EC has problem with social rental housing, no one says what it is
There might be two reasons for EC's discontent.
The European Commission seems to have a problem with building state-supported rental flats in Slovakia according to the current system. Last week, Prime Minister Robert Fico (Smer) admitted so for the first time, reports daily Sme.
"We've encountered a number of irregularities, but especially the fundamental problem whether the inclusion of social rental housing in the five percent rate is in accordance with European legislation," he said, referring to the reduced VAT which was supposed to lure in investors. He also said that the EC wants this to be changed. The PM's statement was later corrected and negotiations are supposed to be still going on.
However, neither the PM, nor relevant authorities, nor the EC want to specify what is the problem.
Who is it for?
More than two years ago, the parliament approved a law that was supposed to create conditions for the construction of social rental housing. Although none have been built yet, Fico's government has said it wanted to continue the project.
Speaking to the daily, members of the board and supervisory board of the newly established Agency for State-supported Housing said that even they do not have any information. However, accordin to them, there may be two reasons for why the EC has taken issue with the project.
First, the project may actually not be social rental housing, but rather housing for the middle class families. Based on calculations, rents in the proposed flats would not differ significantly from commercial rents.
The government has set an income ceiling for the flats up to eight times the minimum wage of a household. For example, a family with two children would have to have a monthly income of less than €5,700. The fact is that the majority of Slovak households fit into the limit.
The Slovak side can still theoretically argue that 10 percent of the new apartments should be given to people with a medical disadvantage or children in orphanages. Another 40 percent should go to civil servants, teachers, health workers or police officers, as well as employees of large companies who travel for work.
The government can still adjust the criteria for the socially weaker strata, but then it would also have to reduce the prices of regulated rents, which will not appeal to investors.
Discriminatory VAT
The second problem might be that the reduced VAT may be discriminatory.
Only selected investors with whom the government signs a contract can build such flats. So far, the government has signed contracts with only two investors - Kooperativa and BSWG. The EC may be asking why only selected companies should build the flats with reduced VAT, giving them an unfair advantage over companies that will build rental flats with the new 23 percent VAT.
Fico says that the government considers the project important and will look for a way to deal with the commission's objections.
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