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Socialist interventions or wild market? The new city council calls for a third way

Unfortunately for the inhabitants, the housing crisis has returned to Prague periodically over the past few centuries, both in terms of quantity and quality of housing.

First the renovation of some neighborhoods such as Josefov in the nineteenth century, then the expansion of the Bohemian capital after the end of the First World War, during the period of the Great Prague, with the incorporation of entire inhabited centers that until then had made up autonomous municipalities, as in the case of Královské Vinohrady, Nusle, Košíře and even Žižkov. Then finally the construction of large housing estates arrived in the post-war period and in the seventies and eighties. Every era and every social and political order have tried to find their own recipe for the growth of the metropolis. The beginning of the XXI century in this sense, is no different.

Growing without expanding

The crisis of today, which has gradually appeared in recent years with a strong increase in housing prices, is in some ways different from those of previous periods. Prague is no longer subject to population growth comparable to that following the first and second world wars. Indeed, between the end of the nineties and the last decade, the number of its inhabitants had been reduced due to new lifestyles and new trends, which pushed a part of the population into settling outside the municipal boundaries of the capital, though not too far. They were the years of the hinterland satellite towns, the satelitní městečka, often identifiable by a uniform aesthetic that in Bohemia has assumed the less laudatory title of entrepreneurial baroque.

In recent years, however, the number of inhabitants of the capital has started to grow again, also due to an ever-increasing presence of foreign citizens. Furthermore, the demand for new housing has been fueled by the decrease in the average size of families and by the general aging of the population, which requires greater attention to some particular aspects, typical of the example of removing architectural barriers.

Coping with the resurgence of population growth, and in general with the renewed fascination of living in the city, is the main aim of the new city plan for Prague prepared by the team of the architect Roman Koucký. His team spoke of a “dissolute” twentieth century, which led to the current definition of municipal boundaries. Unlike its predecessor, the twenty-first century should instead be “responsible”, maintaining these boundaries, but giving them meaning. This is the thought of the creators of this new urban development tool, intended to guide the building activity of the city. In their mind, Prague should grow without expanding beyond the current limits, leveraging the brownfield areas within it. The regulatory plan therefore contains a series of development areas that correspond mostly to former industrial areas or former logistics poles to be redeveloped as a whole. According to the creators, the approach to the areas should be holistic, with one or a few private partners actually interested in the creation of new areas the size of a small neighborhood. This way of proceeding, which requires a greater effort of dialogue in the planning and design phase, should then allow an acceleration of the construction permit release times. The obstacles, which often lengthen the bureaucratic procedures today, should be addressed already in the planning phase. However, it is clear that this approach requires the presence of huge investors and good financial strength. On the other hand, according to official estimates, tens of thousands of new apartments could arise in the inner brownfield areas.

In addition to the issue of the new metropolitan plan, the delay of which is being felt in the development of the city, the new municipal administration, which emerged from the last elections, also seeks more immediate remedies. The proof of mapping the phenomenon of second vacant homes, proposed by the Pirates, was the subject of the first crisis within the Prague municipal coalition. The centrist leader Jiří Pospíšil has even taken to the barricades against his own allies claiming the sanctity of private real estate. In fact, there is only fragmented information on the phenomenon of houses purchased for investment purposes, also because the Czech tax system makes no distinction between first and second homes.

A part of the Prague bourgeoisie, which met its most immediate housing needs by cheaply buying the apartments of residence in the nineties during the privatization phase, now has sufficient resources to purchase another home for its own children. In this way the gap between the historic inhabitants and the new arrivals is further widened (or those who have not had the opportunity to privatize at bargain prices).

Market failure

The rise in prices in recent years is due to a strong imbalance between supply and demand, attributable to bureaucratic delays in the authorization procedures for new housing projects. However, there are many signs that the current situation, rather than an imbalance, represents more of a case of market balance. First of all, in markets with a high rate of owned properties (such as the Czech or Italian), prices of houses tend to run faster than income. The only chance of stopping the growth are strong shocks, like the 2008-2010 crisis. At the same time, the big real estate groups seem to have found a balance with an excellent employment rate of their productive capacities, a good profit margin and conditions to the point of allowing most of the houses to be sold when they are still in the planning phase. On the demand side, there does not seem to be high numbers of potential buyers with current price levels.

Also, for this reason the Municipality of Prague wants to increase its housing fund by taking possession of around ten thousand new apartments every year until 2030. According to the program presented in mid-April by councilor Hana Marvanová Kordová, the municipal housing plan should satisfy not only people in poor conditions, but also a part of the middle class, which is no longer able to access housing loans. The inspiration comes from German-speaking countries, Germany in the first place, where the rate of people living in rent is higher. The plan devised by the new council in Prague provides for the city to participate in thirty percent of new housing cooperatives, making available the building land and a direct investment. In return, the city would be entitled to thirty percent of the apartments built. Instead, private cooperative members would be required to receive an entry investment equivalent to 25 percent of construction costs. The rest would be covered by a mortgage, which would be paid through the rent installments. To show that they are serious, the city institutions have already identified six hundred building plots, a part owned by the central municipality, others belonging to the individual districts.

Return to socialism

That the right to housing cannot be determined solely by market forces has long seemed a slogan for social collectives. The current situation in Prague, on the other hand, shows that market mechanisms alone cannot manage development. The case of the Czech capital requires the reduction of the risk of speculative and financial bubbles. The policy of the Czech Central Bank, which has severely limited access to mortgages, has its prudential reason, which has created a need for creativity in finding solutions, such as direct market interventions, which a few years ago would have been labelled as socialism. It is no coincidence that one of the sources of inspiration is in the municipal socialism of Vienna. The current housing crisis will not change Prague only from an architectural point of view, but it will probably generate alterations even at the political level.

by Jakub Horňáček