It's high time for a comprehensive housing program (INTERVIEW)

It’s high time for a comprehensive housing program (INTERVIEW)

Existing government programs (“Rodzina na Swoim”, “Mieszkanie dla Młodych”, “Safe Loan 2%)” have helped to a small extent in solving the housing problem. Why did it end like this every time?

Krzysztof Czerkas

First, we need to define the term “solving the housing problem”. For me, it is not only about improving typical real estate market statistics, such as the number of apartments per 1,000 inhabitants in Poland, the number of square meters of living space per person or reducing the number of substandard apartments (e.g. without a toilet and/or running water). In this respect, we have seen a change for the better over the last dozen or so years. However, there are general social issues closely related to the housing market. These include the deteriorating demographic situation, the increased number of “nestlings”, i.e. people over 30 years of age still living with their parents. Barriers related to moving out of parents’ house include: the lack of an own contribution required by Recommendation S of the Polish Financial Supervision Authority when taking out a mortgage loan and young people working on junk contracts. A certain solution in the described situation is parents as co-borrowers or guarantors. However, those parents who entered adulthood in the early 90s can also still repay loans.

Even though each subsequent government housing program tried to correct the mistakes of the previous ones, these programs lacked comprehensiveness. The authors moved from wall to wall. The PO-PSL coalition promoted the ownership of apartments in the “Family on Your Own” and “Apartment for the Young” programs, forgetting about renting for the less wealthy. Later, PiS promoted apartments for rent (the “Mieszkanie+” program), but in the second term of its government it stopped promoting apartment ownership. As part of a return to the idea of ​​popularizing home ownership, the “Safe 2% Loan” appeared, and a little earlier, the Act on Family Housing Loans. It is worth emphasizing that another sensible solution within the economic policy of the PiS government, the PPK program, also includes the option of allocating the invested contribution to build an own contribution in the context of taking out a mortgage loan.

The previous government talked about lowering the technical requirements for apartments, only to increase these requirements at the end of its term, which was an anti-supply solution for the real estate market heated up by the “Safe Credit 2%” program.

Meanwhile, the housing program should be consistent and comprehensive. Everyone in such a program should find a solution for themselves – both those who have creditworthiness and those who have it but have no way to organize their own contribution. People who work in garbage collections and do not have their own contribution should also find a solution for themselves in the housing program. For them, there are apartments for rent, with the option of owning them.

What can be changed – on a macro scale – by introducing a reasonable housing policy on a large scale? Everyone should care not only about a much larger supply of apartments, but also about ensuring that they reach the largest possible group of Poles, not only the wealthiest ones…

I share this view. The unsolved housing problem translates into disastrous demography in Poland and the popularity of populists as a result of social frustration. This demography means that – as the ancient Romans used to say – the situation has reached the bottom line. Therefore, there is a strong need to develop a comprehensive and radical solution to the housing problem.

The key problem when building apartments for rent is, among others: lack of sufficient land for such investments. How to acquire this land? From expropriations that raise social objections?

I remember the beginnings of highway construction in Poland, road renovations and blocking of investments. The expropriation regulations regarding plots that could not be purchased came and the problem disappeared. The ghosts about the constitutional inviolability of private property fell silent, because the expropriated land for roads and infrastructure was paid fairly fairly. I see no reason for the increasingly beautiful Warsaw to continue to be marred by empty buildings, ruins and dilapidated construction sites. At the same time, various crooks make money from the bankruptcies of the owners of such areas.

Road construction solutions must be replicated in housing, and market prices must be paid for the expropriation of land and construction that has been torn up for years. Local governments may also add to the pool of land covered by the comprehensive housing program if they are unable to renovate city tenement houses. As regards areas belonging to bankrupt companies, the process of satisfying creditors will be accelerated as a result of expropriations. Apart from improving the aesthetics of cities, this is another beneficial effect of my program.

Good knowledge of economic and market realities is indeed an excellent starting point for creating a new system. Therefore, please briefly present the assumptions of your program.

Here are the key assumptions of the program that my colleague from my time working at the bank, Mr. Piotr Makowski, helped me develop:
expropriation of landaboutin the above mentioned cities area – detailsaboutonly in places where construction has been interrupted and where buildings have been vacant for years as a result of the problemaboutin proprietary or problemaboutin the financial owners, whoabout3 were unable to cope financially with the investment;
land developmentaboutin by State Treasury companies. The form of transfer of the said landaboutIt could also be possible for State Treasury companies to acquire the certificate in exchange for landaboutin investment closed-end investment funds (Closed-End Investment Funds) managed by PFR Nieruchomości on behalf of PFR TFI SA;
land developmentaboutfrom current resourcesaboutin the National Real Estate Resource (KZN). The form of their development would be the contribution of these lands by KZN to the FIZ.

It would also be possible to switch to the FIZ and REIT formula and allow external investors to participate in the project. Work on the REIT Act would then have to be accelerated. FIZ would contribute this land to special purpose vehicles with developers and local governments selected in tenders. Local governments could, in turn, later rent apartments from FIZ special purpose vehicles for municipal housing purposes. Special purpose vehicles could also be established in the premium segment. The developer could later buy back these special purpose vehicles, which would provide FIZ with additional income. In addition to the construction time and construction costs, an additional criterion for assessing a developer entering into cooperation with FIZ would be the number of apartments previously earmarked for rent by local governments in its projects, which would necessarily increase the pool of municipal apartments for rent. Developers, ktaboutthose who would not fulfill the provisionsaboutin the mindaboutin individual investment special purpose vehicles, would be excluded from cooperation with FIZ.

How could the program be financed?

Next to it is the entryaboutin the budget act financing the programat would come from revenueaboutin the rental of apartments and their purchase, from the redemption or sale of shares of special purpose vehicles implementing investment projects (including projects from the premium segment of the real estate market) or from dividends from special purpose vehicles. Financing could also come from redirecting part of developers’ contributions to the Developer Guarantee Fund (DFG) in order to support the supplementation of the own contribution in housing loans. This program would be managed by the National Economy Bank. The institutions administering the funds for financing the housing program should be KZN (service land expropriation) and BGK (guarantees of own contribution). Local governments rentedby apartments with a view to the pool of municipal apartments. The FIZ building apartments for rent would in turn be managed by PFR Nieruchomości.

Your idea corresponds to the idea of ​​the innovative ECO LOAN for the Purchase of an Apartment by Mr. Krzysztof Oppenheim, which we wrote about in the last issue of “FPG”. Is it a coincidence that they complement each other so well, or was that your intention?

We have known Krzysztof Oppenheim for over 20 years. He presented me with his idea of ​​ECO CREDIT, which I liked. Like Krzysztof, I believe that helping those who are able to help themselves is demoralizing. State aid should be addressed primarily to those in need. The ECO LOAN proposed by Krzysztof will not destroy households even in times of economic downturn. The funds exempt from mass subsidies can be redirected to the implementation of the program for the construction of apartments for rent with the option to acquire ownership. And then the housing program in Poland will be comprehensive.

Is there a chance that banks will become interested in the ECO LOAN concept, and that the current government will consider the idea of ​​a new and mass rental housing program?

In Poland, there has been a clear trend of popularizing loans with a fixed interest rate (which is encouraged by the KNF). Thanks to this type of loan, it is possible to avoid the unpleasant consequences related to the increase in interest rates. For banks, projects of building apartments for rent with local governments as long-term tenants with the option of subletting and PFR Nieruchomości supervising the construction are a dream project to finance. All the elements of credit risk assessment, which banks always pay attention to, are included here, e.g. stability of rental income and corporate governance. Land contributed to the special purpose vehicle with a building permit will meet the condition of the appropriate own contribution of the borrower required in the financing of investments by banks in Recommendation 15 of Recommendation S of the Polish Financial Supervision Authority.

He was talking Robert AZEMBSKI