Principles of the market economy require cities to reformulate their housing policies. Rules and actors in the production, allocation and consumption of the housing stock have changed significantly over the last two decades. In 1980s debt crisis, shortages of public investment resources, and inefficiencies in public finance for housing led multilateral and bilateral donor agencies’ recommendations to policy makers structured around the notion of market based principles. The new policy advice was governments’ financing for housing is less important than governments’ role in defining a conducive regulatory and policy framework affecting the development of private land and housing markets. In accordance with this approach policies in many countries aimed to create a more supportive environment for resource mobilization and an expanded role for private sector. But, the most dramatic changes in this respect took place in East Europe and Central Asian (ECA) countries.

Among the most fundamental of the sector reforms enacted in ECA countries during the past decade was the change in ownership of land and housing. A World Bank study reports that in terms of housing, prior to the transition more than 60 percent of the urban housing stock was publicly owned, a figure more than six times the share of the typical OECD country. The change in the ownership of the housing stock was one of the largest wealth transfers in history, as between 1990 and 1999 almost 30 percent of the residential capital stock of the region was conveyed into private hands - a transfer worth more than a trillion dollars, which actually exceeds the regions GDP (World Bank 2000).

In view of such dramatic changes, meaning of public housing stock to the low-income groups in transition cities; and how does the private market serve the low income groups, are the questions deserve particular attention, and they are the main themes discussed in this paper.