Rapid housing privatization in reforming economies: Pay the special dividend now

State ownership and operation of the housing stock in the previously centrally planned economies severely distorts housing markets, stifles labor mobility, and produces operating losses that exacerbate fiscal deficits. The conventional wisdom regarding structural reform is to gradually 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 perceived benefits to a prolonged transition are illusory and the social costs are high.Housing will be affordable only if the population's current ownership of the existing housing stock is recognized and dividends on it are paid out. The payment can be a regular dividend (e.g., housing allowances) or a one-time special dividend (e.g., ownership vouchers). The latter is preferable.