Bridging the Housing Gap: How Czech Municipalities Strive to Improve Affordable Housing?

Last week, the Czech Republic came one step closer to defining affordable rental housing. The legislative proposal that members approved of parliament now defines affordable rent as a maximum of 90 percent of market rent. However, the country still faces a shortage of affordable housing, with new projects only slowly coming to fruition. This slow progress complicates life for individuals and large cities struggling to accommodate their essential workforce.

Almost a year ago, in the transition between March and April, Česká spořitelna introduced the concept of affordable housing. Partnering with developer Finep, they plan to build 254 apartments in Prague’s Prosek, primarily for public sector workers. Such employees would include staff from the Motol University Hospital, police officers, and teachers. Compared to market prices, the rent for these apartments will be one-fifth cheaper, with the least expensive units costing around 10,000 crowns per month.

Česká spořitelna, fulfilling its European corporate social responsibility requirements, prepared similar projects last year. According to data from consulting company BTR Consulting, they have approximately 700 affordable apartments in the pipeline.

However, private sector participation in these projects is still limited. Zuzana Chudoba, founder of BTR Consulting, believes the main obstacle is the lack of cooperation between the state, municipalities, and the rest of the market. She suggests that municipalities could emulate the model used in Helsinki, where the city provides land for a consortium of private developers and stipulates the number of apartments that must be designated as affordable housing.

Municipalities in the Czech Republic are grappling with the aftereffects of previous property privatization. They lacked sufficient land even if they wanted to follow the Helsinki model. As a result, some are seeking alternatives, such as contributions for changes in the zoning plan that could result in the construction of affordable housing. However, such contributions are not high enough to significantly impact the market.

Despite these challenges, municipalities are eager to expand their housing stock. According to the Ministry for Regional Development, three-quarters of municipalities plan to do so. The state supports these efforts by transferring land and annual planning contributions of around two billion crowns. The government is also planning to use funds from the National Recovery Plan and integrate resources from the European Investment Bank to construct affordable housing.