Sheltered housing and Next Generation funds

In October 2021, RD 853/2021 was approved which regulated the Aid Programs in the field of residential rehabilitation and social housing of the Recovery, Transformation and Resilience Plan to develop the Next Generation Funds as we reported in our article from last April. https://bloc.gmg.cat/nou-impuls-a-la-promocio-dhabitet-protegit/. Subsequently, the Housing Agency of Catalonia approved Resolution DSO/1503/2022 in May 2022 to transpose the state regulations. This Resolution sets the requirements for the selection of action proposals that can be financed from the Aid Program in accordance with the criteria set by the Resolution itself taking into account the 2023 annual budget. In a subsequent call they will set the maximum subsidized amounts for each selected action proposal and will be modulated based on the amount of housing income according to the following parameters:

This system that links maximum income with subsidy limit breaks or at least reduces the discrimination of HPO projects depending on the zone where each municipality is classified. In addition, the rule extends the Program to private legal entities owning land who undertake to cede ownership of the land free of charge to the Housing Agency of Catalonia or to the City Council, reserving the surface right for a term of 99 years. These homes will be considered Official Protection for an indefinite period and the income of the tenants cannot exceed 4 times the IRSC (Sufficiency Income Index of Catalonia). The maximum incomes will be the following:

In zone A, up to 50% of the homes will be offered at a maximum of €9.23/m2 (maintaining the €100/m2 subsidy) and annexes at €4.62/m2. The deadline for submission of applications ended on July 25 and according to data from the same Housing Agency, 237 applications were submitted for mostly publicly owned lots and 85 have been selected (35.9% ). In terms of the number of homes, projects were presented to develop 10,334 sheltered rental homes and only 3,211 units (31.1% of the total) could be selected, depleting the planned budget allocation of 160 million euros for the ‘year 2023. It seems that the promotion of rental housing in our country is starting to be well oriented but we identify a series of threats that can hinder its real development. From IMPLICA we have developed the feasibility study of some of these projects and we have detected the following risks: The actual execution of these projects is conditional on obtaining external resources that traditional banking has historically not supported since they consider that they have an infra guarantee (surface right on publicly owned land) or they do not want to assume a reputational risk in the event of litigation. Therefore, it seems essential that the public banks directly or indirectly (ICF, ICO, BEI, ..) will have to provide the necessary resources with ad-hoc financing lines. This action is essential for the success of these projects. We have also warned that the economic and financial performance of these investments, which by definition is already very tight, has decreased significantly during these months due to the increase in construction costs and the drastic escalation of interest rates that penalizes the financial returns of the project We must also consider that the constant changes in the regulations that regulate rents condition the interest of many of the private operators in this type of project since it makes it difficult to predict future cash flows. In addition, these projects bear a significant fiscal cost since the VAT that is levied throughout the life of the project is a non-deductible cost and the Tax Agency has so far not had any sensitivity to reduce this cost. To learn more about this topic, we recommend reviewing the report “Challenges and limitations of the promotion and management of social rental housing in Catalonia” by COHABITAC published in September 2020. We will monitor the evolution of this historic opportunity thanks to the Next Generation Funds and which should be the gateway to a continuous policy of investment in affordable housing to reduce the structural deficit we suffer at home. And let’s not forget that all these projects must be completed before July 2026. There is only a little more than three years left. You will have to hurry…

Mario Blasco Sanz