Armenia, housing, dwellings, homes, shelters. Habitat for humanity

1. Armenia
Housing
Study
Prepared by: Hayastan Stepanyan, legal expert, UFSD
and Armen Varosyan, housing expert, UFSD

2. Contents
Foreword ________________________________________________________________________________ 4
EzRA mIllSTEIn
Acknowledgements _______________________________________________________________________ 5
Executive summary _______________________________________________________________________ 6
Introduction and methodology _____________________________________________________________ 9
Context analysis
Background information on the Republic of Armenia _______________________________________ 10
Housing stock of Armenia before independence ____________________________________________ 11
Housing situation after independence _____________________________________________________ 13
Condition of current housing stock in Armenia _____________________________________________ 15
Vulnerable groups in Armenia lacking access to decent housing _____________________________ 16
Housing analysis
The property rights regime _______________________________________________________________ 17
The housing finance regime ______________________________________________________________ 19
The housing subsidies regime ____________________________________________________________21
Residential infrastructure _________________________________________________________________23
The regulatory regime ___________________________________________________________________26
Position statement and recommendations
Property rights recommendations _________________________________________________________30
Housing finance recommendations _______________________________________________________31
Housing subsidies recommendations _____________________________________________________31
Residential infrastructure recommendations _______________________________________________34
Regulatory recommendations ____________________________________________________________34
Housing solutions
Government of Armenia housing solutions ________________________________________________35
Best practices ___________________________________________________________________________38
The Monument of Sardarapat celebrates the Republic of
Armenia’s battle for independence, which took place from May
References ______________________________________________________________________________41 24 to May 26, 1918. Sardarapat is 40 kilometers west of Yerevan,
and the battle is considered to have stopped the Turkish advance
Annexes ________________________________________________________________________________45 in Armenia and prevented the nation’s destruction.
Photographers: Kim MacDonald and Ezra Millstein. Cover photography by Zaruhi Tonapetyan.
2 Armenia Housing Study

3. Acronyms
AB ........................Apartment building GoAm ..................Government of Armenia nRC ......................norwegian Refugee Council
ACRA.................... Armenian Credit Reporting HFHA....................Habitat for Humanity Armenia PD .........................Passport Department
Agency HFHI ..................... Habitat for Humanity PmU .....................Project management Unit
ADB ......................Asian Development Bank International PPP .......................Public Private Partnership
AmD .....................Armenian Dram HIG .......................Housing improvement grants PRSP .................... Poverty Reduction Strategy
ARC ......................American Red Cross HOB......................Heat-only-boiler plant Paper
Armenian SSR .... Armenian Soviet Socialist HPC ......................Housing purchase certificates RoA ......................Republic of Armenia
Republic HPP ......................Hydropower plant RoA nA ................ national Assembly of the
ASWC ................. Armenian Water and Sewerage IDA ....................... International Development Republic of Armenia
Company Agency RD ........................Road Directorate
CBA ......................Central Bank of Armenia IFC ........................ International Financial SCREC.................. State Committee of Real Estate
CHP ......................Combined heat and power Corporation Cadastre
CIS ........................ Commonwealth of ImF .......................International monetary Fund SDC ...................... Swiss Agency of Development
Independent States IRD ....................... International Relief and and Cooperation
CJSC ....................Closed joint stock company Development SDP ...................... Sustainable Development
CPS ......................Country Partnership Strategy IUE .......................Institute for Urban Economics Program
DCA ......................Development Credit Authority KfW ......................Kreditanstalt für Wiederaufbau SmE .....................Small and medium enterprises
DGF ......................Deposit Guarantee Fund lG .........................local government SWm ....................Solid waste management
DIGH .................... Dutch International Guarantee lTV .......................loan-to-value ratio TPP .......................Thermal power plant
for Housing mlSA ................... ministry of labor and Social UCO .....................Universal Credit Organization
EBRD .................... European Bank for Affairs UFSD.................... Urban Foundation for
Reconstruction and mmPAA................ mortgage market Participants’ Sustainable Development
Development Association of Armenia UI ..........................Urban Institute
EQz ......................Earthquake zone moD .....................ministry of Defense UnHCR ................ United nations High
EQzRP.................. Earthquake zone Recovery mOTC ................... ministry of Transport and Commissioner for Refugees
Program Communication USAID .................. United States Agency for
FC .........................Financial cooperation moUD .................. ministry of Urban International Development
FmC......................First mortgage Company Development USSR ................... Union of Soviet Socialist
FSAP .................... Financial System Assessment mTA...................... ministry of Territorial Republics
Program Administration VAT .......................Value Added Tax
FSDP .................... Financial Sector Deepening nBF .....................non-bank financial sector WB .......................World Bank
Project nmC .....................national mortgage Company WTO .....................World Trade Organization
GAF ......................German Armenian Fund nPl ......................non-performing loans Ym ........................Yerevan municipality
GDP ......................Gross Domestic Product nPP ......................nuclear power plant
Armenia Housing Study 3

4. Foreword
Over the past two decades, Habitat for Humanity, a Christian nonprofit organization dedicated to fighting
the scourge of poverty and inadequate housing, has built or improved more than 350,000 affordable homes
worldwide. While this is clearly an impressive achievement for a nonprofit, we know that it is impossible to
meet the goal of “decent housing for all” through Habitat’s building efforts alone.
At Habitat,
we believe we
To eliminate poverty housing from the face of the earth, our mission calls us to go beyond building and
refurbishing homes. At Habitat we believe we need genuine partnerships and participation with individuals,
need genuine
communities, corporations, nonprofits, local and national governments, and other institutions. Increasingly partnerships and
through our programs in 90 countries where we work, we are aiming to influence the overall housing policy
and practice to enable a functioning housing sector that works for everyone. participation
with individuals,
To start, we all need reliable information on the housing environment and a good understanding of the
primary housing needs. This Armenian Housing Study, conducted around a methodology developed for communities,
Habitat for Humanity’s emerging global housing policy index, is one of the first steps in this direction in corporations,
Armenia. It is an attempt to analyze the context and environment that affects housing issues in Armenia,
and to identify the most vulnerable groups affected by current housing policies and practices. The housing nonprofits, local
policy index looks at five key policy areas and is based on extensive research and studies from many of the and national
world’s leading housing policy experts and institutions.
governments,
Through the data and analysis in this report, we aim to improve our understanding of the housing
and other
environment and need in Armenia. We believe the analysis and recommendations are useful to policy
makers, development professionals, nonprofit organizations and donors who are willing to work together institutions.
to find lasting and sustainable solutions to the large demand for decent housing that is portrayed in this
document. This study is obviously not a panacea for the housing issues in Armenia, but we hope you will
find it a helpful guide to developing working solutions to bring about positive change.
Don Haszczyn
Area Vice President
Habitat for Humanity International
Europe and Central Asia
4 Armenia Housing Study

5. Acknowledgements
Research was carried out by staff from the Urban Foundation for Sustainable Development in Armenia.
■ Authors: Hayastan Stepanyan, legal expert, ■ Acknowledgments from the authors: Atayan, Housing and Communal Policy department
and Armen Varosyan, housing expert. In preparing this study, the Armenian Housing head of the Ministry of Urban Development, and
Study team received support from different agencies Astghik Minasyan, department head of the Ministry
■ Editorial team: Habitat for Humanity and individuals. Firstly, we would like to recognize of Labor and Social Affairs. The names of other
International Europe and Central Asia area vice the assistance offered by Irina Vanyan, director of officials, practitioners and experts with whom
president Don Haszczyn; Habitat for Humanity the Habitat Armenia office, and Siranush Vardanyan, we met are listed in Annex 15. These individuals
International Europe and Central Asia program program development manager. They provided were cooperative, open and informative, and
department, Lucija Popovska, Mike Meaney and very useful comments and supportive suggestions we are grateful to them for their time and good
Feike Dik; Habitat for Humanity International throughout our work. ideas. Sociologist Arsen Aslanyan did a fine job in
Europe and Central Asia resource development The study team met and conducted interviews interviewing experts and practitioners.
and communications department, Willo Brock with the officials and practitioners of the While the aforementioned individuals provided
and Katerina Bezgachina; Habitat for Humanity Armenian ministries of Urban Development, invaluable assistance to the team, the authors are
International Government Relations and Advocacy Labor and Social Affairs, and Transport and solely responsible for the report. The statements
office, Jane Katz; Habitat for Humanity Armenia, Communication; the Central Bank of Armenia; herein are the authors’ alone and not necessarily the
Irina Vanyan. the State Committee of Real Estate Cadastre of the views of HFHI, governmental agencies or the Urban
Armenian government; the Republic of Armenia Foundation for Sustainable Development.
■ Technical support: Staff of Habitat for Passport Department; Yerevan Municipality;
Humanity Armenia; Habitat for Humanity Creative USAID/Armenia Tax Improvement Program;
Support Services in Americus; Habitat for Humanity Kreditanstalt für Wiederaufbau/Development of
Europe and Central Asia, resource development and a Sustainable Housing Finance Market (Phase I)
communications department, Barbora Fricova; Arlene in Armenia; International Financial Corp. office,
Corbin Lewis at Habitat for Humanity International’s Victims of Public Need North Avenue NGO; and
Government Relations and Advocacy office; Siranush independent experts to obtain information and
Vardanyan, program development manager at Habitat insight about the housing sector and policies related
Armenia. to affordable housing in Armenia. Particularly, we
are fortunate to have strong support of Yevgenya
Armenia Housing Study 5

6. Executive summary
The housing situation in Armenia was influenced a comprehensive national housing strategy to areas can be offered as collateral only if they are
largely by the conflict with Azerbaijan over Nagorno address all housing problems effectively. registered in the real estate cadastre and have an
Karabagh in the late 1980s and early 1990s, forcing Housing stock is deteriorating because of issued ownership title.
the influx of an estimated 350,000 refugees. And poor maintenance. Nineteen years after the Maintenance of single-family housing stock is not
in 1988, a devastating earthquake in the northern collapse of the Soviet Union, transformation to given enough attention by the government or donor
regions of Armenia rendered about 17 percent a new housing management system still is not organizations. It is the sole responsibility of the
of the nation’s housing stock uninhabitable. In going smoothly. Although projects supporting owners, who maintain their house over time at their
addition, Armenia experienced a production decline the management and maintenance of apartment own expense. Single-family housing improvement
in its housing sector. Other major problems were buildings, including upgrading communal and new construction are needed, especially in the
deteriorating housing stock (apart from those caused infrastructure and monitoring communal rural areas of the earthquake zone and villages along
by the earthquake) and the households designated as services, are some of the most important the state border of Armenia.
underhoused. priorities of the government, reportedly only 20 Evictions are often illegal and performed without
The aforementioned challenges forced the percent of registered condominiums are effective. proper compensation and resettlement.
government to undertake reforms in the housing This is due, in large part, to irresponsible owners There are many unfinished residential structures
sector. Since 1989, a number of laws, regulations not caring for common areas of buildings; in Armenia. Construction on these structures
and strategies have been adopted to handle the poor service provision; a lack of competition; started prior to 1991 and halted because funds
shelter problems of earthquake-displaced and nonpayment of service fees by local governments; dried up. Most of them are in the earthquake zone
refugee households; to regulate property and land lack of knowledge of building residents; and weak and Yerevan; the remaining units are scattered
relationships; to boost privatization of state-owned managerial skills by the management body. throughout the country. Most units within the
apartments to the registered tenants (by 2000, 96 A startup revolving fund (“seed funding”) unfinished buildings had already been allocated
percent of Armenia’s housing stock was privatized); by donor organizations, commercial banks, or to households. Therefore, any policy that aims to
to introduce market-based housing management and credit organizations is needed to initiate any complete these buildings must take into account
maintenance systems; to expedite the legalization major activity connected with maintenance. the claims that those households might have on a
and registration of “unauthorized buildings and Additionally, homeowners’ knowledge and particular unit.
unauthorized land occupation”; to promote the capacity in building maintenance should be Currently there are damaged buildings in
development of a housing finance market in increased. Efforts to attract external funds to Armenia that are too dangerous to live in, but which
Armenia; and to solve housing problems of the support apartment building maintenance are could be made habitable again after reinforcement,
middle-income population. hindered because receiving long-term loans reconstruction or capital renovation. Such buildings
from banks or credit organizations—an ongoing are designated damage category III by the Armenian
Problems in Armenia’s housing sector: source of external funding—requires collateral in government, and it is illegal to live in them. The
The government of Armenia has not yet developed the form of real estate. For apartments, common number of buildings in this category is increasing.
6 Armenia Housing Study

7. Many apartment buildings built in Armenia during the Soviet era are now crumbling.
interest rates. Because of the and implementation of targeted state projects on the
global financial crisis, private- provision of affordable housing for young families,
sector crediting slowed down and vulnerable refugees, the elderly, etc. Based on
the portfolios of banks decreased separate laws and government decisions, 15 ad hoc
further. projects have been implemented by the Armenian
The private rental market Ministry of Urban Development to support residents
is relatively small. The largest in apartment buildings subject to demolition; those
category of rental units is those deprived of housing because of the taking of land
transferred to local governments for state and community needs; internally displaced
(4 percent of housing stock). There persons; residents in wooden houses in the zones
is no rent control. Landlords set prone to landslides and falling rock; children without
the rents themselves, and most parental care; families of dead soldiers; and victims
private leases are concluded of Stalinist repressions. Earthquake-displaced
informally. Lease contracts are households and households along the state border,
subject to notarization and state mainly in rural areas, remain special concerns for
EzRA mIllSTEIn
registration, which is expensive the government. In addition, thousands of families
and not expedient for the many are underhoused.
landlords who have to set low Since independence, Armenia has adopted many
The registration process of these illegal structures rents for housing. laws and regulations (see detailed legal analysis
is not yet finalized. The passage of the 2003 law “On Because of a lack of funds, there are no investment in Annex 1) that govern the housing relationships.
Unauthorized Buildings and Unauthorized Land plans for urban expansion to accommodate “Housing Code of the RoA” was in force until
Occupation” provided the basis for bringing the population growth in the capital, Yerevan. November 2005, after which a new legislative
significant number of informal structures into the There is no unified government housing package was adopted by the National Assembly of
formal housing market, but there are still tens of strategy for vulnerable groups. Commitments in Armenia, which doesn’t close the gap in the housing
thousands of illegal structures to be legalized. various regulations and documents often overlap: legislation. There are a lot of relationships that are
Despite the improvements in the legal framework The Armenian government’s action plan for not regulated by the Civil Code or the laws “On
in housing finance and the testing of mortgage 2008–12 pays special attention to housing projects Management of Multiapartment Building” or “On
mechanisms in Armenia by international donors, the for earthquake-displaced, refugee households; Condominiums,” such as the establishment of social
mortgage portfolio of banks is very small, with strict children remaining without parental care; the housing systems in Armenia, including the social
eligibility criteria, low maturity period and very socially vulnerable; newly formed young families; rental housing sector; a provision for the definition
high interest rates (13-16 percent). Loans mostly and people with disabilities or partial mobility. of “socially vulnerable,” “social” and “affordable”
were allocated for housing purchase and renovation. The list of measures in the Republic of Armenia housing; assessment criteria definition; needs-
There are no mortgages that are given at subsidized Demographic Policy Strategy includes development assessment methodology; criteria of registration
Armenia Housing Study 7

8. and housing provisions; etc. According to the ■ To shared property of multiunit building. ■ Improve housing conditions by supporting
information provided by the Republic of Armenia’s ■ To the apartments in the buildings under rehabilitation or new construction.
Ministry of Labor and Social Affairs, n about 140 construction (so-called “elite” buildings) that ■ Establish legal mechanisms for construction
legal documents of the Republic of Armenia, the have not yet passed final inspection. of affordable, economical and safe housing
term “socially vulnerable” is specifically used to for vulnerable groups. It is important legally
reflect the meaning of a given legal document. Housing finance to approve a “road map” of construction for
There is no national housing allowance scheme ■ Regulate the housing finance sector to ensure such houses starting from design-drawing,
in Armenia, although the ministries of Urban its viability without impeding its ability to construction permission documents, use
Development and Labor and Social Affairs are meet a broad spectrum of housing needs. of special construction materials (low-cost,
considering this option. ■ Support the creation and development of nonstandard) and volunteer labor, providing
Key legal problems in the field are the lack of housing finance institutions. technical inspection for these houses free of
housing strategy development and clear policy ■ Channel housing subsidies through, or in charge (this service to the “socially vulnerable”
on state responsibilities to vulnerable groups; conjunction with, housing finance. should be provided by the local authorities).
separation of responsibilities among state and local ■ Determine effective housing demand by
authorities; private-sector involvement in housing income and location (urban, rural) to identify Residential infrastructure
industry and finance; improvements of eviction, and define market segments and the volume ■ Develop a strategic approach to solid
foreclosure and bankruptcy mechanisms to conduct of finance required by each segment. waste management (acceptance of concept
legally transparent and sustainable transactions in ■ Find out sources of lenders’ funds and the papers, laws, other legislative acts, and local
real estate, including sales and other transfers of elasticity of these sources. government ordinances).
nonperforming loans; and the implementation and ■ Determine the gap between potential demand ■ Establish clear mechanisms for municipal
enforcement of acting laws and regulations. and current supply for each market segment. borrowing or the issuance of municipal bonds.
■ Develop adequate mortgage and housing ■ Develop a policy document and upgrade
The authors of this study tried to cover all saving products. infrastructure in informal settlements.
housing problems in the country and provide ■ Provide mortgages for vulnerable households ■ Develop capital investment plans for urban
recommendations to solve them. Recommendations with subsidized interest rates. expansion to accommodate population growth.
are summarized and made by subfields to further
facilitate activities of responsible authorities or Housing subsidies Regulatory regime
interested parties (investors or donors, including ■ Create the necessary legal and regulatory ■ Strengthen zoning legislation to protect
international organizations). frameworks to support supply-side subsidies. wetlands and endangered species near urban
■ Increase housing production, which means areas.
Main recommendations: directing more resources to residential ■ Improve spatial development and planning
Property rights construction. activities in all communities.
Ensure and finalize registration of property rights: ■ Increase affordability by building low-cost ■ Deploy the national urban cadastre.
■ By the state, municipalities, legal and physical housing or by supplementing housing ■ Improve the legal and regulatory framework for
entities putting real estate into civil circulation expenditures. urban development.
and making it subject to property taxation.
8 Armenia Housing Study

9. Introduction and methodology
Data as of December 31 2009, since some changes has been taken place in 2010.
Habitat for Humanity seeks to generate reliable and To prepare the study, the study team used the
comparable information on the global housing policy following methods:
environment. The organization seeks to do so by ■ Interviews with the relevant central and
collecting housing policy data in a large number of local government officials, nongovernmental
countries on a regular basis to determine a Housing organizations and independent experts were
Policy Index for each country. conducted based on a questionnaire initially
developed by HFHI.
The data are collected in Armenia in five ■ Ad hoc meetings with the specialists from Armenian
sections—the Property Rights Regime, the Housing ministries of Urban Development and Labor and
Finance Regime, the Housing Subsidies Regime, Social Affairs and, and Department of Statistics
the Residential Infrastructure and the Regulatory within Government of Armenia.
Regime—and an index score was generated from the ■ Review of existing legislation, papers and
analyses. Although the index is yet to be published publications.
alongside those of other countries, the process ■ Review of existing legislation on real estate,
already undertaken to generate data lends itself to the particularly in housing.
development of a narrative report. ■ Review of publications about housing in
Armenia.
The proposed study is a narrative report on ■ Review of other papers available on the Internet
the housing sector of Armenia framed around the about housing in Armenia.
methodology of Habitat for Humanity International’s Data collection: Ministry of Urban Development,
global Housing Policy Index, which analyzes the Department of Statistics, Central Bank of Armenia,
current context and the policies and environment International Financial Corp., Armenian Credit
that affect access to adequate housing in Armenia; Reporting Agency and the Internet.
identifies the vulnerable groups in the country that
lack access to adequate housing and determines how The study team drafted each section and sent it
their access is affected by the five policy areas; and to an editorial committee for review and comments.
reviews the activities of government, international Meetings were held with some members of the editorial
agencies and the private sector to identify good committee to discuss comments of the committee.
practices and opportunities for scaling up or Based on the comments and meetings, a final draft was
replicating programs. prepared.
Armenia Housing Study 9

10. Context analysis
Background information of a centrally planned economy and the breakdown
on the Republic of Armenia of former Soviet trading patterns. Nevertheless,
The Republic of Armenia is a landlocked country the government was able to make wide-ranging
in the South Caucasus. The territory of the republic economic reforms that paid off in dramatically lower
is 29,740 square kilometers. The population is 3.23 inflation and steady growth. Armenia had strong
million.1 The official language is Armenian; the economic growth beginning in 1995, building on
capital city is Yerevan. On Sept. 21, 1991, based the turnaround that began the previous year, and
on the results of a referendum, the parliament inflation has been negligible for the past several
announced the independence of the republic from years. This economic progress has earned Armenia
the Soviet Union. increasing support from international institutions
such as the International Monetary Fund, the World
Political structure: Based on the constitution, Bank and the European Bank for Reconstruction
the Republic of Armenia is a sovereign, democratic, and Development, targeted at reducing the budget
social, rule of law state. The constitution was deficit; stabilizing the currency; developing private
adopted July 5, 1995, through a popular referendum businesses; helping the energy, agriculture, food Like other states of the former
and was amended Nov. 27, 2005. The president is the processing, transportation and health and education
head of state and is the guarantor of the country’s sectors; and assisting ongoing rehabilitation in the Soviet Union, Armenia’s
sovereignty, territorial integrity and security. The earthquake zone. One of the main sources of foreign economy suffers from the
president is elected for a five-year term of office. direct investments remains the Armenian diaspora,
Executive power is exercised by the government, which finances major parts of the reconstruction of legacy of a centrally planned
which is composed of prime minister and ministers. infrastructure and other public projects. economy and the breakdown of
The single-chambered National Assembly is
the supreme legislative authority. The National The global financial crisis also affected Armenia. former Soviet trading patterns.
Assembly is elected through general elections for a Economic decline for 2009 was 14.4 percent.
term of five years. Justice is administered solely by
the courts in accordance with the constitution and
the laws.2 Housing stock of Armenia
before independence
Economy: Like other states of the former Soviet Before independence, Armenia had well-organized
Union, Armenia’s economy suffers from the legacy housing stock and regular housing production, and 1. Statistical Yearbook 2008, www.armstat.am.
2. Official website of the Government of Armenia, www.gov.am.
10 Armenia Housing Study

11. had set out housing management and maintenance sanatoriums, hotels, motels, campsites, sports and
mechanisms, some elements of housing finance. The tourist centers, and buildings of similar institutions
housing sector was tightly controlled and supported were not included in the housing stock, as they were
by the state. The housing rights of citizens were planned for short-term residence or rest of citizens.10
stipulated by the Constitution of 1977 and by the A special legal status was established for homes for the
Housing Code adopted on Dec. 3, 1982, and enacted elderly. Such institutions were under the control of
on July 1, 1983.3 the social security authorities. Houses were included
in the housing stock after being put into operation
In the late 1980s, the country’s housing stock according to the established procedure.
3. Tigran Janoyan, et al. “Transformation of the Housing
included 750,000 units, out of which about 500,000
Rights in Armenia: 1988–2002 - A Survey of legislation
were state apartments, mostly in multiapartment Housing management and maintenance: The and Practice.
”
buildings. More than 250,000 (about 40 percent) state housing stock was managed, maintained and 4. Steven Anlian and Irina Vanyan. “An Overview of Arme-
were in private hands; most were single-family repaired by the official state housing maintenance nia’s Reform: Housing and Urban Development Policy,
houses.4 organizations, known by an acronym pronounced 1989–1995”
Zhek (Public Housing Management Units). Local 5. Such as belonging to the state departmental, ministerial,
■ Housing stock of Armenia before Zheks were self-sustaining organizations. Zheks’ enterprises and other organizations. By the government
independence included (Annex 2): activities historically were financed 10 percent by executive action of 1987, this housing was supposed to be
■ Local city councils’ housing stock. tenant rents, 30 percent by nonresidential users transferred to the city or village council’s jurisdiction by
1993.
■ Village councils’ housing stock.5 and garages, and about 60 percent by the state
6. In some cases received funding from state budget for
■ State (central) budget-funded organizations’ budget. Cooperatives could contract local Zheks
employee housing.
housing stock.6 for maintenance. Single-family house dwellers
7. Trade and professional unions, parties. The main sources
■ State self-sustaining organizations’ housing maintained their units at their expense.
of funding for such housing were membership fees and
stock.7 operational subsidies from the central budget.
■ Public organizations’ housing stock.8 Housing finance: Long-term housing loans in 8. This stock was established in the early 1960s. Its share in
■ Housing construction cooperatives and Armenia were historically available by two banks— total housing stock was 5 percent. main eligibility criteria
housing cooperative stocks.9 Armeconombank (formerly Housing-Social Bank) for this category of housing stock were housing need,
■ Housing stock owned by private individuals. and Sberbank (Saving Banks)—which were both membership in cooperative, 30 percent down payment to
controlled by the state. The existing system of long- State Savings bank and 70 percent paid over 20-25 years
In addition, there were unauthorized or illegal term crediting was first oriented to crediting of new loaned by state economic banks with 0.5–12.5 percent
residential houses and additions built by citizens housing construction (individual or cooperative) and interest rate.
9. In Yerevan, 20 percent of housing stock—but more than
before they were recognized as residential, which not purchasing of existing housing (resales). Citizens
half in square meters—mostly rural and some urban.
were included in the housing stock. Barracks, with low incomes or employed by state organizations
10. It is reported that about one in four Yerevan families have
temporary residences that have a shared kitchen and were eligible to receive loans. Loans were in the
a second home/dacha: small building lots for the citizens,
sanitary arrangements and are, as a rule, made from amount of 20,000 rubles with a 25- to 50-year
usually distributed through their workplace. There were
wood and designed to last for 10 to 20 years, were maturity period. Interest rates were fixed and very 75,000 such housing units among Yerevan households
not included in the housing stock. Holiday homes, low (from 5 to 12.5 percent) and were not adjusted only.
Armenia Housing Study 11

12. EzRA mIllSTEIn
for inflation. Loans were not secured by collateral. A Housing situation before the collapse of
mechanism existed to annul the transaction in case of the Soviet Union: By the late 1980s, Armenia
default, but in reality it was seldom executed. had been experiencing a production decline in
the housing sector. Two events largely influenced
Housing rights of citizens: Citizens had, among the worsening of Armenia’s housing situation: a
other constitutional rights, the right to receive conflict over Nagorno Karabagh, which forced the
housing in multiunit buildings of the state or public influx of an estimated 350,000 refugees from 1988
housing stock or to become shareholders in building to 1992, and, in 1988, a devastating earthquake in
cooperative houses. Citizens also could own a house the northern regions of Armenia, which rendered
or parts of a house with personal ownership rights. about 17 percent of Armenia’s housing stock
The government could establish privileged conditions uninhabitable.11 Among other major problems was
for disabled veterans of World War II, the families deterioration of the housing stock.
of lost or missing soldiers and people given the
same status, and people identified by the Ministry In the mid-1980s there was 2 percent growth in
of Health needing improved housing conditions housing production annually, but by the end of the
because of illness. Citizens working in the enterprises, 1980s it had decreased. It increased again from 1989
institutions or organizations of another residential to 1991(because of the massive housing construction A family stands in the hallway in front of their small apart-
site had the right to be registered and to be allocated by the former Soviet republics in the earthquake ment in a dilapidated Soviet-era building in Karakert.
housing based on employment. The waiting lists of zone). Right after independence, housing production
citizens in need of improved housing were made decreased drastically (Annex 3).
public and were subject to regular adjustments. challenges forced the central governments to
The 60 percent of housing units belonged to the undertake reforms in the housing sector. The first
The established housing space quota for each tenants renting apartments from the state housing reform was Resolution 272, “On Selling Apartments
person was 9 square meters. Allocation of housing in stock. Citizens paid housing rents based on artificially of the State and Public Housing Stock to Citizens
dilapidated houses, those in emergency conditions, reduced prices for communal services and assumed as Personal Property,” adopted by the government
in barracks, in basements and in other uninhabitable no responsibility for the maintenance of common on June 13, 1989, to offer state-owned apartments
structures, as well as in houses that were subject to areas of apartment buildings. Payments by residents for sale to tenants based on officially established
demolition or major repairs, were prohibited. One for communal services partially covered maintenance cadastre value12 beginning July 1, 1989. In the course
of the most significant rights granted to a tenant by costs. Providing funding from other sources such as of four years (1989-93) 40,000 out of 500,000 state
the housing legislation was the right to exchange the the state budget was becoming increasingly difficult apartments, 8 percent, were transferred by title to the
housing he or she occupied with the housing occupied because main budget funds were directed to address private sector.
by others. In general, exchange of housing was the consequences of the earthquake and the Nagorno
executed on the basis of a civil agreement. A voluntary Karabagh conflict. 11. Steven Anlian and Irina Vanyan. “An Overview of Arme-
consent of every family member of legal age presented nia’s Reform: Housing and Urban Development Policy,
1989-1995.
”
in writing was an important condition. Housing situation after independence
12. “Transformation of the Housing Rights in Armenia:
Housing privatization: The aforementioned
1988–2002 - A Survey of legislation and Practice.
”
12 Armenia Housing Study

13. The reformation in the housing sector continued by owners and a trustee manager’s institute through Refugee issues: The Nagorno Karabagh conflict
more intensively after the independence of Armenia delegation of owner’s management and maintenance resulted in the influx of an estimated 350,000
in September 1991. In September 1993, a new “Law responsibilities. refugees in Armenia. Since 1994, because of funding
of the RoA about Privatization of State and Public from the United Nations High Commissioner for
Housing” began to operate. Upon enactment of But the transformation to the new management Refugees, the Swiss Agency of Development and
the law, the aforementioned 1989 resolution was system still is not going smoothly. Reportedly, Cooperation, and the Norwegian Refugee Council,
recognized as invalid. The free privatization option only 20 percent of registered condominium more than 4,300 refugee households have received
was chosen. According to statistics from the Ministry associations are effective. Most owners do not accept shelter (Annex 5) in apartment buildings or single-
of Urban Development, 381,000 households have responsibility for the common property of their family housing. In further meeting the housing
applied to privatize their apartments.13 buildings. There is lack of resources, poor service needs of refugees in Armenia, international donors
provision and lack of competition, nonpayment of and the Armenian government currently consider
The privatization of the housing stock lasted up apartment service fees by local governments, lack of certain refugee groups a priority, namely those
to Dec. 31, 1998. In 2000, based on the amendment knowledge and information by building residents, who are living in collective centers and metallic
to the aforementioned law, the privatization was and a low level of managerial skills by management containers called domics. Based on recent estimates,
allowed to continue without any time restrictions. bodies. about 3,400 refugee households fall under this
As a result of this reform, 96 percent of the republic’s category.
housing stock was privatized by 2000 (Annex 4). Single-family housing stock: Given significant
difficulties in the provision and maintenance of Earthquake zone recovery efforts: A number
Apartment building management and multiapartment housing stock after independence, of laws and regulations were adopted to coordinate
maintenance: The next housing privatization single-family housing stock was not paid due and make activities in the earthquake zone
reform concerned the establishment of attention. Until November 1996, with the comprehensive. Conditioned by an extremely tight
condominiums, which had not previously existed in establishment of local governing authorities, the budget, the government also involved international
the republic. As a first step, in 1995 the government management of the use and maintenance of the donors in the recovery. In early 1994, the World
decided to support the formation of condominiums individual housing stock partially was carried out by Bank approved the first credit (US$28 million)
as a means for providing for the management of the Armenian government, the executive committees requiring the residents to incur 25 percent of the
apartment buildings where at least 50 percent of of the local Soviets of People’s Deputies, ministries, average per-unit incremental cost of completing
the units were privately owned. Some communities and relevant departments. Land then was considered unfinished structures started after the earthquake.
responded to the government’s initiative, but in the exceptional ownership of the state and provided New housing projects for the earthquake-displaced
most of the regions of Armenia, condominiums only by the gratitude use right. After independence, have been introduced since 1999 by the Lincy
were not established. Further reform was boosted the maintenance of single-family houses was the Foundation, USAID, the All Armenian Fund and the
by the adoption of laws on condominiums in 1996, responsibility of the owners. Part of single-family Huntsman family. As a result, the housing needs of
then on apartment building management and a new housing stock, especially in the center of Yerevan, earthquake-displaced households were significantly
law on condominiums in 2000. Reforms broadened was demolished because of the availability of state- reduced.
the options for apartment building management by dominant interest from the urban development
introducing, apart from condominiums, the options perspective. 13. Peter A. Tatian. “Framework for the Housing Policy in the
of authorized managers (proxy managers) designated Armenia Earthquake zone, The Urban Institute, 2002.
”
Armenia Housing Study 13

14. Housing finance: Beginning in 1992, the renovation lending programs. Nearly 1,200 families ownership over time. In 1995, the central, state-run
magnitude of investment in housing construction are expected to be served by the program in its first construction industry folded. Beginning in 1994,
was significantly reduced, causing a sharp decrease two years.17 the share of international donor organizations—
in new construction. Since 1992, there have been the World Bank, Lincy Foundation, etc.—became
no state credits to individual citizens. The only Further developments in the field of housing dominant in housing production, including the
exceptions were credits to the victims of the finance in Armenia included a drastic increase reinforcement of apartments. Those activities were
earthquake: up to 30,000 rubles financed from in housing production by the private sector. carried out predominantly in the earthquake zone.
the USSR central budget.14 However, in practice, Commercial banks started providing loans for The government of Armenia was able to produce only
few individual credit programs were actually used housing production, and international donors a handful of buildings. In the early 2000s, because
because of the collapse of the Soviet Union. started playing a larger role in the development of the private-sector activity (mainly in Yerevan),
of the housing finance sector. In 2004–05, under involvement in housing production increased
In 1995, the Parliament adopted the Law on the funding of the German Kreditanstalt für considerably. Currently, the volume of housing
Mortgage (annulled after the RoA Civil Code was Wiederaufbau bank, the Urban Institute, Bank construction is decreasing because of the global
established) aimed at creating a credible system of Academie International (Germany) and the financial crisis.
housing finance using tested financing models of the Urban Foundation for Sustainable Development,
Commonwealth of Independent States. The housing Armenia, a feasibility study was carried out on Housing markets: There were few market
finance market became active by October 1999 and the development of the housing finance market in transactions annually. Most transactions were done
then real estate prices went down. Until the early Armenia, and in 2006 a project began to refinance informally, and professional real estate agencies
2000s, the housing finance system was dysfunctional the mortgage loan portfolios of commercial banks. were involved in fewer than 30 percent of market
both in terms of public and private system However, because of the global financial crisis, transactions.18 The number of market transactions in
involvement. In early 200115, commercial banks private-sector crediting was actually stopped, and the earthquake zone was relatively high, stimulated
gradually started allocating mortgage loans, although the portfolio of banks decreased. To prevent the by the USAID and government housing voucher
the mortgage portfolio of banks was very small and drastic fall of the development pace in the field of program.
conditions, especially for physical entities, were rigid: housing finance, the government encouraged private
strict eligibility criteria, low maturity period and developers to take loans from the commercial banks
very high interest rates. Loans mostly were allocated under state guarantee. The measure was undertaken
for housing purchase and renovation. Mortgage to support the huge volume of unfinished
mechanisms were further tested by the USAID/Urban construction, mostly in Yerevan, and started the 14. Steven Anlian and Irina Vanyan. “An Overview of Armenia’s
Institute Housing Purchase Certificates Program construction of residential buildings for earthquake- reform: Housing and Urban Development Policy, 1989-
(in 2003–04)16 and applied by Habitat for Humanity displaced households. 1995.
”
15. RoA State Committee of Real Estate Cadastre.
International. Since 2000, HFHI’s Armenia office has
16. The program grants eligible households a voucher to en-
been providing affordable loans with a long-term Housing production: During the initial years
able them to buy an apartment in the housing market and
maturity period (up to 20 years) for construction of transition, 1989–92, all residential construction
has boosted market transactions also outside the earth-
and renovation of poverty housing. In 2008, the activity was under central state funding. Starting
quake zone.
organization launched the first phase of a US$3.7 in 1994, many state construction firms were 17. Habitat.org.
million new housing loan fund, which will allow privatized. In state enterprises, employees received 18. United nations. “Country Profile on the Housing Sector:
for significant scaling of Habitat’s construction and an ownership share with a plan to take over whole Armenia, new York and Geneva, 2004.
”
14 Armenia Housing Study

15. The price of housing in Armenia differs from region
to region. While on average 1 square meter of gross Condition of current It is interesting to note that the housing
residential area had a market value of US$80 to US$90, housing stock in Armenia supply in Armenia measured in housing units
it costs approximately US$600 in Yerevan. Because “During the past decade, Armenia has become has increased significantly during the past five
of the aforementioned housing voucher program and a ‘nation of homeowners,’ with 96 percent of years (Annex 10). The main reasons are increasing
construction by donors (mainly the Lincy Foundation), the housing stock being privately owned today. housing production by the private sector (mainly
prices for houses increased in the earthquake zone. Privatization was accompanied by changes in the in Yerevan) and international donors (mainly in
According to the State Committee of Real Estate institutional and legal framework. New institutions, the earthquake zone) and the gradual “legalization”
Cadastre, after the decline of prices between 1999 and governmental, private and international have of illegal or semilegal housing, in particular
2001, housing prices and transactions have consistently become an integral part of the housing sector, and through legislation that regularizes existing
increased from 2001 to 2007 (Annex 6). In Yerevan the legal basis for private ownership has been created housing and through the low rates of removal
in particular, the prices drastically increased after by the introduction of a number of laws aimed at of inadequate or damaged housing from the
the construction boom starting in the early 2000s. providing a framework for the management of the existing stock. In 2001, only 18,000 square meters
However, SCREC reports that as of the first quarter newly privatized housing stock.”20 or 0.3 percent of housing was taken out of the
of 2009, the real estate transactions decreased by 14 stock because it was inadequate. International
percent and 20 percent compared with the first and Total housing stock and housing supply: As averages, however, suggest that a country needs
second quarters of 2008. The analysis of price indexes of Jan. 1, 2009, the total surface of Armenia’s housing to replace between 1 and 2 percent of its housing
shows that the prices for housing per square meter fell stock amounts to 84,985,200 square meters, of which stock annually to maintain existing standards.
by about 16 percent by taking into account the more 52.6 percent is in urban areas and 47.4 percent is in Given the predominance of poorly maintained
than 20 percent of depreciation of Armenian Dram rural areas. Table in Annex 7 provides an overview high-rise prefabricated structures in Armenia, this
(AMD) against foreign currencies, particularly the U.S. of the distribution of the housing stock among proportion should be considerably higher.21
dollar in March 2009. Armenia’s 10 regions (marzes) and Yerevan as well as
between urban and rural areas. To date, according to the Ministry of Urban
Rental market: The rental market is relatively small, Development, the number of unsheltered
given the large number of apartment units that were Housing types: The housing stock of Armenia households and households in need of improved
privatized. The largest category of rental units is that is divided into apartment and single-family housing conditions in Armenia is about 66,023
which is currently being transferred to local governments housing stock located in urban and rural areas. (8.4 percent of Armenia’s permanent population),
(approximately 4 percent of the apartment stock). The This breakdown is provided in Annex 8, which also out of which 30,000 (3.8 percent of the permanent
private rental market is very small and concentrated in indicates the comparison between total numbers of
Yerevan. Rents in the private market in the early 2000s housing units in 1989 and 2009.
varied from US$50 per month at the low end to US$250
to US$400 per month at the top end. The latter were Single-family homes represent about 48 percent
19. United nations. “Country Profile on the Housing
mainly flats rented out to companies or expatriates. There of the total housing stock—most are in rural areas— Sector: Armenia, new York and Geneva, 2004.
”
is no rent control. Landlords set the rents themselves, and and apartments represent about 52 percent. The 20. Ibid.
most private leases are concluded informally, without typical apartment building is 30 to 50 years old, an 21. Ibid.
notarization and state registration.19 age when serious repairs are necessary (Annex 9).
Armenia Housing Study 15

16. population), are unsheltered (Annex 11) and live in ■ 1988 and 1997 earthquake-displaced Apartments for Young Families,” which states main
domics—temporary metallic containers or wooden households. rules and criteria for young families in acquiring a
or stone structures—in public assets or in other ■ Refugees displaced from Azerbaijan from dwelling. According to preliminary data, the number
temporary shelter. 1988 to 1992. of potential participants in the program equaled 300
■ Residents living in the wooden houses in the young families for 2010.
Vulnerable groups in Armenia village of Lernadzor, Syunik Region.
lacking access to decent housing ■ Residents of houses in zones susceptible to
Housing projects supported by the state: landslides and falling stone.
There is no government strategy to deal with the ■ Children remaining without parental care.
housing issues of vulnerable groups. Armenia’s ■ Families of killed soldiers.
Ministry of Urban Development had been ■ Repressed families.
implementing ad hoc projects for vulnerable groups
based on different laws and government decisions. In the government action plan for 2009-12
There are 15 such projects, part of which have (which can be viewed as Armenia’s sustainable
already been completed by the ministry. Most of development strategy), special attention is paid
the projects are ongoing. As of Jan. 1, 2009, the to housing projects for socially vulnerable groups
total number of vulnerable families involved in (Annex 13), which, according to the government,
the aforementioned 15 projects was 33,730, out of are:
which 19,863 received housing. The remaining need, ■ Earthquake-displaced households in the
according to official data provided by the Ministry earthquake zone.
of Urban Development as of Jan. 1, 2009, is 14,723 ■ Refugee households.
(Annex 12). The government is updating the list of ■ Children without parental care.
beneficiaries annually. ■ Socially vulnerable, young families.
■ People with disabilities or partial mobility.
Based on the government projects, the vulnerable
groups in Armenia lacking access to decent housing The list of measures of the RoA Demographic
are: Policy Strategy (July 9, 2009, GoAM Decision # 27
■ Residents of multiunit buildings subject to N) includes development and implementation of
demolition. targeted state projects on provision of affordable
■ Residents deprived of housing because of the housing for young families, provision of permanent
taking of a land plot for state and community housing for the most vulnerable refugees, for the
needs. elderly, etc.
■ Residents of houses near the state border.
■ Internally displaced persons from Artsvashen Ad hoc housing projects for young families
village. include the government of Armenia’s Jan. 29,
2010, approval of Decision No98-N “Affordable
16 Armenia Housing Study

17. Housing analysis
The property rights regime efficiency of property markets are the priorities for subdivisions.
Property registration, placing property into civil the Armenian government. Nevertheless, private
circulation, the provision of high transferability of property rights are not absolute. The state can define The objects of state registration are the rights
real estate, and the establishment of mechanisms for and limit these rights through, inter alia, zoning of ownership and use, mortgage, hypothec,
the protection of property rights guaranteed by the restrictions, taxation or compulsory acquisition for construction, claim of assignment, servitude to the
constitution are the main responsibilities of relevant public use. property subject to state registration as set in the
government agencies. law, in addition to other rights, their origination,
The overall aim of the Armenian government to conveyance, modification and termination in cases
There are three aspects of the property rights develop property rights registration is: stipulated by law. The subjects of state registration
regime: the freedom to exchange land and housing ■ To promote private-sector development by are the Republic of Armenia, its communities,
property without restriction, the development of implementing a transparent, easily accessible citizens, physical and legal persons, foreign states
land registration systems, and the orientation of and reliable registration system for land and and international organizations, foreign legals and
the government vis-a-vis regularization of squatter other immovable property. people with no citizenship.
settlements as opposed to the eviction of settlers. ■ To provide a chronological record of property
owners and their rights and obligations. All citizens of Armenia have equal land and
The legislation of the Republic of Armenia on ■ To reduce the transaction costs of title other property rights. They can jointly own the land
state registration of rights to property (hereinafter transfers and mortgage financing. or other real estate. Property acquired by spouses
referred to as “state registration”) consists of ■ To reduce the number of procedures and during marriage is in their joint ownership, unless it
Armenian laws and regulations. The two main laws amount of time to register property. is provided as a gift or inheritance or belonged to the
in this sphere were put into force in 1999 (the RoA spouse before entry into marriage.
Civil Code, January 1999, and the RoA law “On State The general principles of state registration in All physical and legal individuals shall be
Registration of Rights to the Property,” April 1999). Armenia are: informed about the registered rights to the real
The RoA law “On State Registration of Rights to the ■ State protection of registered rights to property regardless of their awareness of the
Property” regulates the state registration of rights to property. respective rights.
property and the activity of the system implementing ■ Accessibility and objectiveness in updating
the state registration, and includes rights and and centralizing cadastral data. State ownership of land and housing has been
encumbrances to the property, subject to state problematic. Housing investment incentives by
registration, irrespective of the form of ownership, in The state registration of rights to the property is public authorities have usually been unrelated to
addition to rights to personal property. implemented by the system of state unified cadastre demand, consumer preferences or willingness to pay.
of real estate, which consists of the national body
Securing property rights and increasing the within the government of Armenia and its territorial Common (or group) ownership rights to land
Armenia Housing Study 17

18. EzRA mIllSTEIn
and housing are also problematic. The rules usually
preclude individuals from selling their shares of
these rights freely to others. Individuals lose some
or all of these rights upon leaving the group, and
they are thus constrained in their mobility. Urban
housing cooperatives in Armenia, for example, have
often failed to institute effective policing measures to
force recalcitrant members to pay their dues.
A new type of right was added to the rights of
nonowners: the right of construction, which was
vaguely defined in Article 204.1 of the RoA Civil
Code, giving way to different interpretations. The
right of construction can be provided for 99 years
based on the contract, which does not derive from Carpets are on display for sale at the Vernisage, a bustling market in downtown Yerevan.
the interest of the owner of the land plot. Moreover,
Article 209 of the RoA Civil Code requires that when
right of ownership, right of use, mortgage, hypothec, growth and development of the community at large,
transferring the ownership right to the building or
servitude, other encumbrances, rights to personal all of which lead to increased demand for properties.
structure on the plot belonging to the owner, the
property, and other rights stipulated by law shall be Property owners cannot, therefore, claim the right to
part of the plot occupied by the building or structure
subject to state registration within 30 days of the appropriate all the surplus value of their property, and
should also be alienated, and the rights necessary
transaction. part of this surplus can and should be taxed to cover
for using and maintaining the building should be
the cost of public improvements. Issues of property
transferred. It turns out that the right of construction,
Registered rights, including mortgage and taxation will be analyzed in more detail and shall
within a very short period, can be transformed to
hypothec, have priority over rights submitted within be applicable for all kinds of property in relevance
the ownership rights of the real estate (it also means
the determined period but not registered. with the market value of property (In Armenia, there
the land, which may belong either to the state or to
are two laws regulating property taxation: the law
the community). In general, there are contradictions
Immediately after the state registration of rights “On Property Tax” and the law “On Land Tax.” Now
within all legislation connected with the right of
to the real estate, a certificate stating the registration government is going to combine these two laws and
construction and the consequences of its application.
of ownership (use) and the right to the real estate is establish one unified Tax on Real Estate Property).
issued.
Armenia has a unified cadastral system. All rights
In 2006, the law “On Alienation of Property for
and transactions related to real estate property are
The increased value of properties is in large the State or Community Needs” was adopted, which
a subject of state registration in the same cadastral
measure attributable to public actions in service regulates all relationships related to the compulsory
departments. Rights to the property shall be considered
provisions, to actions by other citizens to enhance taking of a land parcel or the other property for
registered from the moment of registration. Rights
the property values of the neighborhood, and to the the state or community needs. The public must
originating from real estate transactions, such as the
18 Armenia Housing Study

19. retain the right to acquire any property deemed it virtually impossible for families to own homes or unions and pawnshops. It accounts for only 3 percent
necessary for public use through its power of invest in needed home improvements. of the total financial sector, so it does not yet play a
eminent domain. When such a public need arises, meaningful role in financial intermediation.
property owners must sometimes part with their As of Jan. 1, 2010, Armenia had 22 commercial
land involuntarily and receive a fair market price in banks with 410 branches and 8,402 employees, with: The Armenian government has announced its
return. ■ Total capital of 286,807.5 million AMD. goal and objectives in the development of housing
■ Total assets of 1,346,105.1 million AMD. finance, taking into account the development of a
In the absence of an effective practice of ■ Total loans of 778,182.8 million AMD. vibrant and healthy housing finance sector as an
eminent domain, public agencies cannot provide ■ Total liabilities of 1,059,297.6 million AMD. integral component of the financial sector. The
the infrastructure necessary for expanding cities ■ Total deposits of physical persons of 339,493.6 key of reforms in this field is to improve housing
or for revitalizing and upgrading established million AMD. conditions by promoting the development of the
neighborhoods. Often, the success of slum and ■ As of Jan. 1, 2010, there are 28 credit housing sector as a key economic sector in terms
squatter upgrading projects, for example, has organizations in Armenia. of savings, investment, production, employment
hinged on the ability of the community to negotiate and creation of wealth; to make homeownership
agreements to clear sufficient right-of-way for roads Lack of competition also contributes to high more affordable by increasing popular access to
and public facilities. lending rates. Despite the existence of 22 commercial mortgages; and to direct credit and find affordable
banks, certain sectors are served by only a few banks. loans to solve housing problems of low-income or
The housing finance regime Bank loans are mostly short-term, and therefore not vulnerable groups.
Supported by favorable macroeconomic conditions, conducive to productive investment. While the sector
the mortgage market in Armenia has started as a whole is liquid, well capitalized and profitable, Central Bank of Armenia was closely involved,
developing during recent years. However, it remains there is considerable heterogeneity across banks. directly and indirectly, in the reforms addressed to
very small and mainly serves the more affluent The nonbank financial sector in Armenia comprises the financial sector, in particular the banking sector,
population in the capital city of Yerevan. This makes insurance companies, leasing companies, credit and lately the housing finance market.
The most basic policy instrument for the
The Macroeconomic Figures of the Armenian Banking System (comparing 2006-09) development of a vibrant housing finance regime is
Jan. 1, 2006 Jan. 1, 2007 Jan. 1, 2008 Jan. 1, 2009 Jan. 1, 2010 the creation of a property rights regime that makes it
possible to own, buy, sell and mortgage houses and
% of total assets 20.2 20.4 25.0 28.4 42.5 apartments, as well as to legally transfer other rights
in GDP
to the real estate property. The main question is how
% of total loans 9.4 9.5 13.6 17.7 24.6 to make the property registration process and title
in GDP transferring faster, cheaper and easier to allow lenders
% of total capital 4.2 4.5 5.3 6.5 9.1 to sell loans and collaterals in a short time and in a
in GDP legal way.
% of total deposits
of physical persons 5.4 5.4 6.3 6.4 10.7
in GDP
Armenia Housing Study 19

20. The key regulatory instrument is an effective ■ Foster growth and diversification.
and enforceable foreclosure law that makes it ■ Ensure the financial integrity of housing
possible to evict a homeowner who fails to meet finance institutions. The key of reforms
contractual obligations toward the mortgage lender. ■ Establish conditions for the safety of
The Civil Code has recently been amended to depositors. in this field is to
provide for a speedy foreclosure procedure, allowing ■ Restrict conflict of interest and ensure proper improve housing
a secured creditor to foreclose on a property without management of risks. (Central Bank of
having to resort to a court if he has a notarized Armenia adopted a few regulations related conditions by
agreement to this effect. to the asset/loan classification and the promoting the
bankruptcy procedures of banks.)
Another issue is ensuring a transparent, quick, ■ Develop norms for portfolio structure, development of the
efficient and certain enforcement system. Currently, the supervision of financial management,
housing sector as a
the process of enforcement is not clearly stated; accounting, auditing and reporting: Central
standard and workable practices are missing; sale Bank of Armenia approved new resolutions key economic sector.
by private treaty is prohibited; court processes are on the creation of the credit registry, an
delayed; and costs are high. information system on creditworthiness of
customers of banks, credit institutions and
Other international organizations also are foreign banks’ branches operating in Armenia.
interested in foreclosure, enforcement and The creation of a credit registry is aimed at
bankruptcy issues in Armenia and are closely reducing the credit risk for banks and credit
involved in technical assistance projects to support institutions, while making sure that such and considering requesting technical assistance to
the government. an information system would help identify further strengthen contingency planning and crisis
nondiligent borrowers. preparedness.
A second necessary instrument is a system
of prudential regulations to ensure the viability Existing legislation confers on the Central Such practices assess and account for all the
of housing finance institutions. Armenia creates Bank of Armenia comprehensive powers for risks associated with mortgage lending, including
clear objectives of such a system, highlights main intervening and resolving banks’ problems. inflation risk, default risk or risks that houses are
priorities of the subject field and involves all CBA has strengthened its capacity to address the damaged or destroyed, and cover such risks by
authorized governmental and financial institutions banking crisis by expanding the range of eligible settling appropriate interest rates or by the design of
to create necessary regulations to improve the collateral for emergency liquidity assistance. CBA specific mortgage instruments.
housing finance regime and strengthen the housing has also formalized a mechanism to support the
finance market in the country. recapitalization of banks through a subordinated A third group of regulatory instruments often
debt facility matching bank shareholders’ capital found in housing finance regimes are restrictions
These objectives are: injections. It also introduced a temporary loan that aim at rationing credit by:
■ Protect the public interest from the facility to expedite mergers and acquisitions. The ■ Limiting mortgage lending to specific types of
consequences of fraudulent bankruptcies. CBA is securing public resources for this purpose housing.
20 Armenia Housing Study