strategy. One reason for overlooking poverty in the secondary cities may be that most poverty analyses fail to differentiate among urban settlement types. As a result, the better off capital cities conceal the degree of poverty in the secondary cities. This study has pointed to the importance of differentiating <u>between the capital and secondary cities in poverty work.</u>

**Problem of emerging slums.** Development of real estate markets in transition countries has provided a mechanism for increasing the spatial concentration of different groups – i.e. development of slums at periurban areas as well as in city housing stocks.  At the same time, the erosion of public transportation and other public services has meant that marginal neighborhoods are less likely to be well connected to the city fabric and public services and residents are more likely to face exclusion.  In peri-urban areas, ECA countries face a situation found in many other places, where the usual response involves slum upgrading. <u>Preventing the emergence of slums among the existing housing stock is a somewhat different problem and one that is perhaps unique to the region.  Policies relating to provision of public services and</u> transport, urban development, social assistance programs and the housing sector will all influence slum development.

**Problem of mobility.** <u>The study found that poor households were much less likely to have moved during the past five years than better off households, particularly in capital cities.  If residential mobility is an</u> adjustment mechanism to enable households to satisfy their housing needs and find jobs, as is true in other countries, then low income people in ECA cities are trapped due to both housing sector conditions and tight labor markets.

# **5.2.2. Sectoral issues**

The study also pointed to the interrelations between income poverty and poor infrastructure coverage, which go hand in hand in urban areas, revealing the multiple and cumulative aspects of urban poverty.

**Problem of deteriorating services.** <u>The results of this study point to the continuing erosion of</u> - <u>infrastructure services and means that for some countries meeting the infrastructure related MDGs may be a problem in the future.  The continued reliance on connection data, instead of reliability figures,</u> serves to conceal the degree of erosion in infrastructure service provision.  (As discussed in the data section below, information about reliability needs to be improved.)

<u>As service quality deteriorates, the region faces a major challenge since the poor quality of services provides few incentives for payment. At the same time, housing expenditures remain below 10 percent</u> for most countries, while the average is 20 percent for OECD countries. Low tariffs, widespread exemptions and non-payments explain the low rate of spending. Clearly, in this kind of environment, service providers are not able to invest in the rehabilitation of infrastructure facilities, perpetuating the vicious cycle of widening infrastructure poverty. This suggests the need to review carefully existing <u>tariffs, payment practices and subsidy systems (especially categorical exemptions) with the objective of improving quality</u> _<u>and</u>_ <u>access for the poor.</u>

**Problem of deteriorating apartment buildings.** In the transition countries, the quantity of housing (measured in terms of space per capita) is better than expected for their level of income.  However, the <u>quality of the stock, as measured in terms of access to services, location and maintenance, is becoming more problematic.  One illustration is the large number of apartment dwellers, who are generally better</u> off, who do not benefit from any better access to network utilities.  At the same time, regardless of privatization status, apartment buildings go largely unmaintained as a result of continued local government involvement in this part of the housing sector.   Neither the government, nor the households, however can afford to replace the existing apartment buildings.

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