Plan to bring affordable housing to young families in Prague gets early approval

A city-backed project for affordable cooperative housing is moving forward. The project has been approved by both the Prague City Council and the Prague Assembly.

The project is one of the main points of the election platform of the United Force for Prague coalition, which brings together Mayors and Independents (STAN), TOP 09 and the Christian Democrats (KDU-ČSL). It is also part of the City Council’s program statement.

The plan is intended to renew the tradition of cooperative housing with support from Prague City Hall. The aim is to help mainly middle-income groups of citizens, including young families, for whom housing in Prague has been financially unaffordable due to high prices. These groups include, but are not limited to, representatives of professions key to the operation and development of the city, such as teachers, paramedics, firefighters, and police officers.

According to City Hall, cooperative housing’s main advantage is that cooperatives can build apartments cheaper than a commercial developer because they are not aimed at making a profit. In their monthly payments, residents pay only the for the actual costs of the construction, administration and operation of their cooperative apartment.

In addition, thanks to the city support, they do not have to pay for land in the beginning. Land intended for cooperative housing will be provided by the city, which will establish a right for the cooperative building to be on the land for up to 99 years. After repaying the construction loan, the cooperative will be able to buy the land from the city under pre-determined conditions.

At the same time, the city will become a member of the cooperative and will have the right to dispose of one-third of the flats in each project. They will then be able to rent them, for example, to people who belong to members of professions important to the city, but cannot afford to buy a flat.

Thanks to the combination of a cooperative form of construction with support from the city, the final price of housing for a specific household can fall by up to 30 percent compared to market prices in a given location.

An expert team led by City Councilor Hana Kordová Marvanová (United Force for Prague) prepared an economic and legal analysis of the project. It set out a number of principles, starting with the competition to find a construction partner and ending with rules of fair settlement after the termination of the building rights.

“The more than century-old tradition of cooperative housing with city participation is worth renewing because it has a number of advantages. A cooperative resident has legal certainty that they will not lose their investment or fall into the debt trap because they do not have to take out a mortgage, which often they wouldn’t even be able to get. After paying the annuity, the cooperative resident can acquire ownership of the apartment,” Kordová Marvanová said.

The proposed model also makes it impossible to use flats as an investment. For example, they cannot be used for short-term accommodation services as the conditions guarantee the use of flats only for one's own housing.

“The city can increase the availability of this type of building by granting the right to build on city land. The right of construction is used everywhere in Europe to benefit the city's development. It offers an opportunity for citizens and the city to enter into a mutually beneficial relationship,” Kordová Marvanová said.

Affordable cooperative housing with city participation is a key part of the city’s housing policy. The city seeks to fill the current gap for housing for middle-income groups. Increasing the housing supply would also generally make housing in Prague more affordable. Currently, several city districts have expressed interest in cooperative construction and are ready to start preparations as soon as possible.

“Now more than ever this topic is of the utmost importance. Even for the middle income group, housing in Prague has become unaffordable due to high prices. … We would like to help young families, and especially representatives of the professions that are necessary for the operation and development of the city,” he added.