Opinions remain divided over thorny issue of rent deregulation

13-02-2003

The coalition government of the Social Democrats, and the junior partners the Christian Democrats and the right-of-centre Freedom Union cannot reach agreement over the controversial issue of state controlled rents for about 200,000 homes in the Czech Republic. A new proposal submitted by the Christian Democrats a week ago seems to have raised the temperature still more.

The Czech government is struggling to resolve the long-running issue of regulated rents, concerning houses owned by regional authorities and individuals who got their property back after restitution in 1991. Currently the Czech housing market is divided into two parts, one of which functions under normal market conditions with the other part still being controlled by the state. About one third of Czech tenants still enjoy the advantage of low regulated rents for spaces that would cost four times as much under market conditions. These tenants signed their lease agreements during the Communist era and the government is reluctant to make changes which might lead to a major upheaval. At the same time building owners claim their rights are infringed on and will fight to change the law. Libor Dellin is the head of the Association of Apartment Owners:

"There is no time for procrastination here. The government is obliged to deal with this issue immediately and not to postpone it for several years."

Currently the issue is blocked by a lack of agreement between two ministries - the Finance Ministry headed by Social Democrat Bohuslav Sobotka and the Ministry for Regional Development led by Pavel Nemec, who is a member of the Freedom Union. Sobotka and his office are reluctant to deregulate rents citing low incomes of many Czech households, including pensioners. His opponents argue that the government has no right to burden the lack of a social policy on landlords.

A week ago during a coalition meeting, the Christian Democrats proposed that regional authorities be given a free hand in their rent policy while individual landlords will have a 15 percent restriction for annual rent hikes. This should be valid for a transition period of two or three years, after which the government will set new prices according to attractiveness of various localities. The latest proposal met with sharp criticism by both the Association of Tenants and Association of Apartment Owners. Here's Social Democrat deputy and housing policy expert Stanislav Krecek:

"This proposal is unacceptable because it means that a region can raise rents on Monday, then on Thursday and next week on Tuesday, and so on. It is necessary to say how many times per year can rent be raised and how much. It can be raised by 500 percent or 1000 percent and everything would be legal."

Mr Krecek adds that such a proposal goes against the Czech Constitution and the Declaration of Rights and Freedoms because it would give landlords different conditions for exercising their ownership right.

Last November the Constitutional Court ruled that the rent regulation law was unconstitutional after which landlords started pressing tenants for higher rents. The government reacted a month later by freezing rents for three months. Now the Finance and Regional Development Ministries have two weeks to submit a workable solution to the government. However, many doubt they will manage to reach agreement because the coalition is made up of parties that have diametrically opposite views on how to resolve this situation.

13-02-2003