By Demetris Georgiades
The easy political option is to go after landlords. The difficult option is to reform the state. Yet only the latter can genuinely increase the supply of housing and lead to lower rents.
Every time rents rise, the political debate follows the same predictable path. Caps on rent increases. Taxes or penalties on idle property. Restrictions on Airbnb. Measures that sound appealing and create the impression that governments and political parties are "doing something," while avoiding the real cause of the problem.
Rents are not rising because landlords woke up one morning feeling greedier. They are rising because, for years, the state has failed to ensure, or more accurately has obstructed, an adequate supply of housing. And when supply is lower than demand, prices increase. It is as simple as that.
The Cypriot state, particularly local authorities, continues to treat urban planning as a continuous process of exceptions, interventions and piecemeal changes. Planning zones should be determined according to scientific criteria, through fully transparent procedures and with a time horizon of decades, not according to momentary pressures. Only in this way can certainty be created for citizens and investors, and only in this way can housing supply increase. More importantly, it helps prevent speculation by those with access to "privileged information" who are able to influence zoning decisions.
The second major problem is licensing. It is unreasonable for a development project to require years to obtain all the necessary approvals. Every month of delay increases financing costs, which are ultimately paid by the buyer or tenant. Bureaucracy also discourages economic activity and delays the arrival of new housing units onto the market.
There is, however, another reform that we continue to avoid. When an area is designated for residential use, it is not enough simply to change its colour on a map. Roads, pavements, sewerage systems and all necessary infrastructure should be built immediately. The cost should rightly be borne by those who benefit from the increase in the value of their land. Those who are unable to pay immediately should be allowed to settle the cost later, at a fair interest rate, when they sell or develop their property. There is no reason for vast areas of "residential land" to remain undeveloped for decades without any real possibility of construction.
The same applies to Airbnb. It is not the enemy. If an area is designated for tourism, short-term tourist rentals are a perfectly legitimate activity. If an area is purely residential, then the rules should be applied consistently. The problem is not the platform. The problem arises when the state itself fails to respect the land uses it has established.
Nor should the mistakes of the past be repeated. Linking the property market to the granting of passports created an artificial surge in demand, produced a group of millionaires, drove prices sharply higher and exposed the country internationally. Housing policy cannot rely on extraordinary and distorted sources of demand.
The easy political option is to go after landlords. The difficult option is to reform the state. Yet only the latter can genuinely increase the supply of housing and lead to lower rents. Everything else consists of interventions that provide political relief to those announcing them, but not to those struggling every month to pay their rent.
