Govern­ment in­cen­tives aimed at en­cour­ag­ing con­struc­tion in­dus­try to build cheaper homes

Financial Mirror (Cyprus) - - PROPERTY - By Kyr­i­a­cos Kil­iaris

In a move to counter ris­ing rents and home­less­ness, the govern­ment is draft­ing a new hous­ing pol­icy to per­suade the con­struc­tion sec­tor to build cheaper flats.

Part of the state’s new hous­ing pol­icy is a scheme dubbed “af­ford­able hous­ing” which sees the govern­ment of­fer­ing in­cen­tives to devel­op­ers in re­turn for cost-price homes for low-in­come fam­i­lies.

The scheme is be­ing pre­pared by the Min­istry of In­te­rior in co­op­er­a­tion with the Tech­ni­cal Cham­ber of Cyprus (ETEK) and in­volves in­cen­tives for the con­struc­tion of af­ford­able apart­ments.

One part of the hous­ing pol­icy will see the govern­ment rais­ing the build­ing co­ef­fi­cient by 25% or 30% for apart­ment blocks.

In the con­text of the “af­ford­able hous­ing” scheme, devel­op­ers will be al­lowed to keep part of the con­struc­tion built with the ad­di­tional space, while the re­main­der will be used to ac­com­mo­date so­cially vul­ner­a­ble groups.

Ste­lios Ach­ni­o­tis, ETEK’s pres­i­dent told the Fi­nan­cial Mir­ror that based on what is be­ing dis­cussed, in­ter­ested devel­op­ers will be given an extension on the build­ing co­ef­fi­cient (ETEK rec­om­mends 25%, while the Min­istry prefers 30%) and will have two years to ap­ply for a town plan­ning per­mit and three more to carry out the project.

Ach­ni­o­tis said 70% of flats be­ing built with the ex­tra co­ef­fi­cient will have to be rented out to vul­ner­a­ble groups for a min­i­mum of eight years, with the own­ers hav­ing the right to use the flats as they wish af­ter the eight-year pe­riod.

“The state will con­trib­ute to pro­vid­ing af­ford­able homes by of­fer­ing vul­ner­a­ble groups the op­por­tu­nity to rent cheaper flats, and by adding new flats to the mar­ket which, we hope, will bring down rents. We are look­ing into find­ing a for­mula of cal­cu­lat­ing the rents for these flats that will ben­e­fit both land­lord and ten­ants,” said Ach­ni­o­tis.

If devel­op­ers opt to sell the ad­di­tional flats built, then 60% should be sold at cost price to peo­ple meet­ing the cri­te­ria to be set.

“We be­lieve that ex­tend­ing the build­ing co­ef­fi­cient by 25% will be to the ben­e­fit of vul­ner­a­ble groups of our so­ci­ety as the num­ber of flats will in­crease. At the same time, it ad­dresses an­other con­cern of ours which has to do with us­ing up land for hous­ing pur­poses at the ex­pense of agri­cul­tural land,” said Ach­ni­o­tis.

“We see our cities ex­pand­ing with no end in sight con­sum­ing more land than nec­es­sary. Ni­cosia, with the area it has taken up, could eas­ily have housed 2 to 3 mil­lion peo­ple, but the way houses are be­ing built, Ni­cosia can only house around 300,000 peo­ple,” he added.

An­other part of the govern­ment’s strat­egy is to re­duce the min­i­mum size al­lowed for flats so that smaller apart­ments can be built. A rel­e­vant pro­posal was tabled at the House by rul­ing DISY’s chair­man Averof Neo­phy­tou.

At the time, the pro­posal was met with scep­ti­cism by the op­po­si­tion par­ties who said that the re­duc­tion in the min­i­mum area al­lowed for flats will lead to devel­op­ers build­ing ‘boxes’, re­sult­ing in the de­te­ri­o­ra­tion of the qual­ity of peo­ple’s lives.

How­ever, Ach­ni­o­tis be­lieves, at this point, it is more im­por­tant for fam­i­lies and young cou­ples to be able to put a roof over their heads rather than hav­ing the lux­ury of space.

Why a Mercedes and not a Mini?

Prop­erty ex­pert Antonis Loizou, Di­rec­tor of Antonis Loizou & As­so­ciates, said that he finds lim­i­ta­tions on the min­i­mum area re­quired for flats to be ridiculous.

“Ac­cord­ing to the cur­rent law, a twobed­room flat must cover a min­i­mum of 80 sq.m. With go­ing prices, one square me­tre of a flat in Ni­cosia costs around EUR 2,000. Thus, the dif­fer­ence be­tween a 60 sq.m. twobed­room flat and an 80 sq.m flat would be a good EUR 40,000,” said Loizou.

“Why should a stu­dio be 50 sq.m by law and not 35? The sale price dif­fer­ence be­tween the two is EUR 30,000 and in the rent price around EUR 100 a month,” he added.

Loizou said the Town Plan­ning depart­ment in­sists on pre­serv­ing the law as it does not want to see Cypri­ots liv­ing in ‘cages’.

“I un­der­stand their con­cern, but on the other hand though, if the cit­i­zens of this state are not able to buy or rent a home, what are the al­ter­na­tives? To me, it sounds like say­ing that if we are to buy a car it has to be a Mercedes and by no means a Mini. If some­one can­not af­ford a Mercedes shouldn’t they have the op­por­tu­nity to buy a smaller car?”.

Mean­while, devel­op­ers seem to be back­ing the govern­ment’s plans in the be­lief that it will fur­ther stim­u­late growth in the con­struc­tion in­dus­try.

The Fed­er­a­tion of As­so­ci­a­tions of Build­ing Con­trac­tors (OSEOK) says that con­trac­tors and devel­op­ers are ex­hibit­ing a vivid in­ter­est in in­cen­tives be­ing put for­ward by the govern­ment as they find them to be at­trac­tive.

OSEOK’s Fran­gos Prokopas said that any re­lax­ation on the build­ing co­ef­fi­cient will mean that the cost of land for build­ing is re­duced, and the profit scope will in­crease. At the same time, it will give devel­op­ers the op­por­tu­nity to give back to the com­mu­nity.

“It will cer­tainly cre­ate op­por­tu­ni­ties for a se­ries of projects.”

Prokopas said that devel­op­ers also sup­port the govern­ment’s move to bring down the min­i­mum area cov­er­age for flats as this will also act as an in­cen­tive for devel­op­ers to get on board the govern­ment’s af­ford­able hous­ing scheme.

“Build­ing smaller flats, without lux­ury fea­tures, means eas­ier projects which can be com­pleted quicker. That means even lower cost, as devel­op­ers will have to pay for fewer work hours”.

Prokopas ar­gued that devel­op­ers will not be build­ing un­rea­son­ably small flats as they would want to see their units be­ing sold.

New res­i­den­tial com­mu­ni­ties built by the Cyprus Hous­ing Devel­op­ment Corp.

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