It has nothing to do with religion or some intangible identification with Western civilization. It has everything to do with being able to go to a bank and take out a loan to buy a house. In Russia when they speak of revolution, the image is of the mobs in the streets showing their contempt for tyrannical government. In Turkey there have been “hat revolutions” and “alphabet revolutions” and the revolutionary introduction of the Western weekend. The assumption is that changing the details of people’s lives has an equally profound affect as the more theatrical gesture of changing the regime. Turkey is now on the verge of a mortgage revolution which will have major consequences for citizens’ relationship to their government.
Mortgage credits account for a substantial part of the EU economy. Even after the last round of enlargement, the share of the economy of the EU represented by residential loans was 48 percent (according to 2005 numbers). In Holland, residential loans represented nearly 100 percent of their GDP last year. In Turkey, home loans in 2006 were only 4 percent of the GDP -- and even this represents a growth from only 2.5 percent the previous year. Although the home loan business clearly has potential in Turkey, strictly speaking these are long term (five to 10 year) consumer loans and not the sort of 25-year structured finance one thinks of with a mortgage.
Most people (over 60 percent) in Turkey still inherit or finance their own home. Over 20 percent of homeowners borrow from friends and relatives, just under 10 percent are funded by cooperatives. Why there was no universal system of home loans and mortgages is easy to understand in a country that lived through three decades where inflation zigzagged between 40 and 120 percent. No individual or institution could begin to calculate the risk.
A bird’s-eye view of most Turkish cities reveals the consequences. Most have expanded since the war not under the guidance of local government regulation but in defiance. People built neighborhoods and politicians came under political pressure to legitimate this “civil rebellion.” If authorities couldn’t control random developments, they certainly couldn’t ensure that neighborhoods were built to a standard to withstand earthquakes. In the mid-1970s there were proposals for city planners to be more pro-active and to design public housing themselves. There were some successful cooperatives, like Batikent in Ankara, but the impact on the overall housing stock was limited.
Both unplanned development and municipal housing schemes represented two extreme versions of the citizen’s relationship to government. In the first, the state did nothing, or more accurately was required to turn a blind eye to illegal development then to respond to the political pressures to reward house owners with title deeds and basic services. The other example meant that the state did everything. The municipality organized the credit and designed the kitchens. In both instances, the politicians hoped for their reward at the next election. Except that there wasn’t another election, but a military coup instead. The coup on Sept. 12, 1980, was in part legitimated by street violence, which was itself a by-product of unplanned urbanization. And one of the consequences of that coup was to alienate Turkey from Western Europe.
This week, Parliament is expected to pass a law allowing for mortgages. What this will do (as with existing home loans) is to transfer much of the responsibility for ensuring the quality of the housing stock to the lending organization. If there is no clear title deed, if the house is going to fall over in the first tremor and cannot be insured, then the bank won’t issue the credit. The government will still have responsibility for regulating the primary and secondary mortgage markets. More particularly, they will have to provide voters what they crave the most -- the sort of macroeconomic stability that will allow them to meet their repayments over the 25 years of their mortgage. In short, what will allow them to behave like house owners in London, Hamburg or Prague.
