Slovenian public housing scheme kicks off

A boom in residential construction is underway in Ljubljana, Slovenia, having a knock-on effect on real-estate prices in the whole country. It will still not be enough to change the trend of rising residential real estate prices and rents. To offset the unaffordable luxury apartments, there is a national policy to build public housing.

Written by Dr. Ales Pustovrh – Bogatin, EECFA Slovenia


Residential boom in Ljubljana, Slovenia – but can people afford luxury apartments?

After almost a decade of the worst crisis in residential construction in the history of Slovenia, residential construction has turned the corner. Most of it is due to very ambitious plans for constructing new multi-dwelling units in the capital city of Ljubljana. Several smaller developments of luxury residential properties commenced in 2018 and 2019, but their prices are usually too high to impact the price level and availability of housing in the whole city. While a total of almost 1500 new residential units are in planning phase or under construction currently in Ljubljana, only 500 will be completed before the end of 2020 – and most of them will be prized in the luxury range of EUR 4500 – 6000 per square meter, and thus, inaccessible for the majority of the population.

Even so, demand is likely higher. Before the crisis, an average of 1500 units was sold annually in Ljubljana. With the much-improved economic situation in Slovenia, full employment and easily accessible credit, demand for apartments, in Ljubljana in particular, has very likely returned to that level. Reasonably priced apartments for young families are especially in short supply due to lack of new construction.

The latest EECFA Slovenia Construction Forecast Report with analysis and forecast on the housing market up to 2021 can be ordered on EECFA’s website

Public housing scheme – is it viable?  

For that reason, both the local municipality and the national government decided to significantly increase the construction of public housing. They have started the construction of 672 new dwellings at the Novo Brdo neighbourhood that will be completed in 2 years. The National Housing Fund of the Republic of Slovenia, which is building 498 of them, has obtained a loan of EUR 50 million from the Council of Europe Development Bank (CEB) for the construction of more than 800 dwellings across Slovenia, most of them in the Novo Brdo development in the western part of Ljubljana. The local municipality of Ljubljana will construct another 174 dwellings. All of them will be available for rent with rental prices of EUR 6-8 per sqm. The size of the dwellings will be between 30 and 80 sqm. The total value of this construction investment will be EUR 56.8 million.

There are plans to add thousands more dwellings in the next few years – 10000 new dwellings available for rent to young families by 2025 according to the national housing policy. If the policy proves to be successful, it will increase the supply of dwellings in Ljubljana by almost 10%. This would certainly have a major effect on real estate prices in Ljubljana. As Ljubljana represents more than half of the residential market in Slovenia, it also acts as an anchor for residential prices and rents – so a higher supply and lower prices of dwellings in Ljubljana would lower demand for dwellings in the rest of Slovenia as well.

However, this might be impossible. The national housing policy was aiming to finance the construction of such a large number of new dwellings by investing EUR 200 million from the national budget – an equivalent of 0.4% of Slovenian GDP. With much slower economic growth and especially with the resignation of the previous centre-left government and the emergence of the new centre-right government, though, this commitment seems unsustainable.

Another problem is the lack of suitable land for the construction of such a high number of dwellings. While the government does have several interesting plots in her ownership, they are dispersed among various different institutions and often not prepared for construction – some might even have problems obtaining a building permit. The government had been trying to transfer a stock of suitable land that was owned by the DUTB, the Slovenian ‘bad bank’, to the National Housing Fund. With this transfer completed at the end of 2019, the Fund can start the construction of additional 600 dwellings (and 90 houses) if it can assure sufficient financing.

Other ideas related to the transformation of the DUTB itself into a public real-estate investor. However, such institution already exists; the publicly owned DSU is already managing real estates owned or rented directly by the government. The Slovenian Public Pension Fund also owns more than 3000 dwellings available exclusively for retired persons. There are several local housing funds as well, including the one in Ljubljana, which are able to obtain financing for dwelling construction. Yet, none of these institutions has been able to increase residential construction considerably, and the shortage remains as big as before.

It seems increasingly more likely that the government will fall significantly short of its goal to make housing more affordable for young families, achieved by the construction of 10000 new dwellings before 2025. And with private investors mostly targeting the luxury segment, it seems that the prices and rents of dwellings will remain out of reach for most young families and middle-class citizens of Slovenia and its capital city Ljubljana.

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