Minister Bačić: State plans to build and reconstruct 20,200 units by 2030

Today, on the premises of the National and University Library in Zagreb, the Ministry of Physical Planning, Construction and State Assets presented the Affordable Housing Act, referred to the Government for the adoption procedure. The Act is an umbrella legislative framework developed based on the National Housing Policy Plan of the Republic of Croatia, adopted by the Government of the Republic of Croatia in March last year with the aim of increasing the accessibility of apartments, ensuring sustainable housing and managing space for housing purposes. The measures stemming from the housing policy entail several areas: increasing the housing supply, regulating the rental market and reducing regional differences.

The presentation was attended by representatives of the Croatian County Association headed by Danijel Marušić, the Association of Cities headed by Željko Turk, the Croatian Association of Municipalities headed by Božo Lasić, representatives of the Croatian Chamber of Economy (HGK), the Croatian Association of Employers (HUP) and the Office for Social Partnership, who all welcomed the new legal solutions for affordable housing.

Member of the European Parliament Nikolina Brnjac pointed out that Croatia is among the Member States that have taken the most serious steps to tackle the housing crisis, and that Croatian legal solutions and measures fully comply with the European affordable housing plan.

When presenting the new Affordable Housing Act, Minister Branko Bačić said that the state plans to build and reconstruct 20,200 apartments and family houses by 2030.

Croatia lacks approximately 236,000 housing units to fully establish affordable housing, which is the reason why “Croatia, together with Portugal, is the Member State where young people leave their parental homes the latest,” Minister Bačić emphasised.

Young people in Croatia stay with parents until the age of 33

The average age when young people leave their parental homes in Croatia is 33 years, while the European average is 26 years.

According to the new Affordable Housing Act, the Minister pointed out, over the next four years the state plans to build and reconstruct 20,200 apartments and family houses, whereby 8,000 of them refer to new apartments built by the Agency for Transactions and Mediation in Immovable Properties (APN), and 9,000 apartments refer to vacant apartments activated for the purpose of affordable housing.

“Some will say this is a small number, but here’s a piece of information for comparison - in the 24 years of APN’s existence, 9,000 apartments have been built,” Minister Bačić emphasised.

The goal to achieve 20,200 affordable apartments and houses also requires a substantial amount of money, so the plan is to invest approximately two billion euro by 2030 and additional 3.5 billion euro by 2034.

The construction resources are secured by the Republic of Croatia, local and regional self-government units, APN and financial institutions. The plan is to use funds from the state budget, as well as from different financing models of the European Union and loans in the future.

“This is substantial funding, large projects, a great deal of engagement. The programme’s success will depend on the financial capacity of the state budget and on how much of this money will be used throughout the new multiannual financial framework from 2028 to 2034,” Minister Bačić said.

Umbrella legislative framework for affordable housing

The Affordable Housing Act regulates systematically organised housing construction, acquisition and procurement of residential real estate financed or co-financed through public resources, as well as the housing stock management for the purpose of ensuring affordable housing.

Target groups entitled to subsidies or housing care are defined by the Act: citizens with lower income, people under the age of 45, families with children, people in shortage occupations, people involved in precarious work, active military personnel, police officers, state and public officials and employees in shortage occupations, people over the age of 65, citizens with limited access to healthcare and others who need housing support. The prerequisite is that they do not own adequate residential real estate.

For the first time, the Act introduces the concept of affordable housing into Croatian legislation - it refers to housing where rental prices or credit instalments for an apartment of the corresponding net usable surface area increased by the average utility and maintenance costs does not exceed 30% of the immediate family’s income. The concept of non-profit housing cooperatives is also defined - in accordance with the cooperative’s principles, they are responsible for the construction, reconstruction, management and maintenance of the buildings to the benefit of their members.

Bodies to implement the Act

The Act shall be implemented by the Government of the Republic of Croatia through the Ministry, APN and local self-government units. APN is the central investment body.

Local and regional self-government units take part in the implementation of the Act by establishing public institutions, developing local housing programmes, providing land, co-financing construction and amending spatial plans. They monitor citizens’ needs, cooperate with APN and may exempt projects from paying utility charges or facilitate their implementation otherwise.

The Act envisages the development of the national Affordable Rental Programme, developed by APN, while local and regional self-government units will develop their own programmes. This ensures affordable housing through the construction of such buildings in urban, peri-urban and rural settlements, it defines locations, citizens’ needs, implementation measures, available resources and plans to build apartments to rent or purchase.

The Act prescribes the buildings must be designed based on the principles of rationality, modular construction and green infrastructure. At least 50% of apartments must be intended for affordable rental, except in buildings with less that 10 apartments, where all apartments must be intended for affordable rental.

Affordable purchase and rental prices

The Act envisages the purchase and rental of apartments under affordable prices, calculated according to actual construction costs and developmental indexes of local self-government units. In the case of renting an apartment, affordable rent is determined according to the total income of the immediate family, utility costs and real estate maintenance costs.

Buyers and renters are selected through public calls and priority lists. In the case of apartments purchased under affordable prices, it is forbidden to sale and rent them for 35 years, while APN and local self-government units have the right of first refusal. It is possible to purchase apartments trough instalments under affordable conditions in terms of price, interest rates and repayment term.

The income criterion refers to two and a half local median net salaries in the case of a single person and for each family member the amount increases by 0.5% of the local median net salary.

“If we know the average salary is approximately 1,400 euro, then we can estimate how many citizens fall into the category,” the Minister pointed out.

Subsidies for construction or reconstruction and activation of vacant real estate

The Act also enables subsidies for the construction of a new family house or the reconstruction of an existing residential building. The subsidies are allocated for the purpose of improving residential conditions, increasing energy efficiency, enhancing housing quality and ensuring adequate living space.

Another separate mechanism is the activation of vacant residential real estate which aims to include the unused housing stock in the affordable housing system, for the purpose of expanding accessibility of rental apartments without new construction. The mechanism is carried out by APN, with financial support from the Republic of Croatia and possible involvement at the local level.

Available residential real estate may be acquired from their owners, so APN could offer them at affordable rents, provided that the real estate has not been used for at least two years prior to the date of publication of the public call, i.e. that they are fit for use or require only minor works.

APN and local public institutions manage the apartments, commercial spaces and common areas of the buildings. Financial surpluses must be used solely for further construction and maintenance of the stock, which ensures the system’s self-sustainability.

No construction without consent from local governments

Minister Bačić highlighted the role of local self-government units, without which the programme could not be realised, also commenting on the recent parliamentary discussion and critics by the opposition that the Physical Planning Act glorifies affordable housing and overrides constitutional authority of local governments.

The Minister negates it by clarifying that urban planning projects accelerate construction, but that construction could not take place without consent from local self-government units.

The Affordable Housing Act should enter the Government’s procedure next week, and parliamentary procedure in around ten days.

Source: HINA/MPGI

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