REITs AND VACANT SPACES IN POLISH LAW – PART 2

This is the second article in our series that looks at new or planned measures in Polish law designed to increase the supply and affordability of housing[1]. As we saw in the first part of the series, attempts to introduce a REIT-type instrument into the Polish legal framework have so far failed, but a recent amendment to the so-called Emergency housing act of 2018[2] introduced a new entity called the Social Rental Agency (abbreviated as SAN), while the government is working on a legislative proposal, known informally as the Vacant properties bill[3], aimed at facilitating the repurposing of certain non-residential buildings for housing. We turn to these two measures in this second article of our series.

Social Rental Agency (SAN)

What is SAN?  Put simply, SAN is an entity that works with, and on behalf of, the commune, acting as an intermediary between owners of rental housing units in the area and households who, due to low income or difficult life circumstances, cannot afford to pay market rents. SAN can have the legal structure of a limited liability company or joint stock company majority owned by the commune (or a group of communes); a foundation; an association; or a social cooperative.

How does SAN operate? Consistent with its intermediary role, SAN first rents out a housing unit from the private owner, and subsequently sub-lets it to a tenant vetted by the council for a below market rent. Importantly, tenants who rent from SAN can additionally apply for a rent subsidy from the government’s Mieszkanie na Start programme.

SAN enters into a 5-year agreement with the commune. The agreement regulates issues such as e.g., liability for unpaid rent to SAN; the commune’s co-financing of SAN; or reporting requirements that SAN has to comply with.

As we see, SAN is a highly regulated structure. It can receive financing from the commune; but financing brings with it oversight and accountability.

An important aspect is which branch of the communal government is involved here. The law gives the key role to the council (as opposed to the mayor): eligibility criteria, the vetting procedure of tenants, and related issues are all determined by the council through resolutions. Furthermore, it is the council that specifies, in each case, the individuals SAN can conclude lease agreements with.

It should be noted, too, that the law imposes restrictions on commercial income generation by SAN. SAN is not allowed to collect any extra charges from the tenant beyond the rent and the costs that the owner is usually responsible for, such as utility bills.

How significant will SAN prove? How many such entities will be created, and in what parts of Poland? Will the measure help increase the supply of affordable housing? Only time and practice will tell.

Vacant properties bill

Vacant properties are a major urban-planning challenge. They affect their surroundings in a variety of ways, from social to economic. Unoccupied non-residential buildings often sit on public land, or in attractive parts of cities, and unlocking them for residential use is highly desirable. From a legal standpoint, turning non-residential buildings into housing requires a change of use of the land on which they sit, of course.

Countries in Europe use various means to address the issue. In France, for example, in communes in which a significant gap exists between housing demand and supply, a tax is levied on unoccupied properties (i.e., properties which have remained vacant for at least a year). The amount of tax is based on the annual rent that the property in question would earn. The idea is to give owners an incentive to rent out properties instead of leaving them empty.

Turning now to the legislation that the government is working on, its aim is to make it easier to repurpose abandoned office buildings and large retail buildings (containing over 2,000 m² of lettable area) for housing. It seeks to do so in two key ways. First, communes are to gain the power to change, by means of a resolution, the use of properties on which they sit to residential use. The Emergency housing act will be amended to permit the location of housing projects on such properties whatever the local development plan, or the commune’s study of land use conditions and directions, stipulates. (At the moment, this is only possible on sites previously used for railway, military, manufacturing, or postal services purposes.) Second, the necessary redevelopment works (including changes to exterior walls) are to be exempt from the building permit/construction notice requirement, except where the changes would affect the building’s structural elements.

Just like SAN, the Vacant properties bill is intended to help local governments satisfy housing needs in their communities. We will look at its provisions more closely in the third and last part of our series. It is possible that the proposal will have advanced past the cabinet stage by then.

By Jan Akimenkow, trainee attorney-at-law
Originally published in PMR Construction Insight: Poland, No. 12 (261), December 2022

[1] The first article can be found here: REITs AND VACANT SPACES IN POLISH LAW | Miller, Canfield, W. Babicki, A. Chełchowski i Wspólnicy Sp. K. (millercanfield.pl)

[2] The Act of 28 May 2021 amending the Act on certain forms of support for housing construction and some other acts (Journal of Laws item 1243), which came into force on 23 July 2021.

[3] Draft Act on the repurposing of certain non-residential buildings for housing, government schedule item UD 401. See the full text here.