Landlords in the Czech Republic are growing increasingly frustrated as the number of tenants unable to pay their rent continues to rise. Certain regions are experiencing a several-fold increase in debtors compared to the previous year, indicating the deteriorating economic situation and the challenges within the rental market.
While tenants struggle to secure alternative housing, landlords find themselves grappling with this issue from the other side. Evicting non-paying tenants can result in months of lost rental income.
In comparison to homeownership, rental housing has traditionally taken a backseat in the Czech Republic. However, interest in rental properties has started to grow due to the crisis and the unaffordability of mortgage loans. Consequently, rental prices have begun to rise, and this trend is likely to continue with the increase in property tax. The crux of the problem lies in the relationship between tenants and landlords. Tenants often face annual contracts, which offer little certainty for the future, while landlords encounter property damage or difficulties in evicting non-paying tenants.
Recently, the number of such tenants has significantly increased. According to the service Ideální nájemce (Ideal Tenant), non-payment cases rose by 11 percent in the last quarter of the previous year and by 34 percent in January 2023.
Tomáš Skolek, spokesperson for Ideální nájemce explained, “In the presented statistics, a tenant is considered a non-payer if they owe at least 500 crowns for a minimum of one month, to filter out minor debts that may have arisen accidentally.”
The issue is acknowledged not only by landlords but also by experts and the Ministry of Labor. They believe that the problem has two sides: If the period for evicting non-paying tenants could be shortened, it would encourage landlords to offer long-term contracts. Therefore, the Rental Housing Association is advocating for a change in the law, highlighting the current lengthy process of evicting non-payers, which takes several years.
Jakub Wysocki from Ostrava Investment and Real Estate Management (SIAN) expressed hope, stating, “We hope that facilitating the eviction of defaulters will increase the number of long-term leases, including multi-year agreements, as landlords will no longer fear being unable to remove a defaulter from their apartment.”
According to a recent study conducted by SIAN on 684 investment apartments in the Ostrava area, the number of non-payers has tripled. In the first quarter of 2022, it stood at 2.3%, while a year later, it has risen to almost 8%. Wysocki attributed this increase to the current state of the economy.
He added, “Just as the number of people struggling to pay rent is increasing, we are also witnessing a rise in the number of individuals we assist in obtaining housing benefits. However, as the market stabilizes throughout the year, we expect the number of non-payers to decline.”
The increase in property tax did not catch the Rental Housing Association by surprise. It had been a topic of discussion for a while, and it is widely anticipated that the entire housing market will experience price hikes. Currently, the property tax rate in the Czech Republic is one of the lowest among developed nations. Consequently, the increase can be viewed as fair. However, it should be noted that for rental apartments, the property tax is an expense borne by the owner, which will inevitably impact the rental prices. The Rental Housing Association, on the other hand, welcomes the reduction in VAT on apartment construction, believing it will enhance the affordability of new housing.
