Law on Socially Supported Housing: Support for Those Under 45 Years Old

The Croatian Parliament voted on Friday for the Law on Socially Supported Housing, which aims to assist young people in purchasing their first property. Those under 45 years old will receive support in the form of a 50% refund of VAT or the full amount of the real estate transfer tax.

The Law on Socially Supported Housing (POS) will increase the maximum selling price of POS apartments from €1,792.50 per square meter to €1,912, in order to align with the average selling price on the market in 2024.

– A significant increase in construction costs and selling prices of apartments has led to the inability to contract work in the POS programs, and public procurement procedures are often canceled because contractors, given the legally defined maximum prices, have no economic interest in participating in these procedures – states the proposal of the Law.

As noted by Deputy Prime Minister and Minister of Spatial Planning, Construction and State Property Branko Bačić during the discussion in Parliament, the Agency for Legal Transactions and Real Estate Mediation (APN) already has building permits for 732 apartments, which will begin construction with the increase in the maximum selling price, he added.

Tax Refund for Those Under 45 Years Old

Another key aspect of the amendments to this Law is the support for those under 45 years old who are buying or building their first property in the form of a 50% VAT refund in the case, explained Bačić, of purchasing an apartment in new construction, i.e., from a legal entity, or the full amount of the real estate transfer tax in the case of purchasing a used apartment or from a natural person.

– This will also apply to the purchase of land and the construction of family houses – he added.

Support is granted for the purchase or construction of a property, according to the adopted HDZ amendment, in the case that a tax assessment for real estate transfer tax is issued based on a real estate purchase contract after January 1, 2025, or if the applicant has paid VAT based on the seller’s invoice issued after January 1, 2025.

The criterion is that the applicant or their immediate family (spouse or partner, life partner or informal life partner, and children) do not own, co-own, or jointly own a property intended for housing in Croatia or abroad. An exception is if they own a property that is not suitable for housing or if the product of the total area of such a property with the co-ownership share does not exceed the area of the corresponding property defined by the Law, which has been sold or will be sold within two years of purchasing the property for their own housing needs.

Although it was initially proposed that the right to receive support would not be possible if the contracted price of the residential property is 30% higher than the average price per square meter of an apartment defined by this Law or if the usable area of the residential property is 30% larger than the area prescribed by the Law, the acceptance of the amendment submitted by HDZ increases this to 50% in both cases.

Additionally, support recipients will have to repay it if they sell or rent out the property within 5 years or deregister their residence and do not use it.

Affordable Rental Program

The third most important aspect is the initiation of an affordable rental program for apartments with compensation for owners of apartments that have been vacant for more than two years. APN will procure properties from the state, local governments, and legal and natural persons through public calls, and these will be rented for at least three years with the possibility of extension for up to ten years. APN will pay owners 60% of the total expected rent in advance for the period for which the property is rented, and 40% after half of that period, the minister explained earlier.

For example, according to the rental price in the City of Zagreb, for a 65 square meter apartment, if the owner rents it to APN for a period of seven years, they will receive a total of €55,146 from the Republic of Croatia, with 60% received immediately, and the remainder after three and a half years, Bačić noted in a specific example.

– There are about 1,200 vacant residential units owned by the Republic of Croatia because they are not suitable for housing and need to be renovated, and about 150 of them are already in that process, so that they can be put on the rental market for our citizens who need affordable housing, which implies a situation where a family or individual spends more than 30% of their monthly income on housing – he said.

The amendments to the Law were supported by 76 representatives, while 46 opposition members abstained, and nine voted against.