Does Rental Housing In Slovakia Have A Future?

• Jurisdiction: European Union
• Law Firm: Schoenherr Attorneys at Law
• Subject Matter: Real Estate and Construction, Real Estate, Landlord & Tenant - Leases
• Author: Mr Tom' 'ilh'nek
• Published date: 20 February 2023

The National Council of the Slovak Republic approved a new Act No. 222/2022 Coll., on State Support for Rental Housing and on Amendments and Additions to Certain Acts (the "Act") on 5 May 2022. Having entered into effect on 1 July 2022, the Act contains a framework for how the rental housing system should work.

Since Slovaks typically own their dwellings, rental housing is rather marginal. Slovakia is among the four countries in the European Union with the highest share of owner-occupied housing, mainly due to the sale of state flats at the end of the Communist era. Rental housing should fill the gap between social housing and commercial housing, while providing housing with regulated rent. However, the Act contains obstacles both for future tenants and future investors.

The first obstacle concerns the payment of the security deposit by tenants. Prior to the commencement of the lease, tenants are obliged to pay a deposit of up to three to six times the monthly rent and monthly service fees. Even where rents are lower, such deposits may be prohibitive.

For investors, the biggest obstacle presented by the Act is the reduction of VAT on the supply of construction, renovation and reconstruction of buildings intended for rental housing to 5 %, which could lead to market...