Exploring Housing Provision in Cyprus: The Government's Options
Pavlos Loizou 10:24 - 15 March 2023
The topic of government involvement in housing is a contentious one, with various opinions and approaches to how housing should be provided and managed. In Cyprus, this issue has become of interest due to the increase in overseas population over the past three years. In 2022 alone, approximately 25,000-30,000 people moved to Cyprus from Ukraine, Russia, Belarus, Lebanon, Israel, etc., which has had a knock-on impact on property prices and rents. According to the Q4 2022 WiRE Price & Rental Index report, apartment and house prices increased by 9.9% and 1.0% year-on-year, respectively, while rents increased by 18% for apartments and 11% for houses.
Historically, Cyprus has approached housing in a very crude manner: increased the availability of residential land by changing/ widening the town planning zones every five years, give land to individuals/ couples of low incomes to build their home, and/ or build houses and apartments on government land and sell it at (construction) cost. Before exploring other options, its clear that “adding” residential land through rezoning doesn’t help if the “push” of existing owners of such land to develop/ utilise it isn’t there. This is evident from the thousands of empty/ undeveloped land parcels across Cyprus’ cities, where owners have no reason to develop them as there is no dis-incentive (taxation) of them not doing so. Similarly, assigning to government land zero value means that society is giving it to certain individuals. Whilst this is acceptable, considering that the purpose of this gifting is to house our compatriots, why doesn’t the government hold a charge over that property if they decide to sell it on so that they recuperate at a future point in time at least an element of the land value.
Let’s explore the different options available to governments in terms of building, owning, renting, or selling buy-to-let, affordable, or social housing.
Building Housing: Governments can build housing either through direct construction or by providing subsidies to private developers to build affordable or social housing. Building housing allows the government to control the quality and design of the properties, ensuring that they meet minimum standards of safety, energy efficiency, and accessibility. It can also provide an opportunity for local employment and economic growth. This to a great extent is what has been happening until now via the Cyprus Land Development Corporation (ΚΟΑΓ).
Owning Housing: Governments can also choose to own housing, which means they become responsible for the management and maintenance of the properties. This approach can provide security of tenure and enable the government to control rent levels, ensuring that they remain affordable for tenants. However, owning housing can be expensive, requiring significant investment in maintenance and repairs. This is partly what has been happening with refuge housing, where the government has been maintaining it and has progressively been gifting it to the refugees.
Renting Housing: Governments can also choose to rent housing to tenants, either through social housing or buy-to-let schemes. Social housing provides low-cost rental accommodation to those who are unable to afford market rents, while buy-to-let schemes allow the government to provide affordable rental properties to middle-income earners. Renting housing provides flexibility for tenants, allowing them to move when their circumstances change. However, renting housing can be less secure than owning, with the risk of rent increases or eviction. A twist to this is the “mortgage to rent” scheme that is up for approval by the EU as the solution to the €3nln residential NPLs.
Selling Housing: Finally, governments can choose to sell housing, either through the sale of social housing to tenants or through the sale of buy-to-let properties to private investors. Selling housing can provide a boost to government finances and allow tenants or private investors to build equity. However, selling housing can reduce the government's control over rent levels and the quality of housing provided.
The choice of whether to build, own, rent, or sell housing is a complex one that requires careful consideration of the local housing market, economic conditions, and social needs. Each approach has its advantages and disadvantages, and the most effective approach will depend on a range of factors.
Ultimately, the government's role in housing provision should be to ensure that everyone has access to safe, affordable, and decent housing. By working in partnership with private developers, housing associations, and tenants, governments can provide a range of housing options that meet the diverse needs of their citizens. This requires a long-term commitment to housing policy and investment in the development, management, and maintenance of housing stock.
What it also means is that some people will need to pay higher taxes on their real estate, register the rents that they receive from their properties, and follow proper maintenance schedules. No more “incentives only” policies.
CEO, Ask WiRE