A model for the renovation and reuse of derelict real estate properties in Athens. Financial, legal and governance issues.

Abstract

The Athens city-center building stock is in bad situation, due to the lack of appropriate urban policies for a very long time and the current long-lasting economic crisis. About 35% of the real properties are derelict. Due to the high renovation and modernization costs of the buildings, as well as the low rental values, they are gradually abandoned. Additionally, their very high degree of co-ownership renders buildings' renovation an extremely difficult task both for owners and developers.The building stock has been progressively excluded from the processes that could support the economic growth and the socio-economic development of the city. For the financial sector, buildings are no longer an object of interest, not because of their low market value, but because of the high risk in financing investments and the lack of interest for the mortgage market thereon. A vicious circle has been established: the buildings are depreciated due to the degradation of the urban environment and vice-versa.A model for the renovation of the buildings has been elaborated. This model is based on the property rights consolidation, in order to achieve the flexible use and management of the buildings as physical, legal and economic entities. It supports and promotes the mobilization and collaboration both of the private and public sectors, and PPP schemes.The main factors that have been taken into account are:Real estate development: The model supports the use of financial engineering schemes, following a deep analysis of the market and numerous feasibility studies.EU State Aid regulations: Under current financial conditions and local market failures, State aid and/or grants are required.Key legal issues: co-ownership decision making, tools for applying State policyregarding owners compliance to property obligations, institution of a legal framework permitting the compulsory purchase of abandoned properties to the benefit of private entities/developers and fast track investment.Finally, the whole administrative process and governance matters are regulated by the model, according to the existing European and national frameworks for urban projects.Research funded by the Onassis Foundation, following a MoU signed between the Foundation and the Greek Government.