Poland is facing a housing crisis, but politicians are offering the same failed solutions

By Wojciech Kość

When, out of the blue, Inga’s landlord told her to vacate the apartment she had been renting for a year, she immediately began scrolling through offers online – and panicked.

“The costs have shot through the roof. What you’d pay for a two-room flat not that long ago now gets you a ‘micro-apartment’ with a kitchen annexe that’s useless for people with actual needs and a bathroom the size of a portable toilet,” says Inga, a 28-year-old social media manager from Warsaw.

“And that’s not all. Add two months’ worth of deposit, the landlord pushing the agent’s fee onto the tenant, the cost of the move or buying furniture to replace the arrangement somebody did with their grandma’s stuff, and suddenly you’re out of all of your money,” she adds.

Eventually, thanks to help from “friends of friends”, Inga did find a more affordable apartment. “I was lucky,” she says.

Hers is a typical story of people not earning enough to enter Poland’s mortgage market and get a foot on the property ladder yet making enough money not to qualify for municipal housing – of which there is relatively little. That has made it a de facto last resort for the poor instead of being a force balancing a market otherwise dominated by commercial developments.

In effect, a housing crisis is rife in Poland, with tens of thousands of people like Inga renting out ever more expensive flats.

Transaction prices for newly built properties in Poland’s biggest cities – where most demand is accumulated – were up 4.7% year-on-year in the fourth quarter of 2022.

Over the last five years they have risen, depending on the city, from 58% in Warsaw to 79% in Łódź for the smallest apartments (up to 35 square metres), according to a report by the business news website Bankier.pl. Such apartments now cost between PLN10,000 and nearly PLN12,500 (€2,135-€2,668) per square metre in Wrocław, Gdańsk, Kraków, and Warsaw.

Borrowing such sums has become even more burdensome after the central bank last year repeatedly hiked interest rates, bringing them from a record low of 0.1% during the pandemic to a 20-year high of 6.75

The high cost of credit is a collateral of the fight with rampant inflation, which exceeded 18% year on year in February. But the combination of very high apartment prices and expensive credit has collapsed demand.

The number of mortgages granted by banks fell 55.2% year-on-year in February and their total value declined 57.2%, noted BIK, a credit intelligence company, in a recent analysis. While buying has got harder, the rental market has offered no relief.

In Warsaw – Poland’s biggest housing market with a population of over two million people – rent prices shot up by over 33% year-on-year in March for the smallest apartments that are typically in highest demand, according to a report by Otodom Analytics, a real estate market analysis company linked to Otodom, one of the largest listing services of flats to buy or rent.

Rent prices also went up by at least 20% for all apartment categories in Warsaw, the analysis also showed.

In other key cities, the situation is similar with rent prices showing double-digit annual increases in every major urban area apart from one, Bydgoszcz (and even there the only exception was the largest apartments).

Sometimes, the cost of renting a flat can be crushing. “Rent and utilities cost me 75% of my income,” says Mateusz, 34, a worker in a cable factory in Gdańsk, a coastal city of over 500,000 people.

He has been renting for nine years now. “I doubt that I will be able to get a mortgage because it is impossible for me to save up the downpayment and the bank will surely decide that I won’t be able to repay the loan in instalments similar to what I pay for rent now,” Mateusz says. “I just wish there was a civilized rental market here.”

A fundamental way to address the crisis would be a public housing programme, say the central bank and tenants’ rights activists alike. But a state-led homebuilding programme launched in 2016 has, as the government itself admits, been a failure.

With elections approaching later this year, politicians are again jockeying to address the housing crisis, but now from the demand rather than supply side – an approach that has been tried in the past without much success.

The incumbent national-conservative Law and Justice (PiS) party early this year announced a programme dubbed “First Apartment,” which relies on cheap credit for under-45s looking to buy their first flat.

The programme’s fundamental rule is that it will offer mortgages at a 2% fixed interest rate with the state subsidising the difference between that rate and what a regular bank mortgage would charge, which is roughly 9% (for mortgage loans with fixed interest rate).

It did not take long for PiS’ arch-rival, the centrist Civic Platform (PO) to try to outbid the ruling party by offering 0% credit for those aged under 45 buying their first apart. “Housing is a right, not a privilege,” declared PO’s leader, Donald Tusk.

“The state is going to take on paying the interest. People will just pay the principal so the debt will diminish fast. And it will be affordable even for families in which both adults make just the minimum wage,” says Katarzyna Lubnauer, a lawmaker from Civic Coalition (KO), a grouping made up of PO and a number of smaller parties.

“The programme will cover new flats only, which will also give an impulse to the economy by boosting the construction sector and household consumption,” adds Lubnauer.

The cost of PiS’ programme has been estimated at some 16 billion złotys over 10 years plus another 14 billion for the programme’s second part, a savings account indexed by a given year’s inflation rate or the change in the average price per square metre of a new apartment, whichever is higher.

Lubnauer says that PO’s programme will cost 4 billion złotys in the first year. “It will run until Poles’ housing needs, which we think is some two million apartments, are met,” she says.

Lubnauer also says that the party – once in power – will spend 10 billion złotys on upgrading unused municipal flats countrywide. The proposal also includes subsiding rent costs by up to 600 złotys a month.

But there has been criticism, especially from the left, of PiS and PO for proposing solutions that do not directly increase supply and instead reinforce market forces that have long stood behind rocketing prices.

“These ideas are the default ways the housing crisis has been dealt with in Poland. The wealthy will make the most use of the subsidised credit while apartment prices will go up for all others,” says Magdalena Biejat, an MP and leader of the Left Together (Lewica Razem) party.

Surprisingly, experts from the National Bank of Poland (NBP), normally a staunch supporter of the government, have voiced similar criticism.

The proposed solution “only supports the demand side of the real estate market, and therefore would not significantly contribute to increasing the availability of apartments in Poland”, the NBP wrote in an opinion to the government’s proposal.

“Its introduction would contribute to an increase in housing prices and to the improvement of the financial situation of developers, as well as business entities that currently own many apartments, including wealthy people,” it added.

“What should be done is to create a housing agency or even a ministry that will be responsible for bringing more apartments to the market in cooperation with local authorities,” Biejat adds.

She also says that the proposed agency’s primary task would be to amass land held by state companies, either by buying it from the companies or taking it over under a law designed specially for the purpose.

According to Zenobia Żaczek, a tenants’ rights activist from Warsaw, the fact that Poland’s ruling party and the main contender to succeed it are addressing the housing crisis by tabling solutions to pump up demand is not for a lack of possible alternatives.

“It’s a self-imposed ideological constraint that goes back to Thatcherism and Reaganism that continue to have so much influence on politics and life in Poland,” Żaczek says. “But people, especially the young who want none of it, are still forced to live in it and they know they can’t afford it.”

According to Jan J. Zygmuntowski, an economist and the co-chair of the Polish Economics Network, what PiS and PO propose are half-baked solutions at best.

“We need intervention on the demand side so that investment capital leaves the residential market and goes to technology or the stock exchange and stops exerting upward pressure on apartment prices,” Zygmuntowski says, referring to investment funds buying residential development in bulk to rent them out.

“On the supply side, there has to be an alternative to commercial housing in the form of municipal housing. Developers should also be made to set aside a percentage of apartments in each project to grow the pool of municipal housing,” Zygmuntowski says.

But, the economist adds, property developers and banks are powerful enough to thwart political decisions that could hurt them.

“Local authorities could buy commercially developed projects while investment funds trying to do the same should be taxed enough not to do it. But will they be taxed? I don’t think so. Not with a prime minister who hails from the world of finance,” Zygmuntowski says, referring to Mateusz Morawiecki’s former career as a banker.

But it is not only the government that has problems in ensuring greater supply of non-commercial housing.

Warsaw’s mayor, Rafał Trzaskowski of PO, pledged in his campaign in 2018 to build 1,500 municipal apartments a year in the capital city. Only 829 were delivered in 2018-2022, an analysis by the newspaper Gazeta Wyborcza noted in late February.

“I’m worried that we’ll hear more and more stories of people living in ever worse conditions as rents go up. And about more evictions,” says Żaczek.

Main image credit:Szymon Shields/Unsplash 

Wojciech Kość is a journalist covering Poland and the Baltic states for bne IntelliNews. He also reports for Politico Europe and OKO.press, with a particular focus on energy and climate issues.