European Commission approves public support for affordable housing in Czechia

The European Commission has approved support for affordable housing in the Czech Republic from public money. The state will thus be able to finance the creation of rental apartments with below-market rents, for example for young people or useful professions. This year, CZK 2 billion should be allocated to support the construction of rental housing, the Ministry for Regional Development (MMR) announced. The programme is expected to be launched this autumn.

In early March, the House of Commons approved an amendment that allowed the financing of affordable housing from the State Fund for Investment Promotion (SFPI), but the actual confirmation was prevented by the lack of approval from the European Commission that the funding complies with state aid rules. The decision allows the Czech Republic to provide up to 12 billion in support to the affordable rental housing sector by 2030. Funding from the National Recovery Plan will be secured for the first three years.

The support will be available for new buildings, alterations or extensions. Part of the money can be used immediately for up to 40 per cent of the total cost if specific requirements are met. A subsequent subsidised loan at the EU base rate for the Czech Republic, reduced by up to three percentage points, can cover 90 per cent of the project cost. The repayment period is up to 30 years and early repayment is free of charge. It can be applied for by, for example, a local authority, a state-funded organisation or a church.

"We want there to be a dignified alternative for people who, for various reasons, cannot afford their own housing or do not want it. We will be happy if as many municipalities as possible apply for support. At the same time, we have tried to set everything up so that affordable housing is also interesting for the private sector," said Deputy Prime Minister for Digitalisation and Minister for Regional Development Ivan Bartos (Pirates).

Tenants in affordable housing should usually have a contract for up to two years with the possibility of renewal for a fixed term. Affordable rents should initially not exceed 90 percent of the locally customary rent. In affordable housing provided, for example, by the state, counties and municipalities, it should not exceed in the first year the amount calculated on the costs associated with the construction or acquisition and operation of the affordable rental housing. At the same time, it would have to be lower than the comparable normal local rent. In subsequent years, the affordable rent could be increased by inflation, but not more than four per cent per year.

The subsidized affordable housing is intended to serve four target groups. The income group includes all but the wealthiest 20 percent of households. Applicants in the target group must not own any residential property. The next group is young people under the age of 35 who are also not among the richest 10 percent. The third group is public service professions such as health professionals, police officers, social workers and others. They may own a property to live in, but not in the same county in which they apply for bargain housing. The final group is victims of domestic violence.

House and apartment prices in the Czech Republic have started to rise again, although they are falling on average across the European Union. In the fourth quarter of last year, housing prices in the Czech Republic rose by 0.3 per cent quarter-on-quarter for the second consecutive quarter, but fell by 0.3 per cent in the EU by the end of 2023. Germany, for example, recorded a fall in prices in the final quarter of last year, while prices in Poland rose significantly. According to the latest Eurostat data, although the price of Czech flats and houses fell by 1 percent year-on-year at the end of last year, they have become 123 percent more expensive since 2010.

In the fourth quarter of last year, after four quarters of falling prices in the Czech Republic, prices of flats rose by 6.9 percent quarter-on-quarter to an average CZK 95,000 per square metre. Apartment prices rose the most in the Hradec Králové and Pilsen regions. In five regions, however, they also fell, most significantly in the Liberec region, according to data from the Real Index of the consultancy and technology company Deloitte.

Source: MMR and CTK