RAPID HOUSING PRIVATIZATION IN REFORMING ECONOMIES - PAY THE SPECIAL DIVIDEND NOW

State ownership and operation of the housing stock in the previously c entrally planned economies severely distorts housing markets, stifles labor mobility, and produces operating losses that exacerbate fiscal d eficits. The conventional wisdom regarding structural reform is to gra dually increase administered rents, thereby reducing deficits. Housing sales, where they occur, are primarily motivated to generate revenue to cover deficits in current operating budgets. We argue that the perc eived benefits to a prolonged transition are illusory and the social c osts are high. Housing will be affordable only if the population's cur rent ownership of the existing housing stock is recognized and dividen ds on it are paid out. The payment can be a regular dividend (e.g., ho using allowances) or a one-time special dividend (e.g., ownership vouc hers). The latter is preferable.