Mechanisms of property ownership change and social change in inner-city Warsaw (Poland)

Abstract

Chinese

Taking a production-side approach, the article discusses how property restitution and privatisation have created rent and value gaps, and influenced social change in the inner city of Warsaw (Poland). Specifically, a rent gap (resulting from restitution) and a value gap (created by low-cost privatisation) are hypothesised to have produced different ownership structures in pre-war residential buildings, with different implications for social change. These effects are assumed to be modulated by three factors: legal constraints, availability of private capital and changing residential preferences. The main findings show that the national legislation and municipal regulations with respect to low cost privatisation created the value gap and favoured intergenerational property transfer and lower residential mobility. The value gap has been eliminated by the changes in municipal regulations. Second, a lack of private capital was a key element in disinvestment in the 1990s, and private developers have since become key actors in shaping the housing offer and have triggered intensive gentrification. Third, residential choices often follow family reasons (inheritance of a unit), and are loosely coupled with a ‘back to the city’ movement. The contemporary choices of many newcomers are still embedded in opportunities created by earlier privatisation. Finally, former municipal tenants in restituted buildings come under pressure from new, private owners to leave their homes. Paradoxically, restitution, seen as a mechanism for social justice, has led to social injustice. Overall, it appears that both privatisation and restitution have fuelled problems of affordability, and led to the exclusion of lower-income households from the housing market.

Keywords

gentrification post-socialist city pre-war housing privatisation property restitution

Introduction

Changes in home ownership and tenure are key elements in the transformation of post-socialist countries. The shift from public to private ownership due to restitution of nationalised property to its former owners, and massive, low-cost privatisation of public units significantly increased the percentage of homeowners, while the number of municipal tenants has fallen. The withdrawal of the State from the management of public units has contributed to the commodification of housing. Many scholars have examined the consequences of these events for housing structures (Lux and Mikeszova, 2012; Lux et al., 2012), while the social implications include growing inequalities and conflicts between tenure groups (Feldman, 1999; Kahrik, 2000; Lux et al., 2012; Reimann, 1997).

However, less attention has been paid to the impact of changes in ownership structures on social change. This investigation offers new insight into gentrification in post-socialist countries. It adds to the literature, which has, to date, identified urban renewal (Kovács et al., 2013) or new housing (Holm et al., 2015) as the main triggers. In this article, gentrification is defined narrowly as a process of social change that involves the displacement of former, low-income residents by middle- and upper-income groups, coupled with property renovation (Beauregard, 1986).

This case study of the district of Śródmieście in Warsaw (Poland) is based on a production-side approach to gentrification. It follows the work of Sýkora (2005), who claims that restitution and privatisation create different conditions for change. Here, I formulate the hypothesis that the rent gap (associated with restitution) and the value gap (created by low-cost privatisation) produce different ownership structures, and therefore have different implications for social change. I identify three factors (legal constraints, the availability of private capital and residential preferences) and examine their role in these processes. The investigation therefore goes beyond a reductionist vision, which argues that the restitution of nationalised property to private owners necessarily facilitates redevelopment, while privatisation (leading to fragmented ownership) is an obstacle (Sýkora, 2005).

Although the impact of its socialist heritage on social and spatial development cannot be neglected, Poland has made huge strides since 1989. Macro-economic processes and increased openness to foreign investment have restructured the labour market and changed the country’s social composition. More specifically, in the Warsaw region, the overrepresentation of service sector employment, which began in 2004, continues (Batorski and Błażewicz, 2015). Although, overall, its Gini coefficient indicates a slight decline in national income inequality (0.3 in 2013 compared to 0.327 in 2005), average revenue and inequality remain higher (0.338) than in other parts of the country (0.289) (Batorski and Błażewicz, 2015). Between 2009 and 2015 the number of millionaires in Poland doubled, and one in six lives in Warsaw.

Warsaw’s history makes it a unique subject for a case study, as around 64% of the built environment was destroyed during the Second World War. Socialist ideals strongly influenced the city’s reconstruction and, while an ongoing housing shortage and the allocation of units created a patchwork of housing and social structures, the inner city remained relatively socially mixed until the collapse of the socialist regime in 1989. Beginning in the 1990s, increased private investment in the inner city and redevelopment of peripheral districts were the most visible signs of physical upgrading. The 21st century brought dynamic reinvestment in the city centre, and redevelopment in peripheral areas, together with a new set of problems. Regardless of the mechanism, the shift from public to private ownership (for both land and housing) created a broad palette of spatial and social change.

This article begins with a general discussion of the production-side mechanisms (value and rent gaps) that have driven gentrification in post-socialist cities. Next, it sets out the specific context for social and ownership change in Warsaw. Empirical evidence from a variety of sources is used to unravel the underlying causalities between them. The key section on the relationship between the two phenomena is divided into subsections dedicated to three modulating factors, namely: the role of legal constraints; the availability of private capital; and residential choices. The article concludes with a broader discussion of the implications of ownership change for social change and social inequalities.

Production-side gentrification mechanisms in the post-socialist context

The main production-side gentrification mechanisms are rent and value gaps. In general, disinvestment and deterioration in inner-city areas, accompanied by the increasing attractiveness of suburban locations, are said to lead to a growing difference in rents to the detriment of the city centre, termed the rent gap. Smith (1979) defines the rent gap as the disparity between the potential and the actual (real) ground rent, and argues that the increasing cost of new construction and distance from the city centre means that the redevelopment of inner-city areas eventually becomes more economically viable because, at a certain point, the gap is wide enough to trigger reinvestment. The subsequent physical upgrading of the inner city creates a supply of housing for potential gentrifiers. In post-socialist countries, the lack of maintenance of the pre-1945 housing stock¹ by the State under socialism (Reimann, 1997), and the lack of private investment capital, were typical drivers. As the lowest rents were not particularly low, the gap was mainly created by the potential for very high rents (Sýkora, 2005). At the same time, politico-economic transformation and the restitution of nationalised property² to its former owners or their heirs established favourable conditions for redevelopment.

The value gap is generally associated with changes in tenure and the shift from private-sector renting to owner occupation (Hamnett and Randolph, 1984). Taking the example of Inner London, Hamnett (2003) argues that increased property value incentivised landlords to sell their rental units and to reinvest the gains. Changes in tenure were often accompanied by social change, as the newcomers were different to established residents (Boterman and Van Gent, 2014; Hamnett and Randolph, 1984). Similarly, in post-socialist countries, low-cost privatisation of the public housing stock created a value gap. This was associated with the shift in tenure from municipal renting to home ownership and manifested in the difference between the market price and the purchase price of a public unit. It has been reported elsewhere that housing privatisation and commodification accelerate market formation (Struyk, 1994), theoretically giving way to the reinvestment of private capital and residential mobility in the inner city.

Building upon previous research, the following sub-sections explore in more detail the causalities between property restitution and the rent gap, and privatisation and the value gap, and examine the implications of each for social change.

Restitution of nationalised property and the rent gap

The restitution of nationalised property to its former owners is considered as an example of social or historical justice (Habermas, 1997; Kozminski, 1997). Pre-war estates that were managed by the State (followed by municipalities) and disinvested for many years were eventually returned to private hands. Located in the inner city, they became valuable assets and a potential source of benefit, if redeveloped.

However, Sýkora (2005) suggests that reinvestment in post-socialist cities is selective, and limited to formerly attractive areas that declined under communism. Research has found that the rent gap mechanism does not systematically activate redevelopment, typically because of a lack of private-sector resources. An example from Cracow (Poland) shows that the new, private-sector owners of restituted, dilapidated buildings follow one of two strategies: either they attempt to finance rehabilitation through the commercialisation of the ground floor (at the highest possible rent), or they seek a better market opportunity (Murzyn, 2006). In Berlin, in cases where the rent gap has failed to generate redevelopment, policy initiatives have indirectly encouraged investment through attractive public subsidies (Bernt and Holm, 2005). Many private owners of restituted buildings simply cannot afford to refurbish them; the problem is compounded by conservation guidelines that constrain redevelopment of pre-war buildings. Evidence from East Berlin (Bernt and Holm, 2005; Reimann, 1997), Prague (Sýkora, 2005) and Warsaw (Stopa and Brykczyński, 2010) shows that after a couple of years, many individual owners sell their property to private-sector developers.

The literature highlights that the social composition of residents in restituted buildings is influenced by national legislation and municipal regulations. In Bucharest and Prague, sitting tenants have the right to remain in their homes for several years, and rent controls limit social and physical change (Chelcea, 2006; Lux and Mikeszova, 2012). In Poland, the 1994 Act on Leases and Housing Allowances froze rents in restituted buildings for 10 years. The Act was controversial because it only protected tenants, leaving owners with no financial support for maintenance, and exacerbating the problem of decay. More recently, higher rents in renovated buildings in Cracow have contributed to the eviction of poorer households (Murzyn, 2006), and tensions between tenants and owners have escalated as residents resist being forced to leave the homes they have occupied for many years. At the same time, restituted pre-war residences that are purchased by a developer and refurbished experience intensive gentrification, as only the more affluent members of the population can afford these units (Górczyńska, 2017; Sýkora, 2005).

Privatisation and the value gap

Massive privatisation brought tremendous change to the tenure structure (Hegedüs, 2013), and contributed to the rise in the number of homeowners in post-socialist countries. The success of the process was due to the low price of privatised units, and additional discounts offered to sitting tenants, who benefited from the shift from municipal renting to home ownership. Privatisation created a value gap (Chelcea, 2006; Kovacs et al., 2013) that sitting tenants could profit from (Hegedüs, 2013).

Taking the example of Bucharest, Chelcea (2006) argues that property rights gained through the privatisation of public housing were a key source of capital in post-socialist countries, and contributed to the creation of a capitalist class in Eastern Europe. Other scholars highlight the fact that cheap privatisation produced a group of cash-poor and asset-rich households (Hegedüs and Teller, 2006) that were unable to cover the costs of maintenance and renovation (Fearn, 2004). Moreover, the transition from a planned to a market economy impacted household savings and incomes, which was also reflected in a failure to maintain buildings (Standl and Krupickaite, 2004). The case of Pitesti in Romania (Soaita, 2012) shows that even post-2000, the country’s socialist heritage continued to influence collective investment in housing, specifically with regard to a lack of structures and tools designed to cope with contemporary challenges. At the same time, although residents considered themselves poor, they tended to take an individual rather than a collective approach to property renovation. Conversely, Sýkora (2005) claims that the new owners of privatised apartments are not particularly interested in funding refurbishment, and instead seek better living conditions, usually in suburban areas. While the scope of privatisation was impressive, it often produced fragmented ownership in residential buildings, notably in cases where only some units were purchased by sitting tenants, while others remained in public hands. Sýkora (2005) argues that this became a key obstacle to rehabilitation.

Earlier research suggests that although the value gap created by low-cost privatisation affects tenure and ownership structures, it does not necessarily foster rehabilitation or social change. For instance, in Budapest (Hungary), publicly-owned units were sold to sitting tenants without any restrictions on their resale; this enabled local residents to move, and triggered gentrification (Kovács et al., 2013). The situation in Poland is different. Under the Property Management Act (1997), any discount has to be reimbursed if the unit is resold on the open market within 10 years.³ However, as the rule is not applied to transfers to family members, many privatised apartments are inherited or sold within the family, which has resulted in the inflow of younger, well-educated specialists or freelance workers (Grabkowska, 2015). These examples show that the value gap only supports gentrification if the legislation allows the resale of property, and if the individuals living in privatised apartments are mobile.

Therefore, although there is a link between the rent gap and property restitution and the value gap and privatisation in post-socialist countries, physical upgrading and social change are limited by three factors: legal constraints, the availability of private capital and residential preferences. The conceptual framework for the analysis of the relationship between ownership structures in pre-war buildings and social change draws upon these three factors, and the following analysis looks at their influence on restitution and privatisation in the specific context of Warsaw.

Social composition and ownership structures in Warsaw: Setting the scene

The turbulent history of Poland over the course of the 20th century has left its mark on Warsaw’s social composition and ownership structures. Prior to the Second World War, around 95% of buildings were privately owned. This completely changed during the nationalisation of land and buildings (mainly in central districts)⁴ that began in 1945. Under socialism, property restitution was rare and the majority of claims were rejected. While privately-financed construction continued to exist, it was scarce. In the 1960s, housing cooperatives were the main investors in the residential sector. Together with public and company-owned units, this was labelled the ‘socialized housing stock’ (Herbst and Muzioł-Węcławowicz, 1993).

The increase in private ownership took place in the 1970s, and the beginning of sale of state-owned apartments and houses to sitting tenants. It is worth noting that the aim at the time was not to extend the private sector, but to provide relief to a public sector (and later municipalities) that could not meet the cost of maintaining their housing stock (Herbst and Muzioł-Węcławowicz, 1993). By 1988, around 30% of residential buildings were part of the socialised housing stock, and concentrated 92% of apartments in Warsaw (Population Census, 1988). In the district of Śródmieście (Warsaw), this percentage reached 96%.

Although the allocation of apartments was consistent with socialist, egalitarian principles in theory, it did not encourage social mixing in practice. The middle and upper social groups have always resided in prestigious areas (Marcińczak et al., 2013; Węcławowicz and Księżak, 1994), where their presence was correlated with large, state-owned apartments (Dangschat, 1987). Domański (2015) confirms that that many intellectuals and scientists were offered certain privileges, and benefited from the allocation of better quality accommodation.

The 1990s saw the beginning of massive privatisation, in the form of the sale of municipal units to sitting tenants at 10% of the market price. This resulted in a significant increase in privately-owned apartments in Warsaw as a whole, but particularly in the city centre (Muzioł-Węcławowicz and Węcławowicz, 1992), and the number of municipal units declined significantly, from around 154,900 in 1995 to 91,400 in 2010 (25.2–11.0% of the total housing stock). During this time, new housing investments (public or private) remained relatively rare.

The limited-scale restitution of nationalised property to its former owners adds another layer to ownership structures. The situation is complicated by the fact that Poland has not yet developed a legal framework for restitution, although the number of claims filed by former owners (or their heirs) has continued to grow since the 1990s. As a result, each claim is investigated individually, and different solutions, including in-kind restitution, compensation⁵ or the offer of a replacement property are applied.

In some cases, restitution led to the displacement of former municipal tenants. It has been estimated that in the 1990s around 510,000 Warsaw residents were living in buildings that could be the subject of a restitution claim, a third of them in the district of Śródmieście (Kęsicka and Puch, 1992). Between 1990 and 2014, more than 3500 restitution claims were approved, while in 2015, 1900 awaited a decision. In 2009, a revised local legislation recognised a new category of municipal tenant. Consequently, tenants in restituted buildings became eligible for a priority support in finding alternative accommodation and, between 2009 and 2016, around 2450 households received help, i.e. about half were allocated a social unit (City Hall of Warsaw, 2016). It should be noted, however, that only households that meet certain income criteria are eligible, and the overall scale of the problem remains obscure.

Both privatisation and in-kind restitution have produced complicated ownership structures, made up of the building’s private owner, the owners of private apartments and former municipal tenants. These different groups often have differing interests: former municipal tenants want to stay where they are, while private owners try to profit from the sale of refurbished units. Moreover, the new owners of restituted buildings are often reluctant to invest in renewal because they perceive that tenants are unwilling to take care of their residence (Bouloc, 2013).

Data and methods

The article takes a case study approach and focuses on units in multi-family, pre-war buildings that have been particularly affected by ownership change. The analysis concerns the inner-city district of Śródmieście (Warsaw), where pre-war buildings constitute more than 30% of the housing stock (Figure 1), almost all of them multi-family. According to data from the Polish Ministry of Digital Affairs, such buildings housed around 9400 people in 2016. The population of Śródmieście has decreased from 156,900 in 1988 to 119,000 in 2015 (CSO, 2016; Kowalski and Śleszyński, 2006). However, between 2002 and 2015 the percentage of the population aged 30–39 or 55–64 grew by 40%, while the number of children (under 14 years old) and the elderly (over 70 years old) fell by 13% and almost 20%⁶ (CSO, 2016), respectively.

Figure 1.

The district of Śródmieście, showing the four quarters (Śródmieście Południowe, Powiśle, Solec and Ujazdów) used as the basis for the case study.

A combination of empirical datasets and analytical methods was deployed to examine the role of legal constraints, the availability of private capital and residential preferences in modulating the effects of the rent and value gaps on social change. Legal constraints were evaluated from national legislation and municipal regulations regarding privatisation and restitution. Privatisation data was taken from official records published by the Central Statistical Office, and data on restitution was provided by the Warsaw Office of Real Estate Management. The final step was to carry out a micro-case study of privatised units in 68 pre-war buildings in Śródmieście (approximately 23% of the total). These buildings were randomly selected from the list of land parcels granted perpetual usufruct⁷ documented by the City Hall. Land Registry⁸ data identified 627 privately-owned units in the period January to April 2014 (Figure 1). The actual number of apartments is unknown, because the Land Registry database only contains details of privately-owned units that have been registered, and does not include information about any other type of unit. A further complication is that no details are available regarding apartments that have been merged or subdivided.

Triangulation methods estimated the availability of private capital. First, residents of three inner-city districts (N = 400; N_{Śródmieście} = 127) were surveyed⁹ in September 2016 about building maintenance. Second, transaction price data revealed the level of prices in the pre-war buildings. The database provides details of 2192 property transactions recorded between 2006 and 2014 in Śródmieście by the Office of Geodesy and Cadastre.

Residential preferences were evaluated from several sources. First, the 1988 and 2002¹⁰ population censuses provided micro-scale data on socio-professional groups, newcomers in 1989–2002 and ownership structures in pre-war buildings. The aim of the analysis was to identify correlations between the location of pre-war buildings and the influx of middle and upper professional groups to Śródmieście in the 1990s. Spearman’s correlation coefficients were calculated for socio-demographic characteristics of respondents who had settled in Śródmieście in the 1990s. The findings from the survey in 2016 allowed analysis of the contemporary motivations and residential choices of residents, as well as their future residential plans. Finally, this was complemented by the characteristics of customers for luxury housing units in Warsaw (2013–2015), published in a report by the consulting agency MADE Concept.

Ownership changes and their implications for social change in Śródmieście

Legal constraints

National legislation governing low-cost privatisation in the period 1970–2000 created a distinct housing offer. Initially, both privileged and more modest households benefited. However, in 2011, Warsaw City Hall adopted new criteria that restricted the eligibility of tenant-purchasers and the size of units available for sale. These restrictions were the subject of an appeal in the Administrative Court that questioned the legality of the resolution adopted by the municipality. The situation remains unresolved and, as matters stand, no price reductions can be attributed until a new interpretation of the court’s judgment is delivered by the Ministry of Infrastructure and Development.

Prior to the introduction of the new regulations, official figures show that the number of municipal units in Śródmieście fell from around 20,600 in 2002 to 13,700 in 2010 (32.6–18.5%) (CSO, 2002; Long-term program, 2012). Nevertheless, wide-scale privatisation has created a diversity of ownership structures. In 2014, all units were privately owned in 27% of pre-war buildings, mixed ownership¹¹ was identified in 57% of buildings and all units were owned by the municipality in only 4% of buildings. The remainder were occupied by squatters, were undergoing renovation by private developers or their ownership was unclear.

Restitution has been affected by the lack of a clear procedure and scandals surrounding in-kind benefits, which have made the process very controversial and led to some resolved claims being reviewed. The lack of a legal framework means that municipal tenants in restituted buildings continue to be threatened by expulsion, while support from local government is insufficient. At the same time, the growing number of restitution claims have led to the freezing of sales of units in buildings with unregulated property rights. In Śródmieście, 570 restitution claims have been resolved since 1990, while 493 still awaited a decision in 2015.

As highlighted above, under the 1997 Property Management Act, any discount has to be reimbursed if the unit is resold on the open market within 10 years, but the rule does not apply to transfers to family members. The analysis of the micro-sample of 68 buildings highlighted some interesting specificities. Over 60% of apartments had been privatised before the socialist regime collapsed in 1989 (Table 1). By the end of 2014, 18.2% of these privatised units had not changed hands. However, 30% had changed ownership, but did not appear on the real estate market because the transfer was non-market. Most of these non-market transactions concerned units that were privatised under socialism, indicating a form of intergenerational property transfer. It also suggests that the largest apartments in the most prestigious locations remained in the hands of the same families. A further 50% were subsequently resold on the open market: 5% of transactions took place before 1989, 19% in the 1990s, 47% between 2000 and 2009 and 29% post-2010.

Table 1.

Percentage of privately-owned apartments in the Śródmieście sample (N = 627) as a function of period of privatisation.

Period of privatisation
		1972–1979	1980–1989	1990–1999	2000–2009	2010–2014	Total
Total number		191	207	173	52	4	627
%		30.5	33.0	27.6	8.3	0.6	100
Surface area (m²)
Very small	< 30.9	13.6	12.6	15.6	9.6	0.0	13.4
Small	31–49.9	9.9	21.7	25.4	25.0	50.0	19.6
Average	50–79.9	37.7	36.7	41.6	42.3	50.0	38.9
Large	80–119.9	34.0	25.1	15.0	21.2	0.0	24.6
Very large	> 120	4.7	3.9	2.3	1.9	0.0	3.5
		100%	100%	100%	100%	100%	100%
Resale (%)*
None**		12.0	14.0	28.3	25.0	0.0	18.2
Market transactions
Sale		45.5	55.6	48.0	53.8	75.0	50.4
Non-market transactions**
Legacy		16.8	12.1	9.2	1.9	0.0	11.8
Endowment		17.3	11.6	12.7	19.2	25.0	14.4
Other		8.4	6.8	1.7	0.0	0.0	5.3
		100%	100%	100%	100%	100%	100%

Notes: * last transaction; ** remained in the hands of the initial owner.

Source: Land and Building Registry (2014).

Availability of private capital

Low-cost privatisation has created a bigger but socio-economically differentiated group of homeowners. However, this has not necessarily contributed to the spectacular renovation of buildings. Typically, only the most urgent work is attended to, and facades are rarely renewed. This was confirmed by the 2016 survey of residents; 35% of respondents stated that their building required complete renovation (12%) or major work (23%), while only 18% declared that all key renovations had been accomplished. The situation is no better for restituted buildings. Stopa and Brykczyński (2010) document several cases of successfully restituted pre-war buildings that were subsequently sold to developers, as maintenance and refurbishment costs exceeded the capacity of the private owner. Moreover, the renovation of such buildings requires specialist knowledge and only a few companies in Warsaw are specialised in such operations.

The price of units in post-war buildings is similar to those in post-war buildings (Figure 2). However, price levels are determined by ownership structures. Prices in buildings where all units are privately owned are systematically higher than in mixed-ownership buildings (regardless of whether private- or municipally-owned units dominate).

Figure 2.

Average transaction prices for 1m² of residential property in Warsaw (2006–2014).

The most expensive, luxury units are found in refurbished, pre-war buildings where prices far exceed those of units in non-refurbished buildings (Figures 1 and 2). However, there are very few such transactions: only 94 sales in eight buildings between 2006 and 2014. As the number of pre-war buildings currently undergoing renovation increases, this niche segment, serving a very narrow, affluent group of clients, is expected to grow.

Residential preferences

The return of the market economy undoubtedly broadened residential choices. Nevertheless, growing social inequalities mean that only a part of the population is able to fulfil their residential aspirations. Prior to 1988, 35.9% of newcomers to Śródmieście were specialists, and 16.6% were technicians or office workers, and their presence was positively correlated with the location of pre-war residential buildings (respectively R_spec = 0.202, p < 0.014; R_tech = 0.224, p < 0.006). Between 1989 and 2002, the percentage of specialists had risen to 42.2%, while the percentage of technicians and junior managers remained around the same (16.9%). However, in the latter case no significant correlation was found between the location of newcomers 1989–2002 and that of pre-war buildings.

In the 1990s, the social composition of pre-war buildings was still influenced by housing allocation strategies. Only 9.7% of residents in Śródmieście moved in between 1989 and 2002. Consequently, in 2002, the social composition still reflected the egalitarian trends found under socialism. The 2002 census shows that company directors, managers and mid-level professionals were overrepresented in buildings where all units were privately owned. This percentage was even higher in mixed-ownership buildings (Figure 3). Interestingly, buildings where all units were municipally owned were most socially mixed.

Figure 3.

The socio-professional structure and ownership structure in Śródmieście and Warsaw.

The 2016 residents’ survey revealed that newcomers in fully privately-owned buildings (39% of respondents) were more socio-economically homogenous than those who lived in mixed-ownership buildings (60% of respondents). Seventy-six percent of the former had a tertiary level of education (compared to 65% in mixed-ownership buildings), 62% had a monthly per-person disposable income of over €500¹² (60% in mixed-ownership buildings) and 67% were under 34 years old (60% in mixed-ownership buildings). Moreover, 62% in fully privately-owned buildings were private tenants (44% in mixed-ownership buildings).

With respect to the motivation for moving to Śródmieście, an average of 30% of respondents (29% in in fully privately-owned buildings and 31% in mixed-ownership buildings) indicated that the central location and accessibility were key issues. On average, 22% (29% in fully privately-owned buildings, and 19% in mixed-ownership buildings) of respondents stated that their choice was due to family reasons; in most cases residents had inherited the apartment.¹³ Interestingly, 25 years after the collapse of the socialist regime, the choices of many newcomers are still clearly embedded in opportunities created by earlier privatisation. Finally, with respect to future plans, 21% of respondents were ready to consider moving, either to another part of Warsaw, or another city in Poland. Around 30% of respondents were planning to move to a smaller, pre-war or more recent multi-family building.

With respect to customers for luxury city-centre apartments,¹⁴ the survey carried out by MADE Concept revealed that 85% were Polish, and 65% already lived in the city. Most buyers were couples aged 31–50 who ran their own business or worked for transnational corporations (MADE Concept, 2015).

Discussion: From the accumulation of capital to intensive gentrification

The empirical evidence suggests that massive low-cost privatisation and the rapid restitution of nationalised properties in former socialist countries created a value and rent gap that accelerated social change. While this relationship should not be neglected, the findings of this study revealed that it is modulated by three factors: legal constraints; the availability of private capital; and residential preferences.

It is clear that the allocation of accommodation by public authorities (Chelcea, 2006; Szelényi, 1983) and social housing policy (Millard-Ball, 2000) have affected social structures. Current policy states that sitting tenants may only purchase accommodation in buildings that have been officially identified by the City Hall, and price reductions are temporarily blocked. Hence, the value gap mechanism no longer operates, and any change appears to remain in the hands of municipalities. At the same time, national legislation permits transfers (under specific conditions) to family members upon the death of a sitting tenant. Despite the apparent lack of change in ownership or tenure, this mechanism may explain the high degree of social mixing in former municipal buildings. Similar observations were made by Millard-Ball (2000) in Stockholm, although the latter study focused on the luxury renovation of property in the private rental sector by landlords.

This study found less evidence of restitution and redevelopment triggered by the rent gap. Although examples exist, they are rare and scattered as redevelopment can only be carried out by specialised developers, and it is time-consuming and expensive. I would argue that this is not directly driven by a rent gap, but rather by a lack of building plots with regulated ownership in the city centre (due to the number of pending restitution claims). The limited importance of a rent gap mechanism is in line with findings from Leipzig, where new investments were made in already expensive neighbourhoods (Holm et al., 2015).

In many pre-war buildings, the key trigger for intensive gentrification is investment by specialised developers, rather than individual private capital. The typical preliminary stage, characterised by the arrival of artists and middle-income households, has been skipped. The new housing offer, which is distinct from the suburban residences and gated estates that are very popular in other areas of the city, has attracted a new segment of wealthy clients. These affluent customers are not only driven by a preference for living in the inner city, but seek to distinguish themselves by their choice of residence (Bouloc, 2013). However, the data provides no insight into whether luxury units in pre-war buildings are really owner-occupied, or purchased as an investment.

Residential choices are another factor affecting the scale and direction of social change. The growing housing offer located in peripheral or suburban areas has encouraged city-centre households to seek better living conditions elsewhere, and there is little evidence of a ‘back to the city’ movement. In Śródmieście, another factor is the high price of apartments in pre-war buildings. The area has become attractive to private tenants, mainly students and young professionals. Although their arrival brings new life, it is highly unlikely that they will invest in the area, as their stay is usually temporary. This group has been labeled by Hasse et al. (2012) as transitory urbanities, and it is an important segment of new, inner-city residents in post-socialist cities (Kährik et al., 2016).

Finally, social change appears to be a function of ownership structures. Although in 2002, upper- and middle-class professional categories were overrepresented in buildings where all units were privately owned, they were even more numerous in buildings dominated by mixed ownership. The social mix and inflow of potential gentrifiers appears to be encouraged by the co-existence of private and municipal units. Although the lower standard of maintenance makes these units unattractive to affluent households (who prefer refurbished buildings), they continue to attract upper professional categories (notably specialists), who constituted more than 30% of residents in 2002. These purchasers appear to be undeterred by the lack of spectacular refurbishment of the whole building. The variety of apartment sizes has also contributed to social mixing at the level of the individual buildings. The hypothesis that there is greater social diversity in mixed-ownership buildings than in fully private residences is confirmed by the 2016 survey results.

Conclusions

This article examined the role of value and rent gap mechanisms in ownership change, and how the latter has influenced social change in Warsaw’s inner city. Early socialist privatisation paved the way for tenants to become homeowners, and privileged social groups were the first to take advantage. Although a lack of investment in pre-war apartment buildings led to few physical changes, certain districts (such as Śródmieście) retained their prestige, reflected in the fact that the area has the highest housing prices in the city.

Privatisation legislation has, to some extent, encouraged lower residential mobility and intergenerational property transfer. Socialist privatisation offered an opportunity for privileged social groups to accumulate capital through the resale of their formerly municipal apartments. The ongoing high price of property in the inner city illustrates this social elitisation and the exclusion of lower-income groups. The lack of support for low-income households who must renovate their new property has disrupted the rhythm of social change. While official statistics suggest a steady decline in the population, they fail to take account of unregistered, private tenants who constitute an important group of newcomers.

A lack of individual private capital was a key element in disinvestment in the city centre just after the collapse of the socialist regime. Since then, private developers have become key actors; they have shaped the housing offer and, through pricing mechanisms, determined access. Over the years, a segment of wealthier clients has developed and, along with them, more sophisticated housing.

Both privatisation and restitution have created new social inequalities, which can be seen at both district, and single-building level. Rather than creating social justice, restitution has led to social injustice, seen in the case of former municipal tenants who risk losing their homes. Judging from the growing number of restitution claims filed in the past few years, their situation is becoming increasingly precarious. Those who benefited from privatised apartments immediately became asset-rich. Sitting municipal tenants who did not seize the opportunity to purchase their flats in the 1990s could be said to be the losers of transformation.

To sum up, the ownership changes seen in Warsaw have fuelled problems related to affordability, and the exclusion of lower-income households from the housing market. These phenomena are not limited to Poland, and examples can be found worldwide, notably in cities with a market-oriented housing offer and housing commodification (Kadi and Ronald, 2014). Despite its socialist past, it is likely that the ownership changes seen in Warsaw will eventually lead to outcomes that are similar to those seen in Western countries. The global aspiration for home ownership raises new questions. Is it possible both to ensure access and to mitigate inequalities, given the detrimental effect of private ownership on both intra- and inter-tenure group social equality?

Footnotes

Acknowledgements

The author would like to thank two anonymous reviewers for their insightful comments on the early versions of this article.

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This work was supported by the Polish National Science Centre, grant number 2013/11/D/HS4/03899.

Notes

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