Minister of the Interior lays out affordable housing incentives

The government’s affordable housing scheme offers win-win benefits for both sides: eligible recipients of affordable housing gain access to more options for purchase or rent, while business opportunities are created for professionals in the construction sector, according to Minister of the Interior, Constantinos Ioannou.

Speaking to CBN, the minister explains what the government scheme entails and reveals that construction industry has embraced the scheme’s philosophy, making the outlook for its success all the more feasible.

“The Christodoulides Government has fully acknowledged the challenges that have arisen in the housing market in recent years due to the increase in construction costs, geopolitical developments in Europe and the Middle East, and the rise in demand that was not met with a corresponding supply,” the Minister told CBN. “In response to the housing issue, the Government has adopted and is implementing a series of schemes within the framework of its housing policy, which—for the first time—is comprehensive and provides practical solutions to the problem.”

Through the Special Housing Incentive for the Production of Affordable Housing for Sale and/or Rent, he added, the government is providing a practical and realistic response to these challenges. As he said, this is the most substantial intervention by the State, aimed at producing housing stock. “The scheme offers mutual (win-win) benefits for both sides: eligible recipients of affordable housing gain access to more options for purchase or rent, while business opportunities are created for professionals in the construction sector,” Ioannou pointed out.

Goal is to generate housing stock

As a state-owned asset, the scheme grants, free of charge, an additional building coefficient of up to 45% of the current allowance to land development professionals. “The goal is to generate housing stock—but with the obligation that 20% of the additional units be made available in the affordable housing market, i.e., at the prices set by the Cyprus Land Development Corporation (KOAG),” the minister further explained.

To clarify, if the plan is to build 100 apartments, with the additional building coefficient, 145 apartments will be produced instead, of which 20 will be sold at KOAG prices and the remaining 25 at market prices.

“By setting a minimum plot size of 800 square meters, we ensured that the scheme is accessible to the full range of land development professionals, regardless of the scale of their business activity,” said Ioannou.

At the same time, the scheme offers land development professionals the option to purchase the additional building coefficient by paying a fee that will go toward supporting KOAG’s Special Affordable Housing Fund. The expected revenue from such purchases currently amounts to approximately €8.7 million, the Minister of Interior said.

“In practical terms, these funds will be used by the Corporation to construct more affordable housing units for purchase or rent, thereby serving a greater number of citizens from low- and middle-income groups,” he added.

So what is the anticipated impact from the scheme?

“The scheme’s impact is already evident, which is particularly encouraging,” said Ioannou. “The number of applications and development projects submitted to date demonstrates that the construction sector embraces the philosophy behind this measure.”

Based on the current level of interest—and aside from the approximately €8.7 million expected from the purchase of building coefficients—the government estimates that over the next few years, more than 1,900 housing units will be produced, with around 300 of them entering the affordable housing market. “I am confident these figures will continue to evolve, given the ongoing interest,” Ioannou predicted.

The data proves in practice that well-designed and applicable policies deliver measurable results for the benefit of society, he said. “With the scheme’s implementation—combined with the acceleration of permitting procedures achieved through sectoral reform—our ultimate goal is to increase the supply of housing, thus alleviating the housing problem to the greatest possible extent and, in the medium term, easing the pressure on property purchase and rental prices.”

“Housing My Future” – The government housing policy

As part of the State’s comprehensive housing policy, titled “Housing My Future”, special emphasis is placed on the pillar concerning the increase of total housing stock, and particularly affordable housing, said Ioannou.

To achieve this goal, the Ministry of the Interior is implementing the Urban Planning Incentives Scheme, which aims to:

• Increase the number of residential units by granting additional building coefficients
• Allocate a portion of the newly produced units at affordable prices, contributing directly to addressing the supply shortage
• Activate the construction sector through an attractive and flexible framework

The scheme provides for the granting of additional building coefficients of up to 45% of the existing allowance, or alternatively, the purchase of the coefficient.

The distribution of units produced through the additional building coefficient is as follows:

• 20% for sale at affordable housing prices, and
• 25% for sale at market prices

Funds from the purchase of the building coefficient are deposited into the Special Affordable Housing Fund of the Cyprus Land Development Corporation (KOAG).

The scheme applies to developments carried out on plots with a surface area of 800 square meters or more.

• More details about the government’s Special Housing Incentive for the Production of Affordable Housing for Sale and/or Rent can be found here