Housing affordability has helped focus attention on the need for the country to reform its planning and permitting process, but there’s even more at stake. Could you explain what the goals of these reforms should be?
Land use policy is one of the key strategic tools a country has to transform national economic policy into reality. Spatial planning is a set of rules that should enable and promote development, while maintaining a balance between heritage and nature protection concerns. None of these priorities should be allowed to prevail above the others. The goal should be to find a balance that leads to the overall increased wealth, health and well-being of citizens. But this must be done while increasing the competitiveness of the country. With the world changing so quickly, investments need to move rapidly, so spatial planning needs to allow higher flexibility in the use of zoned land.
Developers need permitting to move quicker. Yet the general public is often horrified at all the construction over the last 20 years and many people wonder if there’s even room to build anything else.
Czechia’s built environment is just 4.7% of its overall area whereas the German coverage reaches 7.8%. It may seem like a lot already, but in reality the percentage of developed land is comparatively low. Even on a regional level, buildings cover just 1,7 %. From 2009 to 2022 the built environment in Czechia grew by 7%. In Belgium and Netherlands, it grew by 20 % during the same period. That’s just half of a percent growth each year in Czechia!
I think there’s an opportunity here to enable faster growth but it’s not being utilized. The volume of space set aside as agricultural land here is 53.2%, which is the 5th highest total in the European Union. The EU average is just 38.8 %. And yes, we can build on brownfields, but the whole Czechinvest database holds just 15 000 ha of sites. To put that into context, this is just 0.2 % of the Czech country area. It makes sense to reuse sites, but doing so won’t change the picture significantly on its own.
You mentioned food, which is an incredibly sensitive subject. Politically, it’s easy to attack developers for exploiting agricultural land, which Czechs see as a natural resource.
There IS a problem, but it’s not developers. Czechia has 41,000 square kilometers of farming land, and yet we’re still highly dependent on food imports for a population of just 10 million. The Netherlands has far less agricultural land (just 21,000 km2) for its 18.3 million people. Yet unlike us, the Dutch are self-sufficient.
We should focus on the efficiency and productivity of essential food and food production instead of protecting unsustainable farming methods. Especially since they’re blocking more effective use of some of this excess land.
What do you see as the country’s main problem when it comes to spatial planning?
The Czech planning system is extremely fragmented, with more than 6,500 municipalities. The only place you see such a situation is in France. As it happens, France just introduced new regional development / spatial plans to promote inter-municipal cooperation. But this is possible because the taxation system rewards municipalities who promote new investment through these common planning structures to collect more of the tax revenues those investments produce. The share of tax revenues that French municipalities keep is 25 times higher than in Czechia. Here, the share is just 2.39%. That’s not just the 2nd lowest figure in the EU…it’s 93% lower than the EU average.
There have already been some changes to the Czech construction law, so what else needs to happen?
Despite the recodification in 2024, you still have to count on waiting 264 days to secure a building permit. That’s the second longest time in the EU, where the average is just 77 days. The most progressive countries are 7 times faster than here as it takes just 30 days.
These extreme conditions act like handcuffs on the private sector’s ability to expand the country’s built environment. The result is a deficit in all types of property, from residential, retail, office to industrial. As we know, this lack of supply leads to the extreme growth of property prices. But there are additional consequences downstream, including slower economic growth, a general loss of competitiveness, increasingly unaffordable housing and higher overall frustration of the younger generation.
What do you suggest?
I think we need to take decisive action to reform land use and real estate permitting to turn this around. This would include steps like reducing the number of building authority offices, which there are more than 600 of today.
We also propose a severe reduction in the range of local management functions carried out by municipalities. In practice, rather than dividing responsibility between 6,500 different municipal construction offices, just 60 to 70 district offices would be needed.
But we can’t forget about the importance of implementing greater levels of tax retention on the local level instead of relying on the redistribution of tax revenues on a nationwide level. The current tax revenue system doesn’t incentivize local municipalities to promote new economic activity on their land. Instead, the current planning procedures give them enormous powers to prevent change.
The spatial planning procedures must also be revised in a way that would enable towns to adapt quickly and flexibly to the changing needs of residents and businesses.
How about on the construction side of things? Are there reforms of current regulations that could work against the constant increase in prices?
I think it would be highly beneficial to perform a detailed revision of the existing technical norms and that any new norms be subjected to a cost-benefit analysis. There are so many outdated or pointless norms that the process should be governed by a “one-in, one-out” principle. In other words, two unproductive norms should be cancelled any time a new one is implemented. Additionally, we should revise who actually takes part in the whole process. And again, the focus should be on sustainable construction and on finding a balance between the need for security, health, well-being and economic growth.
Michal Bilý (108 Real Estate): Q2 new industrial leases strengthen
