Coalition divided over rise in rents

11-02-2004

Fourteen years after the end of communist rule the Czechs are still not living in a free market economy. One of the relics of the communist state controlled economy that previous governments did not have the courage to do away with, has come back to haunt the current ruling coalition. It is called "regulated rents". A measure which guarantees about a third of Czech households stable, low rents, often in areas where unfortunate tenants pay several times more for similar flats. While the parties in the governing coalition are haggling over a ten versus seven-percent yearly increase, a group of disgruntled citizens has called on the Czech parliament to remove the double standards on the housing market once and for all.

Petr Bratsky and Tomas Nenicka with petition against regulated rents, photo: CTKPetr Bratsky and Tomas Nenicka with petition against regulated rents, photo: CTK "There are two levels of rents in the Czech Republic; regulated rents and free market rents and there is a big difference between these two levels. The free market rents are several times higher than regulated rents and this system does not reflect any social needs of people."

Tomas Nenicka speaks on behalf of over 1,500 signatories of a petition calling for the levelling out of apartment rental prices.

"In this stage we are trying to communicate this problem to our society because the discussion is still limited to owners of houses and a small part of tenants who live in regulated-rent apartments. After a broader discussion there will be a much higher pressure on our politicians to change our law."

It is not only those unlucky tenants paying free-market prices who are raising their voices. There are also the owners of apartment buildings who can's afford maintenance costs because the controlled rents they collect from their tenants simply can't cover them. The parties in the ruling coalition, however, differ sharply in their view on rent control. Finance Minister Bohuslav Sobotka and Local Development Minister Pavel Nemec agreed last week on a gradual, ten-percent increase in regulated rents in the next three years - a difficult compromise for both parties, in their own words. Minister Pavel Nemec of the right-of-centre Freedom Union.

"We have accepted this maximum compromise only because the situation has not changed at all for two years, and because it is untenable and completely unjust to artificially keep the rents at a regulated level and not even take inflation into account."

Bohuslav Sobotka, photo: CTKBohuslav Sobotka, photo: CTK MPs for the Social Democrats, the strongest coalition party, are demanding a slower growth rate. Otherwise they are threatening to vote against the proposal. Social Democrat Finance Minister Bohuslav Sobotka.

"The coalition needs all its 101 votes in the lower house to pass the compromise Minister Nemec and I agreed on. That's why the whole Social Democrat parliamentary party have to support the agreement. Now we need to discuss under which terms they would support it."

It is expected that the lower house will discuss the bill at the end of this week or early next week. Observers say that if the coalition parties fail to reach an agreement, the three-party governing coalition might collapse. Meanwhile, the price gap on the housing market will continue to cause tension in society and the petition calling for rent deregulation will gather more signatures.

11-02-2004