Filenews 27 May 2023 - by Chrysanthos Manoli
The ETEK warns again that the problem of lack of affordable housing will be one of the most important in the coming years and in a letter from its president, Konstantinos Konstantis, to the Minister of Interior Konstantinos Ioannou, dated 23/5/23, reserves the right to submit the findings of the research it conducts in search of proposals and solutions. However, it also submits to the Minister a proposal for a first palliative solution, through the utilization of the approximately 33,000 housing units that are estimated, according to EAC data, to remain in disuse and out of the market.
Mr. Konstantis points out to the Minister of Interior that incentives should be given to the owners of these units to integrate them into the market, but stresses that it has been proven in recent years that incentives alone are not enough. According to ETEK, decisions must also be taken by the state that will act as disincentives to keep so many housing units in disuse, at a time when the housing problem is becoming more acute, pushing prices upwards.
In particular, as a disincentive the ETEK recommends to the Minister of Interior the imposition of an annual fee of two per thousand on the value of each vacant or disused residential unit (based on EAC data for zero or minimum electricity consumption). For the value of each unit, the general assessment of the Department of Lands will be taken into account.
According to Konstantis, the imposition of the levy is not aimed at increasing the state's revenues, but at pushing owners to lower their expectations (in terms of sale or rental price) or to take actions that will drive properties to market, increasing supply and possibly lowering prices.
At the same time, the president of ETEK points out to Mr. Ioannou that in addition to targeted incentives for a holistic approach to the problem, the taxation of idle land and the imposition of an urban upgrading fee should definitely be discussed in a rapid and serious manner. These measures, according to ETEK, will make a big difference, as the generous incentives of the last decade for land development purposes did not yield the expected results. The absence of disincentives to hibernate real estate is harmful to cities, taxpayers and the public interest, it added, but exacerbates the problem of lack of adequate affordable housing.
And specific incentives
The ETEK also proposes to provide incentives to owners who want to renovate residential units and put them on the market. In particular, it proposes for residential units that were vacant or disused in 2022 [presumption of electricity consumption] if they join the housing market in the next 18 months to:
(a) benefit from tax exemption [income tax] expenses related to repairs, maintenance, etc., up to an amount of EUR 3,000
(b) benefit from reduced VAT of 5% for renovation or repair works
(c) if these units are integrated into the housing market through renting, the rents of the first 24 months can benefit from income tax exemption
(d) if the integration of these units is done through sale, the transfer fees should be reduced by 33%.
The painting with thousands of houses in disuse
ETEK's letter to the Minister of Interior is accompanied by a table with a geographical distribution of the 33,8 housing units that are considered vacant or disused, as according to EAC they do not consume electricity or consume very little. The table shows that a significant part of residential units in disuse are in urban-residential areas, while rents have skyrocketed due to reduced supply and increased demand.
For example, in Aradippou 58 units are recorded in disuse, in Dromolaxia 13, in Kiti 30 (in total in the district of Larnaka 1361), in Agios Athanasios Limassol 39, in Agios Tychonas 18 and another 40 in the tourist area, in Germasogeia 117, in Kato Polemidia 48, in the municipality of Limassol 732, in Mesa Geitonia 72 (in total in the district of Limassol, with perhaps the biggest housing problem, There are 1662 closed residential units and another 6,662 with almost zero electricity use).
In the Nicosia district there are 2,176 unused residential properties, while there are another 7,005 that have minimal electricity consumption, an indication that they are not being exploited either. In Agios Dometios 113 closed houses were recorded, in Aglantzia 115, in Engomi 100, in Strovolos 370, in Lakatamia 127 and in the city of Nicosia more than 600 houses in disuse.
In Paphos, the table submitted by ETEK to the Minister of Interior includes 1,690 residential units closed and disused, of which 54 in Geroskipou, 475 in the city of Pafos, 181 in Chlorakas and 217 in Pegeia.
All the above figures refer to houses with zero electricity consumption, therefore they are considered closed, while EAC data used by ETEK show that the numbers of residential units with less consumption than 200 kilowatt hours are many times higher. In total, with zero or minimal electricity consumption, 32,593 residential units were counted all over Cyprus.
