The problem of non-development – spectateur.sme.sk
Tatra Banka’s Tibor Lörincz takes a closer look at the particular problem Bratislava faces in real estate development.
A year ago, we were discussing regional economic gaps between Bratislava, western and eastern Slovakia. It may have seemed that Bratislava was the land of milk and honey, but it certainly isn’t.
Today we will take a look at what is plaguing Bratislava and we will find a significant issue where Bratislava is significantly underperforming the rest of Slovakia.
Not in my garden
The big problem, and a topic frequently brought up in the media, is the lack of housing in Bratislava proper. Bratislava has 436 apartments per 1,000 inhabitants, less than Prague, Warsaw, Budapest and Vienna, and less than the EU average. And the trend is not favorable either: in 2020, Bratislava completed the construction of 2,793 housing units, which is less than the surrounding districts of Malacky, Pezinok and Senec combined (2,983), while Bratislava has roughly the double the population of the surrounding neighborhoods. When we look at the projects launched, the situation is even worse: the district of Senec (95 ths.) Alone began to build more housing in 2020, than the whole city of Bratislava (440 ths.). Bratislava has too few apartments and is building too few apartments, further widening the housing divide.
The problem is quite simply that it is very difficult to start building in Bratislava. Developers have their own stories, but even when the city itself offered to build rental apartments in Prievoz this year, it failed due to opposition from locals. Bratislava is experiencing what has come to be known as nimbyism (from NIMBY = Not In My Back Yard), where residents fundamentally oppose any development in their neighborhood.
This, of course, explains why apartments in Bratislava are so expensive and prices keep going up: when supply is limited, prices have to go up. And as long as the supply is limited, prices will continue to rise and people will continue to look for housing opportunities outside of Bratislava, for example in Senec, putting more pressure on transport. And this is where the second problem lies.
Taxes are too low
(Source: Bureau of Statistics, Tatra Banka research)
The second problem with Bratislava is that its budget is too low (a problem shared with practically all municipalities in Slovakia). When comparing Bratislava’s budget to that of Prague, Bratislava had budgeted income of € 1,023 per capita in 2020, while in Prague it was € 1,786 per capita, or about 75% more. Even in Brno, a non-capital city, with no underground metro but with trams, budgeted revenues amounted to € 1,446 per capita, more than 40% more than in Bratislava.
With incomes so low, it is difficult for Bratislava to build new housing and alleviate the problem, although it was able to overcome opposition from Nimbys. In addition, it is also difficult to build and maintain a public transport infrastructure to promote peri-urbanization. For comparison, the tram network in Bratislava has a total length of 41.5 km, while that of Brno is 70 km and that of Košice, with about half of the population of Bratislava, is 34 km. .
The opposite of Dead Souls
In the novel Dead Souls, Nikolai Gogol describes them as long-dead serfs, who were however still officially registered and the landowners paid taxes for them. Bratislava has exactly the opposite problem: the citizens are alive and well, but there are in fact more people actually living in Bratislava than officially registered ones, and, to make the opposite of the novel even more poignant, Bratislava does not perceive any tax revenues. for them.
This exacerbates the above problems. According to cell phone location data, the actual number of people living in Bratislava is not the official number of 440,000, but rather 666,000. If so, the number of apartments per 1,000 inhabitants is not is not the 436 mentioned above, but 288. Per capita income drops to 676 €, less than half that of Brno and about a third of that of Prague.
Is there a problem?
Of course, the question is, what are the downsides to this? If there is not enough housing, won’t prices go up until they find a balance? If streetcars aren’t built, won’t people use cars? Of course, these outcomes are perfectly possible, but just as taxes create a deadweight loss, so does limiting supply (and a low housing stock limits supply).
(Source: Bratislava.sk, Brno.cz, Praha.eu, Tatra Banka research)
Take the example of Tokyo, where new construction progresses with changes in the population and where fixed prices move at the same rate as consumer price inflation. Or Berlin, which has become a bustling city and hipster mecca precisely because of the cheap accommodation. Or San Francisco, California, the unofficial capital of nimbyism, where the lack of new housing has cost middle-class residents dearly and caused an epidemic of homelessness.
The bottom line is that the lack of housing and financial means limits the growth of Bratislava both in terms of population and quality of life. While defending and maintaining the status quo is a reasonable political goal, the current limits do not meet that goal: with housing and money low, housing will become more expensive and infrastructure will continue to deteriorate.
Tibor Lörincz is an economic analyst at Tatra Banka
Originally published in Connection, the magazine published by AmCham Slovakia
3. August 2021 at 11:47 | Tibor Lörincz