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Contents | | Executive summary | How to obtain this publication | Additional information
The following OECD assessment and recommendations summarise chapter 4 of the Economic survey of Poland published on 11 June 2008.
Contents
The supply of housing is constrained by the absence of zoning plans and by labour shortages
Another important advantage of an ad valorem tax would be to provide municipalities with stronger incentives to release zoning plans, given the prospects of higher revenues from new housing developments. By limiting the straightforward availability of land, the absence of such plans is currently contributing to the long term shortage of housing, in addition to being a potential source of corruption. Their release should in any case be made compulsory. In the short run, however, the main housing supply constraint is rising construction costs owing to labour shortages in that sector. To ease the constraint, the government should enhance its vocational training programmes so as to raise the proportion of unemployed and inactive individuals that can be recruited to this sector. Even so, such measures may take time to bear fruit; in the meantime the authorities should provide easier access to the domestic labour market for all foreign workers, not only for those from its eastern neighbours, as has recently been done.
Mortgage subsidies are not an efficient way to promote home ownership
As in many other OECD countries, the Polish government has also introduced a number of initiatives to facilitate access to home ownership. The success of these measures in closing housing gaps has generally been mixed. One of them, the deductibility of mortgage interest payments has been repealed for new loans since 2007. This is appropriate, given that without taxation of imputed rents or capital gains, there was no justification for allowing interest costs to be deducted. However, another form of borrowing subsidy was put in place in 2006 whereby half of the mortgage interest costs are absorbed by the government for the first eight years of a loan. The programme is legitimately aimed at low income households, but its design constraints are such that it squeezes out potential beneficiaries in large cities – due to high real estate prices – in favour of more affluent home buyers in rural areas. Although with some adjustments the programme could be made more equitable across regions, this could substantially raise its cost. Hence, in light of its limited usefulness, the programme should be reconsidered. A better approach would be to eliminate stamp duties on houses purchases and to support the development of the mortgage market by increasing the availability of funding alternatives for mortgage institutions by allowing them to use a broader range of long term financial instruments, with appropriate supervision. In addition, the introduction of escrow accounts would help protect buyers’ down payments in case the developer goes bankrupt.
Regulatory barriers are restricting the development of the rental market
More generally, housing policies should avoid creating too strong a bias in favour of home ownership, not least because transaction costs hamper labour mobility in the case of a move. In this regard, a number of regulatory barriers stifle the development of a dynamic rental market in Poland, with adverse effects on labour mobility. For instance, the combination of controls on rent increases and eviction procedures that allow non paying tenants to remain makes the expected investment return on rental housing relatively unattractive and may contribute to the prevalence of informal arrangements between landlords and tenants. The result is an under supply of new rental facilities, a lack of modernisation of the existing stock and, in cases of informal letting, tenants with little or no protection. Furthermore, given that rents can generally be fully adjusted to reflect market conditions only when tenants leave, controls tend to reduce turnover, as tenants prefer to remain locked in at what become below market prices. In this context, the best course of action would be to work towards further easing of the controls on rent increases but to consider introducing means tested allowances so as to help low income households cushion the impact of possibly steep increases in rents. In addition, although tenants must remain adequately protected from exploitation on the part of unscrupulous landlords, eviction should be enforced in the case of non paying tenants.
Density of the dwelling stock
2006 or latest year available, units per 1 000 population
Source: European Mortgage Federation (2007), Hypostat 2006.
How to obtain this publication
The Policy Brief (pdf format) can be downloaded in English. It contains the OECD assessment and recommendations.The complete edition of the Economic survey of Poland 2008 is available from:
Additional information
For further information please contact the Poland Desk at the OECD Economics Department at eco.survey@oecd.org. The OECD Secretariat's report was prepared by Alain de Serres and Rafal Kierzenkowski under the supervision of Peter Jarrett. Research assistance was provided by Sylvie Foucher-Hantala.
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