Dilemmas of housing-asset-based welfare in the post-socialist context: the case of the Czech Republic

Abstract

In the Czech Republic, buying housing is regarded as a way of attaining financial security in old age. People are, however, wary about using Housing-Asset-Based Welfare instruments that would allow them to withdraw housing equity. This article explains the contradictions surrounding housing-equity release in the post-socialist context and the barriers and catalyst behind the wider use of two specific instruments – reverse mortgages and reverse schemes. The paper focuses on the generation of Czechs in their forties and fifties. Members of this generation have largely remained outside the scope of research, even though they will be impacted much more by the effects of population ageing than the current generation of seniors. The paper draws on a survey of a sample of the total Czech population and in-depth interviews and focus groups with people between the ages of 40 and 55 in three Czech municipalities. The research showed that, without the introduction of strong incentives, Czechs, despite their worries, are not likely to start accumulating savings more than they do today. They view owner-occupied housing as a secure form of housing in which it is possible to save on housing costs but do not regard it as property whose value could be used to increase their quality of life in old age.

Keywords:

• Asset-based welfare
• post-socialist
• reverse mortgage
• Czech Republic
• homeownership

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 In the UK, reverse mortgages are offered to people over the age of 55 and come with a ‘no negative equity guarantee’, which means that the debt cannot be greater than the value of the real estate, so the mortgagor’s heirs will not inherit the debt attached to the loan after his or her death.

2 In this model, the real estate is sold for a lower selling price, but this is offset by the fact that the previous owners are allowed to live in the property for the rest of their life and for the duration of that time receive an annuity from the new owner.

Additional information

Funding

The research on this paper was sponsored by the Czech Science Foundation with grant number 16-06335S.