Regulated rents to rise by 10 percent in three consecutive years

Regulated rents to rise by 10 percent in three consecutive years

Vinohrady

The ruling coalition has agreed on a government regulation which would send the price of rents in regulated tenement flats up by 10 percent in three consecutive years. At the end of that time - described as a transitional period - Parliament should debate a new law on regulated rents. Although the coalition is happy with the compromise -landlords accuse the government of dragging its feet and refusing to take measures which would help to correct the distortion of the Czech housing market. We asked economic analyst Radomir Jac what he thinks of the new government regulation:

"Well, the Ministry for Regional Development originally wanted a 15 percent increase in regulated rents each year - that means a 45 percent increase altogether. I think that the solution that the Ministry for Regional Development and the Finance Ministry found is a kind of compromise. If we want to calculate the likely impact of this phased-out rent increase then we can say that for example in Prague a three room flat /75 square metres/ will be approximately 900 crowns more expensive at the end of those three years. So it is clearly a moderate step. It should not be a problem for the average Czech family to pay this rent."

Right. But the owners are not happy. And moreover this is not actually a legislation is it ...

"Yes, that is a big issue. At the moment it seems that the government wants to postpone a legislative solution to the problem until 2006. In my opinion this is a point which flat owners are likely to confront the government with: whether the solution is in compliance with our legislation and jurisdiction."

Why has the government postponed drafting a new law and is clearly not willing to do so even now?

"Well, I think that for politicians this is obviously a very sensitive social problem. Roughly one million flats in the Czech Republic - which means more than one third of all flats in the Czech Republic - have regulated rents. So obviously for politicians this is a very sensitive matter that they have to resolve and it is clearly proving to be a problem. However we should not forget that rent regulation in part of the housing market has a very adverse effect on the flexibility of the market as such and furthermore it has negative consequences on the flexibility of the labour market in the Czech Republic."