Rental housing, highway, tourism boost are priorities

It is crucial that citizens and businesses function based on a modern and unambiguous construction law, which on the one hand protects the public interest, but on the other does not unnecessarily burden businesses, said František Palko, state secretary of the Ministry of Transport, Construction and Regional Development in reference to the ambitions of the ministry to replace legislation dating from 1976 with a new law.

František PalkoFrantišek Palko (Source: Jana Liptáková)

It is crucial that citizens and businesses function based on a modern and unambiguous construction law, which on the one hand protects the public interest, but on the other does not unnecessarily burden businesses, said František Palko, state secretary of the Ministry of Transport, Construction and Regional Development in reference to the ambitions of the ministry to replace legislation dating from 1976 with a new law.

“The law is more than 40 years old and it has been revised more than 20 times,” said Palko in an interview with The Slovak Spectator. “What we have today is a mixture of old and new elements which no longer harmonise.”

The Slovak Spectator spoke to Palko about the changes the new construction law will bring, the lack of a rental housing market, highway construction as well as developments in tourism, which fall under Palko’s mandate at the ministry.

The Slovak Spectator (TSS): The ministry has submitted the draft construction law to a wider public debate. How do you assess the responses? How much of this will make it to the final draft?
We subjected the law to a public debate since we do not view this legislation as something political. It pertains to the lives of almost all citizens. I do not view the responses as criticism and it is pleasing that they are mostly of technical character, coming from people knowledgeable of the situation on a wide range of issues. We basically incorporated almost every fourth comment. We haven’t prepared the law from an office table but rather had a 55-member working group which involved professional chambers, interest organisations as well as civil society. We would invite the parliamentary deputy factions for a discussion about this modified draft and would then include all the reasonable comments.

TSS: What are the most significant changes the law will bring?
There is an institution called a zoning plan, which might be interesting for the businesses, which are applying for a development permit. The zoning plans will be adopted by municipal deputies and should clearly indicate the zoning and the planned use of the given land. Thus the zoning plan will free the citizen or the business from the duty of requesting a development permit from the construction office. It really means that at places where zoning plans will exist, which we would like to be parts of the municipal master plans in the future, the development permit process would lose its justification.

This way we want to simplify the lives of people, who for example, plan to build a family house in the countryside or even in a town. Based on the draft bill, the approval process would be shortened by three months, which is quite a significant time period. For houses up to 300 square metres it will no longer be necessary to apply for development permit. These will need a construction license only.

By the time the development permit process starts it will also be necessary to have the environmental impact assessment, so it would no longer happen that there is a development permit process and then only after that the environmental impact is assessed.

Also, by 2034 all the municipalities should have master plans. Based on the presently valid legislation only municipalities with 2,000 inhabitants or more are required to have such a plan, but we have the information that many do not meet this obligation. This draft law is also about order, and order in terms of land-use planning cannot exist without master plans.

The draft law is about increasing the responsibility of all participants involved in this process. It means that the responsibility of construction supervision, as well as of the architects and project planners, will increase. For example, the construction-technical supervision will have the authority to order the halt of the construction if it finds out that it is no longer in line with the construction license or the law. This also assumes higher self-regulation on the part of organisations such as the Chamber of Architects or the Chamber of Construction Engineers, so that these also influence their members through their guidelines.

We will also be responding to failures by hiking the penalties and in some cases introducing a minimum level of fines.

TSS: The new law will be tough action on illegal construction. What are the changes in this area?
In Slovakia we have hundreds if not thousands of illegal constructions, unfortunately. Of course there are several reasons behind this, with one being that in fact each municipality is also a construction office. I indeed cannot believe that the mayors who in these cases are heads of the construction office do not know that illegal buildings are rising on their territories. There is a civic-political aspect to that. On one hand there is the mayor and on the other hand there are his voters, who, let’s say, are violating the law. Perhaps the mayor is conflicted over what to do, even if the law has no exceptions.

Once the new construction law goes through it will not give such variability, but it will line up exactly with the defined duties. Simply, if an illegal construction is being built, a decision to halt this construction must be issued and immediately delivered to the builder, and at the same time to the operator of the utilities, such as electricity provider, which has to immediately halt electricity supply. If the constructor does not respond, then the business license of this company might be withdrawn. If after that the building is still standing, it may be put up for auction. The declarer tears down this construction and would build there something in line with the construction license. If the decision is still not respected we talk about a crime which can result in a jail sentence.

No matter how nicely a law is drafted if it is not executed by people who really understand their job within the public administration, and thus we will also focus on training people who will be working at the construction offices. Today if you have a university degree in a specific area, you do not need to demonstrate experience in order to issue decisions in the sphere of construction proceeding, which I do not think is the right practice. The new law will require previous experience as well as a professional exam, while the employees will continue being tested throughout their service.

TSS: During the public debate representatives of the Roma communities as well as municipalities tabled objections regarding the way the law treats illegal constructions, since some of the Roma dwellings that are considered illegal were not built yesterday nor recently and are a result of societal developments. How did your ministry respond to this problem?
In the new law we would not scrap the institute of additional approval [post facto approval] of a construction and keep it valid for certain time after the new legislation becomes valid for constructions without a construction license. But the character of these constructions will have to meet all the definitions of the law. Submitting an application for the additional approval will not automatically mean the approval is granted.

The Roma communities are a specific case and thus we also established an international expert group to address this issue. With the government proxy we have prepared solutions which are now being translated into the provisions of the law. We will then consult the draft law with bodies of the Council of Europe and United Nations so that all the international agreements are met.

We have approved a draft resolution on assessing subsidies for municipalities to process the land-use planning documentation including criteria for granting these funds. By this move we want to make sure that the integration of these constructions into the land-use plans of the municipalities does not remain a cliché. Yet we also consider the option that a dwelling without a license cannot be considered a construction based on the law and we have elaborated a proceeding for these situations. If the dwelling can be considered a construction then we ask about the land on which this construction is built. On land owned by the owner of the dwelling? Land owned by someone else? Land owned by the municipality?

The ideal situation is when there is a construction license and the dwelling has the features of a valid construction and the landownership is settled. If the dwelling displays features of construction but stands on land owned by the municipality, then it is still not the worst case, because the municipality is able to solve this situation. The third case is when such dwelling with characteristics of a construction stands on private land. This situation is being addressed by a committee established by the government proxy and one of the solutions could be a land-swap through the Slovak Land Fund. In order to have the situation mapped, there is a so-called ‘passportisation’ going on in cooperation with the UNDP, which should give more detailed information on the state of these dwellings. If the dwelling cannot be characterised as a valid construction, then the situation must be addressed together with the Ministry of Labour, Family and Social Affairs and substitute housing must be sought through social rental housing.

TSS: The energy efficiency of buildings and cutting electricity consumption in this area is a challenge not only for the construction of new buildings but also the reconstruction of old ones. How does the ministry address this challenge?
Apartments and buildings overall are one of the biggest users of energy in Slovakia, be it public buildings or apartments. Yet, it is not only about thermal insulation of older apartments, because even if you insulate an old shell, unless the energy system within it is effective, then energy and heat leakage will continue to be significant. In cases where both the energy distribution networks as well as the thermal insulation are modified, 60-70 percent energy savings can be achieved, with consumers seeing their energy bills drop by 40 percent. We have already approved a concept for energy efficient buildings by 2020 and have harmonised Slovakia’s legislation with the EU law. Energy performance certificates are becoming a reality and people started exploring the certificate of the building they are going to move into.

TSS: Slovakia is one of the four countries of the EU where the two largest cities are not connected by a highway, a fact widely criticised by businesses and investors. What is the state of the construction of the cross-country highway and why has it not been finished yet?
During the term of this government there should not be one single section left on which construction either has not started or finished, which means that minimally all the sections of the cross-country highway will be under construction except the section at Hubová, where we have a special geological situation, which is being solved now. Of course, this part of the highway infrastructure is very important for us, and the highway does not end at Košice but we are also getting connected with Ukraine.

As far as other highway infrastructure is concerned, the situation now is very promising in terms of public procurement, which we announced in the spring of this year, which means that the National Highway Company could soon sign a contract with suppliers of several highway sections.

TSS: In Slovakia, so far only one highway section has been built through a public-private partnership (PPP) project. Based on media reports, the R7 section from Bratislava towards Šamorín and the so-called zero by-pass of the capital, the D4, will be built through PPP projects. What were the reasons for choosing this form of financing?
We consider the D4 and R7 suitable for PPP projects since considering the economic structure of Bratislava Region, this is not suitable for using EU funding as it is possible to use in eastern or central Slovakia. Yet, if we look at the road from Dunajská Lužná during the morning rush hours when people commute to work, it becomes evident that the situation needs to be addressed and the suitable form of financing is PPP.

TSS: Highway construction often involves land expropriation. The ministry is preparing a new law on the expropriation of land. What are the major changes?
We will always want to meet legal conditions for land expropriation, which must always happen in the public’s interest and involve compensation. It is also the last resort when ownership change cannot be achieved differently. The main change is that expropriation can happen only in exchange for financial compensation while an expert opinion will always serve as a basis for determining it.

TSS: The Ministry of Transport is also working on a concept for new housing policies until 2020. What are the shortfalls in the housing sector you want to address?
The weakness of housing policies in Slovakia is rental housing. Now I do not have in mind only social rental housing but also the classic rental housing market. In many other countries rental housing is very developed. In London, for example, only a small group of people own apartments. Yet in Slovakia, rental housing makes up only 3 percent of the total of apartments. At first sight, it seems positive that the rest of the people own apartments, but through a closer look the situation is not positive at all.

Perhaps you recall when in recent years a factory operating in western Slovakia received investment stimuli and made an offer to employ people from eastern Slovakia where unemployment rates are high. The company offered apartments and salaries at the level of western Slovakia but nobody came. Slovaks do not commute for work, it seems. Yet, by developing the rental housing market we could change people’s habits and thus impact the high unemployment rates.

More than 60 percent of people aged between 25 and 33 still live with their parents. I am confident
that in the case of young people and young people with families, social rental housing has its justification. However, developing social rental housing without cooperating with the regional self-governments is not possible since the main player on the market is the municipality. Some municipalities are active and by offering social rental housing, they manage to keep young people in the municipalities. This is one of the areas I want to focus on. Three months ago we visited the Austrian counter ministry to study the situation in Austria to get inspiration for Slovakia’s housing policies.

TSS: Tourism in Slovakia generates around 2.5 percent of the GDP and in other developed countries it is 3.5 percent on average. Why has Slovakia been unable to fully utilise its tourism potential?
There was much talk but little has been done. In neighbouring countries such as Austria or Hungary there is systemic support by the state and self-governments as well as symbiosis of these interests between all the players in the tourism market. It cannot be achieved overnight but the reason for Slovakia’s shortfall is that the declarations have been different from the reality. The government has finally adopted a strategy for developing tourism until 2020.

TSS: What are the main objectives of this strategy?
The strategy pertains to three areas: increasing the quality of services, unified presentation of Slovakia but also support for the tourism environment. Competition between private players can boost quality. We cannot pretend that small Slovakia in itself is a destination. We are surrounded by interesting countries, which attract tourists from all over the world. Quality is the area that needs to be addressed and thus we will introduce a unified system for quality of services in tourism. We do not want to invent something which has already been invented and tested, and thus we would get inspiration from well-tested systems in the EU.

We of course cannot force private market makers to join this system. However, I am confident that the highest possible number of participants will voluntarily join this system because if you come to a region where the other hotel has the ministry’s certificate of quality it will naturally inspire your hotel to enter the system.

This government has provided subsidies for tourism to the maximum possible scale the law allows and this year [2013] we allocated approximately €3 million for regional organisations of tourism, as these are the closest to destination management and could use these finances for promotion of their territories at international fairs. We also provided EU funding for the development of tourism and now we have opened a call within which we are assessing applications worth €50 million. Under the new programming period, the application for funds will change since tourism asa priority will no longer exist, but the European Commission will, in the new programming period, focus on investment and topical goals. Thus players will have to seek specific activities, be it development of innovations or support for wellness or education tourism, for example.

TSS: We frequently come across criticism that sometimes hotels or other projects are supported in areas where there are no tourism attractions.
The fact that the players will have to apply for funding based on topical priorities will remove these tendencies. This happened in the past and we do know about some negative cases, which bother us. Statistical data suggests that since structural funds have been used, bed capacity in Slovakia has doubled, while the occupancy rate significantly dropped.

TSS: You have previously noted the need of a unified approach and symbiosis, however another area of criticism is that sometimes regional tourism bodies are unwilling to cooperate. How would you respond to that?
There really is fragmentation among these organisations and today we already have almost 40 tourism associations, which is a pretty high number for Slovakia. But one has to understand that when foreign tourists come here they first see Slovakia. As for symbiosis, there is tough competition between them and we sense that in communicating with them. In such an environment it is hard to achieve a consensus and we do not always know what interests they pursue. Now we have a draft law in parliament making it possible for these regional organisations to merge, but the decision must come from below because you cannot order them to merge.

For more information about the Slovak business environment please see our Investment Advisory Guide.

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