Czech government plans gradual rent deregulation

01-02-2005

Fifteen years after the fall of communism the Czech Republic still has a complicated system of regulated rents. If you've been living for 20 years in the same flat and hold the same lease, you pay a low rent regulated by law. But if you don't have such lease; you are usually doomed to pay the full market price. For an identical flat you'll find yourself paying up to five times more. The Czech government now says it would like to change this system and slowly deregulate rents.

Market rents in the Czech Republic, and especially in big cities like Prague, are very high compared to average incomes. All governments since the fall of communism have been rather reluctant to reform the old system, afraid of the impact on the least well off. Vojtech Cepl from the Law Faculty of Charles University in Prague says that every country needs a system of social housing, but the Czech system is not working anymore.

"What we use the term 'rent control', it is in fact preservation of the old communist artificial system of prices, which has nothing in common with the real market prices. The prices were generated by administrative orders. In the current political struggle they have been slightly adjusted to the market mechanism, but insignificantly."

We asked a few people in the streets of Prague whether they agree with the government's attempt to deregulate rents.

"I think it's absolutely necessary, the regulation brings advantages only for one group of people while others pay twice as much, three times as much as they should. It's simply deformation of the market."

"The situation as it stands right now - I don't care about it for the moment, but when I get my own house and I will have to pay quite a lot, and then I will care, and I think (deregulation) will not be so good for me."

"I have one flat which we rent, but my family live in another flat which is rented and for us as people who live in a regulated flat, it is good, but I know that a change in the law is needed."

So the people we spoke to there, generally seemed to have to come to terms with deregulation but Vojtech Cepl says that though there have been several attempts to change housing policy in the past but no government has dared to go the whole way.

"There have been sort of shy attempts to make a compromise and adjust the level of prices but it is all with sort of a belief that it should be done slowly and it is a part of a political struggle. The modern social housing policy should not be based on general deformation of prices, but on supporting the poor by providing them with money to pay the rent."

Social Democrat MP Stanislav Krecek is a vocal opponent of rent deregulation. This time he says that he welcomes the government attempt to gradual reform, but still is rather sceptical that it may be successful.

"Any new law or attempt by the government to make any change in this matter is to be praised because the current housing system has lost its social function - which is to guarantee that socially weak people are not segregated and deprived of their housing. So it is a step in the right direction. I am just afraid that it is not anchored in the social system because it is not clear where the state takes the money needed for social housing."

The proposed reform will certainly have more opponents even within the government itself. Other critics from the right of the political spectrum say that it is too slow and comes too late. But even though the reform will probably be nothing more than a compromise, it is expected that it will reduce the current distortions in the housing rental sector.

01-02-2005