This is the second article in our series that looks at existing and planned government measures and programs designed to help young households buy a flat or house. In the opening article, we saw that the most important existing pieces of legislation are Housing Act 2021[1] and Housing Act 2022[2]. In the present article, we take a closer look at the housing co-op (kooperatywa mieszkaniowa), a new institution introduced by Housing Act 2022 that is distinct from housing cooperative (spółdzielnia mieszkaniowa); and at Safe Mortgage 2%, the new assistance scheme for first-time home buyers that is the central piece of Draft Housing Act 2023, which is expected to come into force in mid-2023[3].
I. Housing co-op as per Housing Act 2022
The housing co-op is a collaboration of natural persons who join their efforts to execute a housing project. Housing project (henceforth “project”) is defined by Housing Act 2022 as a construction project undertaken by members of a housing co-op, or by a housing cooperative, aimed at satisfying the housing needs of members, or their children, and co-habiting persons, that consists in the purchase of an undeveloped land plot and the construction of an apartment building or buildings, or single-family houses, on it, or the purchase of a developed land plot with an existing building or buildings on it and its redevelopment into apartments or single-family houses.
A minimum of three members (natural persons) are needed to establish a housing co-op. It can be established in two ways, either by concluding a housing co-op agreement under civil law, or by setting up a civil law partnership. Both legal forms are intended to lay down rules of cooperation among members, and must be recorded in a notarial deed to be valid. A housing co-op agreement must specify/regulate at least the following: the project, its financing and rules of financial settlement; the conduct of co-op affairs, mechanisms of decision-making and representation; joining and withdrawing from the agreement; duration of the agreement; and termination of the agreement.
Crucially, co-op members bear solidary liability for all financial obligations related to the project. In other words, creditors – e.g., contractors – can seek recovery in full or in part from any one (or more) of the members of the co-op.
A housing co-op agreement automatically expires in case the number of members falls to two (with the exception of death). All expenditures related to the project are made and settled by co-op members via escrow accounts, in line with relevant provisions of the Banking Law.[4]
When the project is completed, the property is divided among members by establishing separate titles to premises (in the case of apartment buildings) or by abolishing joint ownership of buildings (in the case of single-family houses).
In passing, it is worth noting that, apart from introducing the housing co-op, Housing Act 2022 also lays down rules under which communes may sell land plots to support the execution of housing projects. Briefly, the council of a commune may adopt a resolution to sell a land plot owned by the commune to a housing co-op or housing cooperative. The sale agreement is signed with the best bidder in an open tendering process. The commune retains the right to buy back the plot, e.g. in the event that the buyer has not used it for housing construction purposes.
II. Safe Mortgage 2% as per Draft Housing Act 2023
Safe Mortgage 2% is one of three key components of Draft Housing Act 2023, alongside Home Account and Home Deposit. Under its provisions, Bank Gospodarstwa Krajowego (BGK), the state development bank, will subsidize mortgages that eligible households take out with commercial banks for a period of 10 years to keep their interest rate at 2%.
Safe Mortgage 2% will be granted by banks until the end of 2027. To participate in the program, banks will be required to offer Home Account and Home Deposit, too.
Safe Mortgage 2% will be available for persons who do not own, and have never owned, a flat or house (and do not have, and have never had, a cooperative member’s right of ownership to a flat or house), and are under 45 years of age.
Importantly, persons who are, or were, party to another mortgage loan agreement concluded up to three years prior to the submission of the application for Safe Mortgage 2% will not be eligible.
Safe Mortgage 2% will not replace, but will co-exist with and complement the existing government-subsidized mortgage product for first-time home buyers, the Family Home Loan (formerly Home Without Down Payment), in which BGK guarantees the downpayment and also repays part of the mortgage principal if the borrower has a second or subsequent child during the loan’s term. However, the borrower will have to choose one product or the other.
As we see, Safe Mortgage 2% is a complex instrument that more directly affects the financial services market than the property market. We will continue our discussion of it in the next article in our series. We will also look at Home Account and Home Deposit. And we will continue to track Sejm’s work on Draft Housing Act 2023.
[1] Cf. „The Act of 1 October 2021 on Guaranteed Home Loans.”
[2] Cf. „The Act of 4 November 2022 on housing co-ops and on rules concerning the disposal of land plots from a commune’s real estate stock to support the execution of housing projects.”
[3] On 23 March, Draft Housing Act 2023 („Draft Act on state support for home savings”) officially entered the Sejm – where it was assigned Sejm document no. 3,096 – and was referred to the first reading. Under Poland’s constitution, a bill needs to go through three readings, in principle, to be adopted by the lower house.
[4] Cf. article 59 of The Banking Law of 29 August 1997.