 3,098 4,868 26,329 41,374 Gilau 798 27,930 43,890 4,190 6,584 2,793 4,389 23,741 37,307 Table 8.2(b) Estimated monthly payment and savings needed price of 1-BR Range of estimated monthly payment @ 5.58% APR (EUR) 35m2 55m2 35m2 unit 55m2 unit unit unit EUR EUR 15 yr 20 yr 30 yr 15 yr 20 yr 30 yr Cluj-Napoca 59,150 92,950 (413) (348) (288) (649) (547) (453) Baciu 37,625 59,125 (263) (221) (183) (413) (348) (288) Florești 31,255 49,115 (218) (184) (152) (343) (289) (239) Apahida 30,975 48,675 (216) (182) (151) (340) (286) (237) Gilau 27,930 43,890 (195) (164) (136) (306) (258) (214) Table 8.2(c) Net income, gross income and savings required, based on 15-, 20-, and 30-year loan Net HH income needed to qualify for loan (EUR) @ Gross HH income needed to qualify for loan (EUR) Savings needed 5.58% APR (EUR) @ 5.58% APR (EUR) for DP+TC 35m2 unit 55m2 unit 35m2 unit 55m2 unit 35m2 55m2 unit unit 15 yr 20 yr 30 yr 15 yr 20 yr 30 yr 15 yr 20 yr 30 yr 15 yr 20 yr 30 yr Cluj-Napoca 1,032 870 720 1,622 1,368 1,131 1,475 1,243 1,029 2,318 1,954 1,616 14,788 23,238 Baciu 657 554 458 1,032 870 720 938 791 654 1,474 1,243 1,028 9,406 14,781 Florești 546 460 380 857 723 598 779 657 543 1,225 1,032 854 7,814 12,279 Apahida 541 456 377 850 716 592 772 651 539 1,214 1,023 846 7,744 12,169 Gilau 487 411 340 766 646 534 696 587 486 1,094 923 763 6,983 10,973 As shown, houses in the communes are significantly lower compared to Cluj-Napoca, and accordingly, the income required to qualify for loans to buy these homes is significantly lower. For example, in order to buy a 35 sq.mt unit in Cluj-Napoca with a 15-year bank loan (@5.58% APR, 15% down payment, and 10% transaction cost), one would need an income of atleast EUR 1,475, plus savings of EUR 14,788 for upfront 59 costs. The income requirement could be reduced to EUR 1,029 with a 30-year loan; however, that is about the same as what is needed to buy a 55 sq.mt unit in Gilau under a 15-year loan (EUR 1,094), and also has a much lower upfront costs (EUR 10,973). This may explain why many people in recent years opted to move to the surrounding communes. It is also important to note that these calculations assume that there is no other debt, and that the entire 40% of the DTI cap is being used towards the housing loan. As such, this is a very generous scenario, considering that the general norm for housing affordability is a 25-30% housing expenditure-to-income ratio. Overlaying these income requirements with the average income figures presented in Table 2.1 , it appears that most people earning less than the average (EUR 1,773/ month - gross) will not be also to afford anything in the market, and even those around the average cannot afford nothing more than a 35 sq.mt. ‘average’ price unit in Cluj-Napoca. Such a unit may work for young professionals, or couples without children, but is unlikely to be suitable for larger households or households with children, thus pushing them to less desired options either in lower quality housing or into the city periphery or suburbs. Cost of living and Shelter poverty The affordability picture becomes considerably worse when taking into account the household characteristics and the cost of living. This is a more nuanced way to assess affordability, and is based on the residual income method (RIM). The RIM measures how much money is available for housing expenses after other essential expenditures have been taken into account (as measured by a defined non-housing ‘budget standard’68). In other words, if there is an insufficient amount of money left for housing expenses after meeting this budget standard, a household has an affordability problem – se Box 8.1. The RIM thus provides a more precise and nuanced instrument for assessing housing affordability problems. Box 8.1 Unpacking the Residual Income Method The table below provides a simplified comparison of EIR and RIM. Both Household A and Household B have annual incomes of USD 40,000. If an EIR of 30 percent is used, Household A has USD 12,000 to spend on housing. But if RIM is used and the budget standard for that household type (Household B) is USD 30,000, then they actually only have USD 10,000 available for housing expenses without forgoing other basic needs. Simplified comparison of ratio and residual affordability measures: Further, consider two households of different sizes with comparable incomes. The large household would have higher non-shelter expenses than the small household in order to achieve a comparable material quality of life. This implies that the larger household will be able to afford less for housing than the small household even though they have the same income. 68A budget standard is a list of goods and services that a family of a specified size and composition would need to live at a designated level of well-being, together with the costs of those goods and services. 60 Now compare two households of the same size and composition, but with different incomes. Both would need to spend about the same amount to achieve a comparable standard of living for non-shelter items. The higher income household could afford to spend more for housing, in absolute terms as well as a percentage of income. Source: Stone, Michael, Terry Burke, and Liss Ralston. 2011. “The Residual Income Method: A New Lens on Housing Affordability and Market Behaviour.” AHURI Final Report No.176. Melbourne: Australian Housing and Urban Resear ch Institute Limited. Since an official budget standard or cost of living is not available for Cluj, a proxy has been used for these calculations: the cost of living indicator for Cluj-Napoca on Numbeo.com – see Annex 2. The input variables for expenses were kept at a very modest level, to arrive at a basic minimum cost of living for non-housing expenses that is more nuanced than a blanket ratio that does not factor in the household size (and their basic non-housing expenses). Further, due to unavailability of the household income distribution for Cluj-Napoca, several income thresholds have been used to calculate the amount different types of households can “afford” to spend on housing after paying for basic minimum non-housing expenses. Rather than calculating affordability at different points of the real income distribution, some random income levels are considered: e.g. those earning the “average income”, EUR 2,000, EUR 3,000 and so on, to work back to what they can afford to spend on housing without compromising on their non-housing essential expenses. This was done for 5 different household compositions, as shown in Table 8.3. One aim of the exercise is to illustrate the difference in affordability by household income and by HH composition, but also to ultimately assert the importance of collecting this data at the local level. As can be seen in the Table 8.3, - A single person household earning the “average Income”, after paying for other basic expenses (assuming a very modest lifestyle), has about EUR 300 left to pay for housing. In reality, if he or she spends any more on housing, it means they are witnessing shelter-induced poverty, i.e. be cutting back on other necessary expenses to pay for housing. So what can one get for EUR300? As shown in the earlier sections, it is barely enough to cover rent on a studio in Cluj-Napoca, let alone qualify for a mortgage buy a house of any size. - Even young families (with children) with two “average incomes” cannot afford anything for housing (based on house prices presented in previous section) after covering their other costs. For couples with school-age children, housing in Cluj-Napoca is not affordable unless the gross HH income exceeds EUR 3,000. - On the other hand, a household with two earners without any children/ dependents is the best off in this first group of “average income earners”. This suggests, in addition to more effectively targeting people in the lower income groups, there is also a need to prioritize assistance to young people with incomes below EUR 1,000, and young families with incomes below EUR 2,500. 61 Table 8.3 Housing affordability based on household size and cost of living Size of HH "average GROSS Non- EUR remaining for income" HH housing housing earners income cost of living (*) # persons # persons EUR EUR EUR % income Assuming “Average income” = EUR 886/earner Single adult only 1 1 886 586 300 34% Couple only 2 2 1,771 939 832 47% Couple with infant 3 2 1,771 1,226 545 31% Couple with infant and 1 child in kindergarten 4 2 1,771 1,868 -97 -5% (KG) Couple with 1 child in KG and 1 in school 4 2 1,771 2,134 -363 -20% HH Income = EUR 2,000 (~25th income percentile**) Single adult only 1 2,000 586 1,414 71% Couple only 2 2,000 939 1,061 53% Couple with infant 3 2,000 1,226 774 39% Couple with infant and 1 child in KG 4 2,000 1,868 132 7% Couple with 1 child in KG and 1 in school 4 2,000 2,134 -134 -7% HH Income = EUR 3,000 (~40th income percentile) Single adult only 1 3,000 586 2,414 80% Couple only 2 3,000 939 2,061 69% Couple with infant 3 3,000 1,226 1,774 59% Couple with infant and 1 child in KG 4 3,000 1,868 1,132 38% Couple with 1 child in KG and 1 in school 4 3,000 2,134 866 29% HH Income = EUR 4,000 (~75th income percentile) Single adult only 1 4,000 586 3,414 85% Couple only 2 4,000 939 3,061 77% Couple with infant 3 4,000 1,226 2,774 69% Couple with infant and 1 child in KG 4 4,000 1,868 2,132 53% Couple with 1 child in KG and 1 in school 4 4,000 2,134 1,866 47% HH Income = EUR 5,000 (~85th income percentile) Single adult only 1 5,000 586 4,414 88% Couple only 2 5,000 939 4,061 81% Couple with infant 3 5,000 1,226 3,774 75% Couple with infant and 1 child in KG 4 5,000 1,868 3,132 63% Couple with 1 child in KG and 1 in school 4 5,000 2,134 2,866 57% (*) https://www.numbeo.com/cost-of-living/city-estimator/in/Cluj-napoca? (**) THESE PERCENTILES ARE ILLUSTRATIVE (see Annex 1). Source: https://www.averagesalarysurvey.com/cluj-napoca- romania#:~:text=CLUJ%2DNAPOCA%2C%20ROMANIA%20SALARY&text=Average%20take%20home%20earning%20is,is%20RON %2054%2C783%20(Gross). 62 Legal and Institutional Framework Key takeaways Inadequate technical and financial capacity at the local level, and fragmented institutional framework in the housing sector. Too many mandates, and some unreasonable obligations for local councils with regards to housing assistance. No coherent, overarching housing policy at the national or local level, and lack of meaningful housing data. Lack of land management and asset management policies. Local authority mandates in the field of housing In Romania, even though the Constitution does not clearly mention the right to housing, Article 47 establishes that “the state has an obligation to take measures for economic development and social protection in order to ensure a decent standard of living for its citizens”. Complementary to these stipulations, Law no. 116/200269 refers to the “social character of the Romanian state, provided in the Constitution” which “requires the establishment of measures that avoid the degradation of living standards and preserve the dignity of all citizens”, the purpose of the law being to guarantee access, in particular to young people, to basic and fundamental rights, such as: the right to a job, housing, health care, education, and the establishment of measures that prevent and combat social marginalization and that mobilize institutions with responsibilities in the field of housing" (art. 1 and 2). Housing Law no. 114/1996 (modified), with its subsequent amendments, is the least ambitious normative act when it comes to housing measures. Although it regulates the general framework for the construction, operation and management of housing, it mentions few principles regarding access to quality housing: free and unrestricted access to housing is the right of every citizen; housing construction is a long-term major objective, of national interest, of the central and local public administration (art. 1). Local authorities play an important role in providing public housing (youth housing, social housing, emergency housing) by making available serviced land (connected to utility networks), and for being responsible for the administration of the public housing stock. Social housing and youth housing are programs implemented in partnership between the local councils and Ministry of Regional Development (MDPWA) and the National Housing Agency (NHA), while local authorities cooperate with the County Council in providing assisted housing or homeless shelters. Although the legal housing framework covers all significant housing aspects (access to housing, land, infrastructure, loans and subsidies, etc.), at the local level the results are limited, in part due to the incomplete law enforcement framework or to limited budgets allocated for the implementation of such 69 Law 116/2002 on preventing and combating social marginalization 63 measures. The specific housing legal framework also proposes a variety of measures for a wide range of beneficiaries (youth up to 35 years of age, marginalized people, people in inadequate housing, young married couples, etc.), which have not been implemented locally for the past several decades. In fact, the housing measures applied by the local public authority have been limited to youth housing, social housing, and/or vouchers. Housing supply and land policy Local public authorities, in cooperation and with the support of the central public authorities, must take measures to facilitate local investment in urban development, increase and improve the quality of housing (achieved from public and private funds), ensure equitable and accessible use of public urban space, ensure diversity and integration of vulnerable groups, support access to housing and buildable land, manage urban spaces, municipal infrastructure as well as health, education, sports, and cultural services. These measures should be taken within the framework of legal responsibilities and sustainable housing policies. Subsidized housing construction and sale Currently, the legal framework proposes several measures that can be employed by local authorities to support the access to housing for certain categories of persons. Local councils are able to build homes, for sale for certain categories of people, using funds from the local budget (Law 114/1996 - art. 7), and provide subsidies in order to facilitate access to home ownership. Priority is given to young married couples who, at the time of the housing allocation, are not older than 35 years, followed by other categories of persons determined by the local councils. The categories of beneficiaries mentioned above are eligible for subsidies from the state budget, within the limits of the annual budgetary provisions. The subsidy amount received depends on the average monthly net income per family member, for up to 30% of the value of the dwelling. It also depends on the monthly installments, for a period of 20 years, with a 5% interest rate Local public authorities, through delegated administrators, sign loan agreements for payment advances with the beneficiaries mentioned above, according to current legislation. However, there is no data on the enforcement of these measures. Additionally, Section 2, Access to housing, of Law no. 116/2002, states that “in order to facilitate access to housing for persons up to 35 years of age, unable to purchase housing from their own funds, county councils […] may allocate funds from the following sources: - amounts or quotas deducted from the share of central budgets re-distributed to county councils, established annually by state budget law; - a share established annually from the county council’s own revenues, respectively of the General Council of the Municipality of Bucharest; - a tax determined annually by law, for individuals who own housing units in which they do not reside and which they do not rent (art. 13). The above-mentioned amounts are administered by the county councils, which should fully cover payment advances for housing purchases or construction, and also rent for a period of up to 3 years (art. 14). This includes both the construction of a new home and the housing purchase at market prices (in which case the amount of the advance paid by the county council must represent at least one third of the value of the sales contract). The value of the advance is established at the beginning of each year by the 64 county council. The county council also establishes the criteria for granting the amounts mentioned above, taking into account the following priority categories: - youth from foster care and reception centers; - couples up to 35 years of age with or without dependent children; - other persons up to 35 years of age. According to existing public information, this stipulation has never been applied. Budgetary resources for housing construction through taxing vacant housing (art. 14 c). In order to establish the necessary budgets to facilitate access to housing for persons up to 35 years of age, who are unable to purchase housing at market prices, art. 13 paragraph (1) of Law no. 116/2002 proposes “a tax established annually, by law, for private individuals owning housing where they do not reside and that they do not rent”. Although the law requires Parliament to determine this tax level annually, this rule has never been applied since its entry into force. In addition, the absence of an effective local records system with information on inhabited housing units does not make it possible to identify vacant housing. Sale of youth housing built through NHA (ANL) Rental housing for the youth and young professionals built by the NHA may be legally sold to the tenants/ beneficiaries at their request, after the expiration of at least one year of uninterrupted rental to the same occupant/ beneficiary, without the sale being conditioned by the age of the applicant.70 There are certain mandatory conditions that need to be followed in the sales process of the youth housing units. Some of these conditions state that the lease holder and his family members (spouse, children and / or other dependents) should not own another dwelling, including holiday homes, except for housing shares, that does not exceed a usable area of 37 sqm (the minimum usable area / person). Another condition is that at the date of the sale, the average net income per family member of the holder of the rental contract, obtained in the last 12 months, should not exceed the national average net salary. Construction of housing through NHA’s Mortgage-financed Housing Program Beneficiaries that obtain a mortgage loan through a financial institution authorized by law can also obtain financing for the completion of the housing unit through NHA.71 NHA’s mortgage housing programs have financed several real estate projects in the country, but only where local government authorities owned land and agreed to grant the right of free use of the land for the housing units built. Law no. 1/2005 on the organization and functioning of cooperatives mentions that among the first-degree cooperatives, “housing cooperatives” can also be established. Housing cooperatives are defined as “associations of individuals that are formed with the purpose of building, buying, conserving, renovating and managing housing for their cooperating members” (art. letter a). In the absence of methodological norms for implementation and of dedicated programs or measures, local public authorities have not had a framework that supports the development of these cooperatives. Access to subsidized loans for housing construction/purchase In order to provide social protection to youth, Law no. 350/2006 stipulates several national priority items: a) offering grants through bank loans to married young people, in their first marriage, with low-interest 70 According to Law 152/1998, art. 10. 71 Law no. 152/1998 on the establishment of the National Housing Agency. 65 loan of up to 10 years; b) priority national programs developed in the field of construction of social housing, for young people and low-income young families; c) supporting the construction or purchase of owner-occupied housing for young people and young families aged 18 to 35(art. 24). However, in reality, the first measure is not practiced, and the second has limited application. The third measure has been operationalized through the “First House / New House (Prima Casa/ Noua Casa” program (since 2009). Land access to youth Law no. 15/2003 (modified) establishes a framework for allocating land parcels (150-300 sq.mt.) inside municipalities to young people aged 18 to 35 for the construction of housing. This pertains to municipality- owned land. The land is to be allocated free of charge, and in accordance with the priorities and criteria determined by the local council. Planning and housing authority Urban Planning According to the Spatial and Urban Planning Law no. 350/2001, in order to ensure a balanced, coherent and sustainable development of the national territory, local public authorities need to take land use decisions based on the principles of decentralization, local autonomy and de-concentration of public services. The state, through the public authorities, has the right and duty to ensure the proper conditions for sustainable development to take place. Spatial management aims to ensure individuals and communities have the right to use land equitably and efficiently, have access to adequate living conditions, to quality architecture, working conditions, services and transport that meet the diversity of needs and resources of the population, reduction of energy consumption, ensuring the protection of natural and built landscapes, biodiversity conservation, public security and sanitation, as well as the streamlining of travel demand. (art.1). Additionally, the law highlights the fact that, among the main urban planning objectives is improving living conditions by eliminating dysfunctions, ensuring access to infrastructure, public services and affordable housing for all inhabitants (art. 13). Through the General Urban Plan and the subsequent zonal urban plans, parcels must be identified for building social housing72. According to strategic European documents, these parcels should be located in various locations within the city (not in isolated peripheral areas or in neighborhoods with a high concentration of low-income people), thus ensuring social diversity and integration through housing of those belonging to vulnerable. Building permits and infrastructure According to Housing Law no. 114/1996, as part of the urban projects approved by the public authorities, whether they are initiated by the local authority, by individuals or by legal entities, infrastructure (public roads, water supply and sewage networks and, if applicable, district heating networks) on land destined for housing development is financed, among others, “from local budgets and other funds legally established for this purpose.”73In other words, the local public authority, through their approval of any housing project, implicitly assumes the financing and construction of municipal infrastructure, even though there is no stipulation that these costs be assessed and foreseen in the local budgets. 72 Housing Law no. 114/1996 - art. 38 stipulates that “the construction of social housing can be carried out, in any locality, on the locations provided in the urban planning documentation and under the conditions of the present law”. 73 Law no. 114/1996. Art.12 66 As a result of this provision and the lack of obligation to provide the necessary budgets before the approval of private investment projects, numerous projects aimed at expanding built areas have been initiated / completed without municipal infrastructure having been built (fully or partially). Even in some residential developments that had access to existing public networks, there have been issues related to the limited capacity of the existing public infrastructure (water, sewerage, traffic) and its inability to cope with increased demand. As a result of the 2011 modifications brought to Law 350/ 2001 regarding spatial and urban planning, if an investor requests a change from the stipulations of the urban planning documents approved for a specific area, or if the specific conditions of the location or the nature of the investments require it, the local public authority has the right to request through the issued pre-approval categories of costs to be borne by private investors and the categories of costs to be borne by the local public authority.74 In practice, these provisions are used for building infrastructure inside apartment complexes, and in some cases investors have been asked to build (private) kindergarten projects. The legal provisions regarding urban infrastructure investments within residential development projects are not consistent. For example, servicing the land with infrastructure is mandatory in the case of public projects carried out by NHA, but not for any private investment. Thus, in order to ensure the coordination of investment programs for infrastructure within parcels aimed for housing development, NHA enters into contracts with the local public authorities who use their approved budget for public investment programs for municipal infrastructure. 75 Land availability and land management In order to build publicly funded housing and implement successful local housing policies, it is essential that the state owns some land and manages it well. However, Romanian legislation does not provide the legal framework that establishes or recommends to local public authorities to ensure they have land reserves (keeping land stock, or purchasing additional land) with the aim of future public investments (for housing but also infrastructure and public amenities). Thus, Law 50/1991 establishes that land owned by state or local authorities destined for construction, can be sold, concessioned or rented through public auction, under the conditions stipulated by urban planning and territorial planning documentation, in order for construction to be carried out by the owner.76 The concession is made on the basis of offers presented by the applicants, in compliance with the legal provisions, aiming at maximizing land potential. However, even though land inventory owned by the public authorities does exist, land concessions for housing happen rarely. Additionally, there are no land use policies that would regulate land allocation for concessions with the aim of building private housing. According to legislation, there a few exceptions when it is allowed for public land to be concessioned: a) to achieve objectives of public utility or charity, of a social nature, non-profit, other than those carried out by local authorities on their lands, b) for the construction of housing by the NHA according to law, c) for the construction of housing for youth up to 35 years of age (art. 15). There are no provisions that encourage public authorities to capitalize on these lands prioritizing the construction of affordable housing, and in the absence of the obligation to establish land policies as a basis for sustainable development policy, many localities have alienated valuable land. This absence of land is often attributed 74 Law nr. 350/ 2001, Art. 32 para. 1-3 75 Law 152 / 1998, Art.3 paragraph 5 76 Law 50/1991, art. 13, paragraph 1 67 to the failure of local public housing construction programs In fact, there is not enough data and inventory concerning public available land to be used for local investment programs. Additionally, there are no legal requirements stating that the unused state land owned by the ministers and governmental institutions (military camp, railway brownfield, etc.) should be transferred to the local public authorities. Therefore, (a) social housing can be built only on land belonging to the mayoralty, and under the administration of the local councils77, and (b) land intended for building housing through the NHA can be either public or private property of the state or of mayoralty, as well as the private property of an individual or a legal entity78. In cases where the land parcel intended for building housing through the NHA, it is transferred free of charge in the property of the territorial administrative unit where it belongs, or to be administered by the local councils of the communes, city or municipality, or, as the case may be, in the administration of the county councils. Establishing the necessary land reserves with the purpose of developing public housing can be achieved by applying the provisions of art. 3 paragraph (4), according to which public or private land owned by the state and being managed by national defense, public order, national security, judicial authority institutions and national administration of penitentiaries, may be transferred to local public authorities (to be managed by local councils of municipalities), in order to build housing. The provision has not yet been implemented, and the lack of available land is one of the causes of low housing investment by local public authorities. Housing assistance The law establishes that housing accessibility for vulnerable categories of citizens, is done through a series of measures, such as: developing a public housing stock and making it available with subsidized rent (allocation, subsidies), providing subsidies for paying the rent of housing on the free market, and ensuring the access of marginalized people and families to housing and basic public services. In Romania, the public housing stock available for rent consists of the following categories of homes, each with different legal conditions, different eligible beneficiaries and a different type of production: homes built by NHA for rent by youth; social housing79 and housing for tenants evicted from nationalized houses80; other dwellings owned by the state / local authorities (dwellings built according to Government Ordinance 19/1994 aimed at stimulating investments for public works and housing constructions, dwellings purchased from the free market by local authorities, nationalized houses that were not returned to the former owners and are used as rental units). The highest number of public housing available for rent at the local level is that of social housing, and housing for youth built through the NHA. The main responsibilities of the local councils in social housing provision are defined by Housing Law no. 114/1996, and include the following: managing and allocating the social housing stock available in the respective administrative-territorial unit; converting vacant dwellings from the social housing stock into emergency housing in cases of major emergencies; establishing the maximum rent amounts for public housing units; providing financing for social housing, service housing units and emergency housing; and other responsibilities for access to housing and housing management at the local level. 77 Law 114/ 1996, art.11 and 50 78 Law 152 / 1998, art. 3 paragraph 1 79 Housing Law 114/1996 80 OUG 74/2007 68 Social housing The local public administration is responsible for: managing and developing the utilities and municipal infrastructure necessary for housing construction, according to the urban planning documentation; elaborating the development strategy of the housing stock, while the local councils ensure adequate social and emergency housing stock needed to cover the local requirements; establishing the necessary measures for taking into account and analyzing the (social) housing requests received; setting up working groups that would review the social housing applications, and establishing and publishing the criteria for social housing allocation, as well the necessary supporting documents accompanying the application and where the applications should be submitted. Beneficiaries. Families or persons would be eligible to rent social housing if they earn an average monthly net income per person below the net average national income threshold, calculated for the last 12 months.81 The average national income is determined by the National Institute of Statistics in the last Statistical Bulletin prior to the month in which the application is reviewed, as well as prior to the month in which the housing unit is allocated. The rental contract is signed by the mayor or by a person authorized by the mayor, with the beneficiaries established by the local council. The contract is valid for a period of 5 years, with the possibility of extension based on the income statement and the necessary supporting documents, according to legal provisions.82 The rental contract can be terminated if the average net monthly income per family, earned in a period of 2 consecutive fiscal years, exceeds by more than 20% the minimum level provided in art. 42 of the Housing Law, or if the holder of the rental contract has not paid the rent amount within 90 days from being notified.83 Allocation criteria. Local public authorities allocate social housing units and manage the program based on the criteria they establish annually, and in accordance with the Housing Law. According to the law, the categories of persons that may benefit from social housing are: persons and families evicted or to be evicted from the homes returned to the former owners; young people up to 35 years old; and youth from social welfare institutions who have reached 18 years of age.84 In addition to the mentioned legal provisions, priority will be given to young families and those who may receive special scores 85 such as: - those who have been evicted due to contractual or legal provisions unrelated to their will; - repatriated people; - youth from social protection homes; - tenants of dwellings that are no longer safe; - civil servants transferred for work purposes. The criteria for allocating “units from the state housing stock” (other public housing categories that are not regulated by the Housing Law), taken into account in art. 30 para. (2) of GD no. 122/2000, are not limiting. Local councils are able to add allocation criteria, depending on specific situations existing at the local level. 81 Housing Law no. 114/1996, art. 42 82 Law 114 / art.44 83 Law 114 / art.46 84 Law 114 / 1996, art.43. 85 Law no. 114/1996 (Housing Law) art. 30 of GD 1275/2000 69 Rent Amount. According to legal provisions, the maximum rent amount for social housing will not exceed 10% of the net monthly income of the family, calculated for the last 12 months. The difference up to the nominal value of the rent, calculated according to legal provisions, will be subsidized from the local budget of the administrative-territorial unit where the social housing unit is located.86 Development and management. As part of the strategy for the development of the housing stock, local councils are supposed to ensure the adequacy of the social housing stock with respect to local requirements/ demand. This is to be done through: - Building more social housing units, and/ or rehabilitating existing housing and converting it to social housing. Social housing is funded by the local council budgets, within the limits of the budgetary provisions approved annually, by establishing distinct expenditure subdivisions within these budgets. The state supports the construction of social housing through the Government Program for social housing construction. 87 - Transferring public housing of various categories to the social housing stock. By local council decision, other categories of public housing that did not have the status of social housing can be transferred to the social housing stock belonging to the administrative-territorial unit. Emergency housing can be temporarily set up as a social housing. 88 - Purchase from the real estate market. According to Government Emergency Ordinance no. 37/2008 regarding the regulation of some financial measures, public authorities and institutions are prohibited from purchasing real estate; however, the local public administrations may decide to purchase “support housing through public auction”. - Donations. Individuals and business can provide donations or contributions for the construction of social housing. - Other situations through which local public authorities become owners of private dwellings, and their occupants become tenants eligible to benefit from social housing, etc. (ex: “support housing” according to art. 79 of Law no. 196/2018). NHA Youth Housing Beneficiaries. The eligible categories for youth housing built through the NHA are: (a) Young people - adults up to 35 years of age at the date applying for housing allocated under NHA programs, intended for rent, and who may receive housing latest 36 months after reaching this age; (b) Young education and health specialists (including resident doctors) - adults up to 35 years of age on the housing application date, and who may receive allocations within a maximum of 36 months from reaching this age, being employed in the respective fields within the administrative-territorial unit in which the housing units are located, and who do not own a dwelling within the specific administrative-territorial unit.89 Allocation criteria. Youth housing allocations take place according to criteria established and adopted by the local public authorities,90 with the approval of MDPWA, based on access to housing framework criteria and housing distribution priority.. The framework criteria for access to housing can be adapted to specific local situations based on well-justified proposals. Rental contracts are only valid for one year from the 86 Law 114 / art.44 87 Law no. 114/1996 on the Housing Law and OUG no. 74/2007 88 Law 114 / art.56. 89 Law 152/1998 art.8 90 Law 152/1998 art. 8 (3)) 70 home allocation date. The lease can be extended, for one-year periods at a time, in accordance with the law. Rent calculation. The rent is established by the local public administration and covers at least the management, maintenance and repair expenses, as well as the cost of investment, depending on the standard duration established according to legal provisions. Based on these indicators, the rent calculation method is established by the provisions of Law no. 152/1998 (art. 4 para. 71). The maximum rent amount for youth housing cannot be higher than 10-30% of the average monthly net income per family member, calculated according to the income obtained realized in the last 12 months (art. 8 paragraph (91). Construction and management. NHA collaborates with the local public authorities in identifying vacant land and / or constructions in various stages of execution or completion, which can be included in the programs (art.1 (7)). The local public authorities are responsible for managing and developing the utilities and municipal infrastructure necessary for housing construction, in accordance with the urban planning documentation. Access to housing services Law 116/2002 on preventing and combating social marginalization and its methodological norms for implementation 91 assign local councils the responsibility of ensuring that marginalized persons and households have access to housing and basic public services, such as: water, electricity, natural gas, district heating, etc. In order meet these obligations, the local councils may enter into agreements with service providers, by which they undertake to bear part of the debts incurred by the marginalized individuals and families. 92 The amounts necessary to cover these costs, mentioned in the agreements signed with the service providers are provided from the MDPWA state budget or from the local budgets, according to the annual budgetary laws (art. 24). The measure has not been applied. Law no. 116/2002 also establishes the fact that the Government is authorized (within 90 days from the date of entry into force of this law) to establish the necessary measures to prevent the eviction of disadvantaged persons who have debts to homeowner or tenants’ associations. The measure was also aimed at modifying or improving housing sales procedures, in order to ensure that a homeowner facing financial difficulties is not forced to sell a home at a price much lower than the market price (art. 31). These measures to prevent evictions have not been implemented / promoted. Law no. 325/2006 (public service of thermal energy supply - Section 2 Social Protection) authorizes the Ministry of Labor and Social Protection to provide aid for heating the homes of low income households and individuals.93 Thus, the design and construction of new condominium buildings with residential or mixed use, having a common source of heat supply or connected to the public district heating networks, must be able to measure individual consumption and provide the conditions for installing systems for 91 HG nr.1149 dated 17 October 2002 for approval of the Methodological Norms for the implementation of the stipulations mentioned in Law no. 116/2002 on preventing and combatting social marginalization. 92 Socially marginalized persons are defined as persons benefitting from a guaranteed minimum income or that is part of a family benefiting from a guaranteed minimum income, according to the provisions of Law no. 416/2001, and is in at least two of the following situations: a) has no job; b) does not own a home; c) lives in improper conditions; d) has one or more dependent children or is part of a family with many dependent children; e) is an elderly person, without legal supporters; f) is included in the category of disabled persons or invalids; g) has a dependent person with a severe disability or degree I or II disability; h) executed a custodial sentence (art. 49). The level of net monthly income per person, for the person to be considered marginalized, is established annually, by Government decision, before the submission to Parliament of the draft state budget law (art. 23). 93 Law 325/2006, art. 43 71 consumption, recording, distribution systems for the entire building and for each apartment or space with another destination (art.54). Although the city of Cluj Napoca has a functional district heating system, in recent years no new connection has been established to the existing network, the new condominiums having individual heating systems. Energy Efficiency According to Law no. 121/2014 on energy efficiency, local public authorities are encouraged, according to their competences and administrative structures: a) to adopt an energy efficiency plan, independently or as part of a general plan addressing climate change or environmental measures, containing objectives and specific actions on energy saving and efficiency, providing central government buildings as examples of good practice; b) to implement an energy management system, including energy audits, as part of the implementation of the energy efficiency plan. Also, the local public authorities of localities with a population of more than 20,000 are required to: a) prepare energy efficiency improvement programs which include short-term measures and measures aimed for 3-6 years; b) appoint an energy manager, certified according to the current legislation, or to sign an energy management contract with an individual or with a legal entity providing energy services, as stated by the law94. Local public authorities should initiate strategies, policies and measures in order to encourage new residential areas or new industrial facilities that consume heat in their production processes to be located in areas where residual heat is available.95 This could include proposals that support the concentration of individual systems in the same location in order to ensure an optimal match between the demand and supply for heating and cooling services. Additionally, all new buildings put into use based on building permits issued as of December 31, 2020, are required to have “near-zero” energy consumption. Therefore, the urban planning certificate issued by the local public authorities prior to obtaining a building permit will require new buildings to be classified according to energy requirement levels provided in the specific technical regulations. Mayors of localities with more than 5,000 inhabitants should initiate multi-annual local plans aimed at increasing the number of new and existing buildings whose energy consumption is almost zero. These plans, which are approved through the local councils, may include building differentiated according to climate zones and building functions. Housing informality Law no. 151/2019 (“Law on informal settlements” amending and completing Law no. 350/2001 on spatial and urban planning) establishes the general framework for identifying and regulating the situation of informal settlements. 96 Local public administrations have the most important role in identifying informal settlements, in assessing and understanding their particularities and in establishing regulations for finding effective solutions, with the support of the communities directly affected. Therefore, the Mayor, within 94 According to Law no. 372 republished on 13 December 2005 regarding the energy performance of buildings. 95 Law no. 372, Annex 6, part 1 letter f) 96 The methodological norms for the implementation of the law were established through Order no. 3494 on July 27, 2020, for the amendment and completion of the Methodological Norms for the implementation of Law no. 350/2001 on spatial and planning and on developing and updating urban planning documentations. 72 his/her purview and through means of specific structures dealing with urban planning, construction regulations, social assistance and public health and the local police, has the following responsibilities: - to identify available land within the administrative territory occupied by informal settlements, to establish their boundaries and to send the cadastral documentation in electronic format to the county council and the MDPWA - for including them in the National Territorial Observatory; - to prepare and update a database regarding the number of people living in informal settlements, the buildings occupied by them and the typology of informal settlements; - to inform the inhabitants of informal settlements about the legal provisions and to initiate consultative and participatory planning processes in order to identify solutions for interventions adapted to the specifics of the informal settlement and the needs of the community; - to initiate and coordinate the necessary steps for identifying the legal and economic regime as well as the regulations needed for land occupied by informal settlements; - to ensure the relocation of informal settlements inhabitants, if regulations decide their partial or total demolition, under the following conditions: offering alternative housing solutions, either by providing social housing or by supporting the construction of housing on plots with municipal infrastructure, identified and provided by local public authorities, according to the law; to inform and organize prior consultations on alternatives and to obtain the agreement of the residents that will be relocated; - to initiate and coordinate the actions necessary for limiting the expansion of informal settlements, by identifying the land available for housing construction or by providing alternative housing solutions and to inform the inhabitants of informal settlements about these options; - to initiate and coordinate the necessary actions for developing municipal infrastructure on land where informal settlements will undergo urban regeneration; In order to support the local public authorities, the County Council, through the chief architect of the county, should provide methodological and technical support to the local public authorities in the process of identification, monitoring and management of informal settlements. Institutions Local authorities Local public authorities have the highest number and the most important responsibilities when it comes to housing issues. Thus, the local councils, the mayor and the specialized structures inside the City Hall, have, according to the competencies established by law (Law no. 114/1996, L.50 / 1991, L.350 / 2001, etc.) among others, the following tasks: urban planning and urban development, issuing building permits, construction and management of public housing, ensuring the quality and safety of housing, measures that support access to decent housing for marginalized people, etc. Achieving coherent and efficient housing policies can be done through proper management of the tasks enumerated above, as well as a good level of coordination of the measures established by the law and monitoring results at local level, cooperating with central authorities with which the local authorities share responsibilities in the field of housing, urban planning and social assistance. Additionally, even within the limits of the current regulatory framework, cooperation on responsibilities and resources (information, administrative capacity, financial allocations) with territorial administrative units in the peri- urban and metropolitan area can contribute to efficient capitalization of the existing housing fund, to the 73 proper functioning of residential areas and improved quality of life of the inhabitants, both at local and metropolitan level. In order to carry out their housing responsibilities, local public authorities cooperate with the following public institutions: Ministry of Public Works, Ministry of Regional Development, Public Works and Administration (MDPWA), National Housing Agency (NHA), and County Councils. Ministry of Regional Development, Public Works and Administration MDPWA is the key player in the housing sector at national level. It has two major roles: The first is to establish housing policy, and draft legislation as required to establish the legislative framework for that policy; and the second is to obtain funds to implement housing programs. MDPWA administers several programs in the housing sector: - Social Housing Construction program (Law 114/1996) - State subsidies for savings and loan products for housing (GEO 99/2006) - Housing Fund for Tenants Evacuated from Nationalized Houses (Government Emergency Ordinances 68/2006 and 74/2007) - Programs for energy efficiency and consolidation of buildings with seismic risk. National Housing Agency NHA is a statutory body under the authority of the MDPWA with the mandate to implement public sector housing programs. According to Law 152/1998, the role of NHA (which is financially autonomous) is to administer financial resources for housing construction, and also to coordinate the sale, rehabilitation, consolidation and extension of the existing housing stock. The investments are covered from the State budget and/or local budgets, internal/external credits, private investors, and other legal sources. NHA’s projects are developed on land provided and serviced by local authorities. NHA is responsible for the implementation of programs regarding the construction of: Youth Housing; Mortgage-financed Housing Program; Housing for Resident Physicians; Rental housing concessions program; Rebirth of the Romanian Village; Social Housing for the Roma Community; Emergency Housing; Rental Housing through Private Capital, service housing for public sector workers in the fields of education, defense, security and law, in addition to health professionals. County councils County Councils have a general oversight and intermediation role with regard to housing, although they also retain important powers for prioritizing investments. The relevant laws pertaining to the competences of county councils include the following: - Housing Law no. 114/1996 and GD 1275/2000 for approving the Methodological Norms for the implementation of the Housing Law provisions mandate county councils with: o Aggregating requests for state budget allocations, received from local councils, and forward these to the MDPWA o Overseeing the transfer of revenue from the sale of housing units and non-residential spaces in blocks of flats into specially designated budget accounts earmarked for housing investments 74 o Requesting on a monthly basis the necessary co-financing from the MDPWA for construction and assembly works executed by the end of the previous month. Upon transfer of the co- financing, the county councils redistribute the state budget allocations to local councils o Requesting subsidies from the MDPWA from the ministerial designated budgets for housing investments. - GD 962/2001 for approving the Methodological Norms for the implementation of Law no. 152/1998 on the establishment of NHA states that county councils should: o Monitor and analyze waiting lists for requests for rental youth housing o Elaborate and update the list of new investments proposed for communication to the MDPWA o Play a role in managing rental youth housing o Finance, develop, and approve pre-feasibility studies on the need and opportunity for construction of youth housing. This law stipulates that the county councils act as intermediary between the local councils and the central government and retain an important role in how funds and investments are being prioritized within the county. Law 116/2002 on preventing and combating marginalization mandates county councils to support access to housing for youth between the ages of 18 and 35 years who cannot afford housing at market prices. The law provides possibility for county councils to fully cover payment advances for housing purchases or construction, but also rent for a period of up to 3 years. The value of a payment advance covered through this instrument is established at the beginning of each year by the county council (or the General Council of Bucharest Municipality, respectively), based on the provisions of the methodological norms. This level can be adjusted periodically according to trends in consumption and housing prices. The budgets for such investments can constitute a share of central budgets re-distributed to county councils, a share of county councils’ own revenues, a tax applied to individuals who own housing units in which they do not reside and which they do not rent, as well as donations, sponsorships or other sources approved by the law. Local Councils Local councils have shared responsibilities with the higher administrative units. Social housing is implemented in partnership between local councils and the MDPWA, while collaboration with county councils is required for assisted and sheltered housing for youth or homeless people, as well as other NHA- run programs. The Law on Local Public Administration no. 215/2001 details that, "in exercising its powers, the local council ensures, according to its mandate competences and current laws, the basis for providing local public services for social housing and other housing units owned or administrated by the mayoralty. In exercising the powers referred to above, the local council approves the construction of social housing, the allocation criteria for social housing and housing units under its property or administration. The Local Council must ensure, in accordance to its competences and the law, the necessary framework for the provision of public services of local interest regarding:97 “a) […] 2. social services for the protection of children, the disabled, the elderly, families and other persons or groups in social need; 17. social housing 97 Accordingto the provisions of art. 36, paragraph (6) of Law no. 215 of April 23, 2001 (republished) of the local public administration. 75 and other housing units owned or administered by the administrative-territorial unit; […] e) approve the construction of social housing, the criteria for the distribution of social housing and housing utilities owned or managed by it.” (Art. 36). The main attributions of local councils in the housing sector are:98: - Building housing, with funds from the specially designated budget accounts, controlling the sale price, in order to enable access to housing for certain categories of people - Allocating public land for housing construction - Managing and allocating social housing stock in the respective territorial administrative unit - Designating, in case of emergency, vacant social housing units as emergency housing - Setting the maximum rent for public housing units - Providing funding for social housing, service housing and emergency housing. - Local council attribution 99 also include: Managing and allocating the youth housing rental stock - Identifying buildings in various stages of completion or finalized, to be included in NHA programs - Determining the selling price of housing units and using the proceeds for the sole purpose of financing further housing construction - Providing public land with municipal infrastructure for housing construction. Also, Law 116/2002 on preventing and combating marginalization mandates that local councils ensure that marginalized individuals and families have access to basic public services (i.e. water, electricity, natural gas, heating, etc.). For this purpose, local councils can sign special agreements with service providers to cover the debts of marginalized individuals and families. The law adds that the government must act to institute measures necessary for preventing the eviction of individuals from collective housing units as a result of unpaid dues to the housing association. Challenges Technical and institutional capacity In Romania, the organizational structure of City Halls is very similar to each other, being organized on specific activities and administrative responsibilities (economic, investment, heritage, social assistance, human resources, etc.), not on important thematic areas, pillars of community development or priorities of the administration (e.g. housing, sustainable development, community development, etc.). The situation is similar within the City Hall of Cluj-Napoca, with housing not being the main activity of any specific department / service or of any interdepartmental structure with transversal responsibilities, not sectoral ones. An important aspect is the coherent and structured way in which the information for the public is presented on the city hall website, these being well organized on topics (Community, Housing, Administration, Environment, Mobility, Economy), but without having the actual structures in place inside the organization and functioning of the institution. Thus, within the City Hall of Cluj-Napoca (according to ROF Cluj-Napoca City Hall - Annex to Decision no. 741/2016), housing issues are found in most directions 98Housing Law no. 114/1996 99 Definedby GD 962/2001 for approving the Methodological Norms for the Implementation of Law no. 152/1998 on the establishment of the National Housing Agency 76 in the structure of local government, without tasks, procedures and direct cooperation mechanisms or regular interdisciplinary / interdepartmental meetings on housing issues. From the analysis of the measures implemented in the housing domain (including measures and governmental programs) and from the interviews conducted, although each service and department officially fulfils its responsibilities related to housing, significant progress and an effective approach to all housing issues seem to be lacking. For example, in the administration and monitoring of families receiving social housing, there is poor coordination between the Directorate of Heritage (main role is managing the "files" of beneficiaries) and the Department of Social and Medical Assistance (which has information on the situation of families in Social Surveys). Data and monitoring Although there is a structure within the City Hall entitled "databases" (Personnel Records Service database and public relations), the responsibilities and data held by it are limited. Currently there is no centralized data on the public and private housing stock in Cluj-Napoca. Digitization and interoperability of administrative databases are necessary and desired, but have not been achieved so far. In addition, the inventory of the public and private domain (primarily land and buildings) is not updated. The current procedural hierarchy does not favor cooperation and the rapid exchange of data and information between the departments and officials involved (which must comply with the administrative hierarchy and bureaucratic procedures), nor the creation of unitary, effective and constantly updated databases to support decisions and policies in the field. Although each department has databases related to the activities carried out, there is no common database that would serve all services of the city hall. Data that would help manage a local housing policy is not available – for example, the number of rented or vacant housing units, or the number of units that are not primary homes etc. – and there is no practice of collecting, updating or digitizing urban databases (including housing) among local and central public administrations in Romania. Internal cooperation and external inter-institutional relations From the discussions and interviews, it appears that challenges in the housing sector are related to allocated human resources, and especially to: budget allocations, difficulties in implementing certain legal provisions, fragmentation of activities in different areas and poor vertical and horizontal communication within the City Hall. Even though the elaboration of the budget of Cluj-Napoca City Hall involves a stage of inter-directional consultation and public consultation, the budgets allocated for the housing field (constructions, subsidies, rehabilitations, etc.) are low. The scaling back of MDPWA government programs to finance housing construction (youth housing, social housing, emergency/ necessity housing, etc.) and the MMPS rent subsidy program for marginalized categories, etc. is an impediment to increasing the stock of public housing, and therefore, to increasing the number of beneficiaries served. Also, a number of specific activities of some departments and services that have responsibilities related to housing (land allocations for youth housing, concessions, etc.) have very few results. In addition, the approach to housing (and urban development) does not integrate a metropolitan perspective, despite a strong functional relationship (not administrative-institutional) between Cluj-Napoca and its periurban / metropolitan area. An important aspect with an impact on the development of the public and private housing stock, and the quality of housing and local development is the lack of coordination among urban measures (urban 77 expansion, legal clarifications on the construction of urban infrastructure, expropriations for public utility, sites for social housing and education and / or health infrastructure, etc.), and the budgets necessary for their development and assuming responsibility for their implementation. 78