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Unlike a free market economy, housing according to the socialist doctrine was not accepted as a source of profit for an individual. As such, owneroccupied dwelling was encouraged to restrict private ownership of more than one dwelling in order to eliminate, at least in principle, the private rental sector. According to these principles, housing was a consumer good, excluded partly or fully from distribution. The principles of a centralized command economy dictated the creation of conditions in which the housing needs of every member of the community should be met regardless of members' affordability. The allocation of housing as such, was based on non-market rules set by government authorities, that is, the consumers' preferences and purchasing power had no role in the distribution process. As housing ceased to be a commodity and therefore a source of investor's profit, individual housing construction activities motivated by profit had to be abolished. While housing sale to private individuals was not allowed, in effect, there was no demand for private mortgage finance, because there was no need for it. According to Kornai, in socialist economies ownership, financing, and atrophied financial system are controlled by the state. The state also has monopolies over the production and distribution of goods and services. By contrast, the cornerstone of public policy in the free market economies is based on competition and contestable markets. Policy makers are concerned about the efficiency of the housing finance system as it provides several economic benefits such as efficient real estate development, construction sector employment, labour mobility, efficient resource allocation, and so on. Housing privatization, therefore, was very much a precondition to market-based housing finance. Increasing pressures for housing policy reforms have come from the fact that capital grants and stock maintenance subsidies place a heavy burden on the state budget in the form of interest subsidies, particularly when interest rates are kept much below the inflation rate. On the other hand, the high costs of private housing could absorb populations' savings, lessening the inflationary pressure and curbing the demand for consumer durables. The full 'free markets' that have been in operation and currently prevail in the USA, Canada, Western Europe and Asia are quite different from the objectives of CEE countries' reform post 1989. The degree of efficiency and social costs of gradual versus radical reforms have been subjected to an international debate. Renaud, argues that the classification of the radical reform as 'shock therapy' or 'big bang' by the press, is somewhat misrepresented. He asserts that the social costs of change would be greater under radical than gradual reforms. In practice, these countries may not necessarily follow the same path to the market, rather choosing different ways at various speeds.
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