A solution to the housing crisis is on its way
An increase in the number of affordable flats should be supported by a recently launched investment instrument that allows towns and cities to involve private-sector partners in the construction, renovation and purchase of rental properties. The main idea is to expand rental housing capacity in the Czech Republic, which lags behind the usual European level, where the share of people living in rented accommodation has long been significantly higher. The Affordable Rental Housing programme has a total of 7 billion Kč available in its first call, provided to applicants in the form of direct subsidies and low-interest loans. State support can cover up to 90% of eligible expenditure. The funds can be used for the construction of an apartment building as well as for structural alterations, extensions and add-on storeys that create new flats. In this case, the energy performance of the existing building must also be improved. The third option is the purchase of completed residential projects.
The subsidy programme is intended primarily for smaller households; support can cover the cost of building a flat with a floor area of no more than 80 m2
One of the key conditions for obtaining support is that the floor area of the rental flat must not exceed 120 m2, though support is provided only up to the cost corresponding to 80 m2. The sustainability period of the project is set for the duration of loan repayment, but at least 20 years. During this time the property must serve as affordable rental housing – at least 25% of tenants will be selected directly by the municipality or by a public institution in fields such as healthcare, education or social services. These should therefore be, for example, teachers, members of the emergency services or socially disadvantaged young families. The rent must not exceed the level set by the decree and therefore cannot be higher than the usual rent in the given place and time. The maximum rent will be determined using the Rental Housing Price Map, created and maintained by the Czech Ministry of Finance. The lease will be concluded for a fixed term of one to two years. Any subsequent extension will again take the form of a fixed-term lease for two years.
Effective cooperation between the public and private sectors
The Affordable Rental Housing programme is based on cooperation between the state, regions, municipalities and private developers, investment banks and institutional landlords. In an ideal scenario, the local authority finds experienced partners to work with. Private companies can prepare the project documentation, arrange financing, carry out the construction or renovation and, once completed, also propose how to manage the flats efficiently.
Cooperation between the state and private companies in the construction industry is gradually developing. Construction of the flats must be completed within 4 years of the support being granted
The State Investment Support Fund accepts applications on a rolling basis and the programme applies without exception across the entire Czech Republic. In the case of construction, applications may be submitted by a legal entity, typically a local authority. The maximum support per entity is 250 million Kč, covering the subsidy and the loan together. The direct subsidy ranges from 25% to 40% of total costs. For new builds, eligible costs include expenditure on the construction itself, including basic flat fittings such as kitchen and bathroom equipment. The amount of the low-interest loan must be at least equal to the value of the subsidy and can cover up to 90% of the costs. Its interest rate is derived from the EU base rate for the Czech Republic, reduced by 3 percentage points – currently (October 2024) it stands at 1.68%.
Where to apply for the affordable rental housing subsidy?
According to experts, this subsidy-and-loan programme has the potential to change the real estate market for the better. It represents an ideal opportunity for towns and municipalities wishing to develop their housing stock and thus attract new residents. The full programme conditions can be found directly on the website of the State Investment Support Fund. That is also where applicants will learn exactly where and how to apply for support. Have you bought an investment property? Inherited a flat? Moved with your family to a larger place? At the property management company Flat Service, we are here for you. Our experienced experts will be happy to help you rent out your vacant flat. Write to sales@flatservice.cz or call +420 277 000 330 and you will no longer have to worry about paperwork, tenant selection or routine maintenance.
