Prague 2 city housing to be finally privatized or sold?

In Prague 2, the central and often posh district of the Czech capital comprised of Vyšehrad, and parts of the Vinohrady, Nové Město and Nusle neighborhoods, there were three waves of privatization during the 1990s as concerns municipal flats. Whether the privatization process should continue (at discounted prices to current tenants), or the city flats be sold at the market rate (if at all), remains a hotly contested issue that may come to a head at the close of June.

The question of how to proceed — if at all — regarding the remaining city-owned housing in the district was also a major issue in the local district elections last year. In fact, finishing second to the Civic Democrats (ODS) was a newly established association, Citizens for Contented Living (OSB), whose entire raison d'être is to “fight” for the continued privatization of the municipal flats. Now, fully a year on from the local elections — and although the ODS insists privatization is over — the issue will again be addressed in earnest by Prague 2 representatives. It is a long time coming.

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Where does ODS stand?

In its proposed program for Prague 2 prepared for the 2006 elections, which the ODS won, the center-right party wrote that the “municipality should own only such properties as are necessary to perform its tasks and duties. The manner for privatizing of blocks of flats realized in the district in recent years is not possible in accordance with EU legislation, and the sale of municipal property must proceed according to standardized procedures.”

The actual view of the Town Hall, however, was expressed clearly by the then-incoming Prague 2 Mayor Jana Černochová (ODS), who said that the privatization process had finished. In reaction, tenants of municipal flats in 2008 submitted a petition to the Town Hall demanding the privatization process continue and subsequently formed the Association for Privatization and Improved Living Conditions in Prague 2 to press their cause. 

Residents of city-owned flats also staged a demonstration on náměstí Míru square in October that year against the privatization freeze, which was disrupted by the cleaning firm KOMWAG, “on the board of which sits Mayor Černochová and which planned the cleaning of the square during the afternoon at precisely the time of the gathering, which was quite public information,”  the civic association wrote on its website following the demonstration.

What is ‘privatization’?

Černochová’s successor, current district Mayor Jiří Paluska, is also against renewing the process. “Privatization was one of the most important methods of economic transformation of Czech society in the 1990s. In this regard, Prague 2 sold roughly 260 blocks of flats, or approximately half,” Paluska said. “The economic transformation finished with the Czech entry into the EU and with it the privatization also finished . ... Nowadays, it’s about standard sales or purchases of property.”

ODS member Miroslav Kalous from the Ministry for Regional Development (MMR) sees it a bit differently. “The concept of privatization is a general concept, and in my opinion is in no way primarily linked to transformation processes of the post-revolutionary era,” he said, noting the common Czech understanding of the term has distorted by recent history.

EU membership in no way changed privatization conditions, he added. “It has had no influence on the sale of flats to end users. It doesn’t have public support,” Kalous said. Meanwhile, Prague 2 has a far higher percentage of flats still in municipal hands — 17 percent — compared with other districts in the Czech capital, which have 3 to 5 percent on average. Why the discrepancy? Mayor Paluska is rather laconic in his explanation: “Because local municipal council representatives thus far have not decided to sell them.”

Empty promises

In June 2009, the leadership of the Prague 2 Town Hall again promised that the sale of city-owned flats would continue. A list of dwellings that the district would part with was to be drawn up. But this remained an empty promise. And so the privatization of public housing, against which the ODS is so opposed, again became a campaign issue. ODS won the district, with the OSB group and TOP 09 finishing in the opposition.

Still, the unloading of flats — according to ODS literature, at least — should continue. Prague 2 Mayor Paluska claims that in all likelihood the Municipal Council on June 27 will consider the list of dwellings slated for privatization. The biggest stumbling block will be the valuation of the flats. “The price will be defined by expert opinion,” he said. Members of the OSB favor selling the flats at an administrative cost; TOP 09 suggests starting from common prices but is not against discounts.

Tenants are hopeful but taking a wait-and-see stance. “The decision to privatize (or sell) municipal housing will be in the political domain, but no legal claims exist. And when we read through the program declaration of the Municipal District Council that citizens in the elections refused massive clearance of municipal property, it is not, especially for members of the OSB, a reason for excessive optimism,” the chairman of the TOP 09 representatives, Otto Schwarz, wrote on the OSB website. “At this stage, it is therefore above all up to the coalition to finally show its cards and submit its vision (if, of course, it at all has one).”

It is impossible to unequivocally evaluate the privatization of municipal flats, and not only in the case of Prague 2. Tenants who didn’t have the chance to buy the flats earlier regard it as unfair that their neighbors had that opportunity. Meanwhile, those living in cooperative or privately owned flats point out that no one gave them housing at a discount, either, and why should their taxes indirectly go to subsidizing the reduced prices at which other tenants bought the city flats?

Who is right?

The argument that tenants of municipal flats contribute more to city coffers than do others (who pay only real estate tax) resonates with many people. “In Prague 2, more than half the resources from collected rents go toward activities that have nothing to do with housing,” OSB’s Richter said. Mayor Paluska argues that the district treats rental income as part of the agreed budget, let us say, and the respective plan for taxation.”

Those critical of the privatization also make a compelling argument. Why should municipal flats be sold for a tenth of the market price? In this way, the Town Hall will make instant millionaires out of some lucky few.

“The problem with low prices for flats and houses is that these advantageous prices are not paid by people who somehow deserve it. It’s rather the opposite. It does not address the housing needs,” said Jiří Pácal, a member of the Association for the Development of the Real Estate Market. “Furthermore, the municipality is expecting considerable income. It’s simply populism, shirking responsibility, and sometimes business.”