Public Rental Housing as Middle-Class Entitlement? Economic Analysis of the Slovak Public Rental Housing Policy

Abstract

The article explores economics of public rental housing policy in Slovakia. Our principal research question is: why has construction of such housing not succeeded in activating rental market and labour mobility? The secondary question is: does the policy ensure that public housing projects are economically meaningful and well-targeted? Four case studies were examined to determine who bears the costs of housing construction and whether disadvantaged groups benefit from the public housing subsidies. We show that there are no constraints pushing for targeted allocation to lower-income families. With proper calculation of costs, municipalities allocate housing, but share only a small percentage of the costs and bear risk of rent non-payment. The current framework thus provides incentives for local governments to prefer indefinite leases to middle-class tenants. Therefore, it is simply owner-occupied housing in disguise, but there is a substantial subsidy compared to market cost of housing – approximately 50%.

Keywords: Housing policy, Social Housing, Slovakia

JEL Classification: H23, H42, H53