Comparative Analysis of Housing Policies in Selected WB Cities and EU Cities
Introduction
Housing Policies in WB cities are at a critical juncture, marked by severe affordability crises and fragmented governance structures that leave vulnerable populations exposed. A recent comparative analysis highlights the stark contrast between the housing markets of Bosnia and Herzegovina (BiH) and Montenegro versus established European models in Denmark and the Netherlands.
This deep-dive summary explores the structural deficiencies in the Western Balkans, the untapped potential of vacant properties, and the strategic policy reforms necessary to stabilize these markets. By examining tenure structures, tax instruments, and social housing systems, we can identify actionable pathways for reform.
Understanding Housing Policies in WB cities is essential for policymakers, researchers, and international stakeholders aiming to address the root causes of housing insecurity in the region.
The Affordability Crisis: Beyond Price-to-Income Ratios
The core challenge facing the region is not merely high property prices but a systemic failure in affordability metrics. In both BiH and Montenegro, average price-to-income ratios exceed 13, a figure significantly higher than those in Denmark (2.1) and the Netherlands (6.6). However, relying solely on price-to-income ratios provides an incomplete picture. True affordability encompasses housing quality, energy efficiency, and access to essential services.
Data reveals serious deficiencies in housing quality within the Western Balkans. For instance, 22.4% of residents in Montenegro live in dwellings with leaking roofs, damp walls, or structural damage. In BiH, accessibility issues further compound the cost burden; a third of households struggle to access banks, primary healthcare, and public transport, with rural areas being disproportionately affected.
When evaluating Housing Policies in WB cities, it becomes evident that location drives real affordability. Even if a dwelling is nominally cheap, the high costs associated with reaching essential services render it effectively unaffordable for many citizens.
Tenure Structures and the Informal Rental Trap
A defining characteristic of the housing landscape in BiH and Montenegro is the dominance of homeownership, with rates hovering around 90%. This legacy stems from post-socialist transitions where social housing stocks declined sharply in the 1990s. Consequently, the rental market is small yet critically important, but it operates largely in the shadows.
More than 80% of rental leases in these countries operate informally. This widespread informality creates a dual disadvantage: tenants lack legal protection against eviction or sudden rent increases, and governments lose significant tax revenue. In BiH, neither the Federation nor Republika Srpska tax administrations keep separate records for rental income types, making enforcement difficult. Similarly, in Montenegro, an estimated 80% of tenants do not have signed contracts.
When analyzing Housing Policies in WB cities, the lack of formalization stands out as a major barrier to stability. Without notarized or legally valid contracts, tenants cannot access state subsidies, which often require proof of formal tenancy. Landlords avoid registration to evade taxation, perpetuating a cycle of insecurity.
In contrast, Denmark and the Netherlands employ strong rent regulations and clear distinctions between short-term and long-term leases, ensuring tenant protection and market transparency. The absence of such regulatory frameworks in the Western Balkans undermines housing stability and discourages formal market participation.
Vacant Housing: An Untapped Resource
One of the most striking findings in the comparison between Western Balkan and EU cities is the volume of vacant housing. While Denmark and the Netherlands report almost no vacancy due to high demand and strict taxation on unused properties, BiH and Montenegro are characterized by large stocks of empty dwellings.
According to the 2013 Census, approximately 24% of housing units in BiH—equivalent to about 385,000 dwellings—are vacant. In Sarajevo’s Center municipality, every fourth dwelling is empty despite high demand. Montenegro’s 2023 Census revealed that 25% of total property units, or 71,204 homes, are empty. This represents an increase of 12,000 vacant properties over the previous decade.
The persistence of vacant homes highlights a failure in current Housing Policies in WB cities. In the Netherlands, the "Box 3" wealth tax applies to properties regardless of occupancy, removing any financial incentive to keep apartments empty. Conversely, in BiH and Montenegro, tax policies fail to discourage property hoarding. Owners often hold multiple properties without penalty, leading to speculative investment rather than productive use.
Addressing this vacancy requires more than just data collection; it demands fiscal instruments that make holding unused property costly while incentivizing owners to bring these units back into the rental market.
Social Housing: Scarce and Poorly Managed
Social housing is often presented as a primary solution to affordability, yet in the Western Balkans, it remains an underdeveloped and inefficient instrument. In the Netherlands, social housing constitutes 34.1% of the total stock, while in Denmark, it accounts for 21.3%. In stark contrast, only 0.6% of the housing stock in BiH is classified as social housing, a figure that has remained stagnant for over a decade.
The management of existing social housing in the region is marked by fragmentation and opacity. In Sarajevo, for example, there is no unified registry of publicly owned apartments. Institutions like the Institute for Construction of Canton Sarajevo hold assets, but exact numbers are unknown due to poor record-keeping.
Furthermore, coordination between municipal authorities and federal institutions is virtually non-existent. Public calls for social housing often feature vague eligibility criteria and lack transparent scoring systems, creating fertile ground for arbitrary decision-making.
Montenegro has a more structured legal framework, including a Law on Social Housing that defines priority groups such as single parents and persons with disabilities. However, implementation suffers from similar transparency issues. There are no publicly available registries of beneficiaries, making it difficult to monitor fair distribution.
When assessing Housing Policies in WB cities, it is clear that social housing is currently not a viable standalone solution due to limited stock and weak governance. Before expanding supply, governments must establish unified, publicly accessible registries and improve inter-institutional coordination.
Fiscal Instruments and Tax Reform Opportunities
Tax policy serves as a powerful lever for shaping housing markets, yet its potential remains largely untapped in the Western Balkans. Denmark and the Netherlands utilize progressive tax policies to discourage speculative investment and multiple-property ownership. In the Netherlands, inheritance tax can reach up to 40% for non-relatives, and property wealth is taxed annually. In Denmark, property taxes range from 0.44% to 1.1% of assessed value, alongside significant land taxes.
In contrast, BiH and Montenegro lack effective disincentives for property hoarding. Inheritance taxes are relatively low, with exemptions for close relatives, and property taxes do not progressively penalize multiple ownership. This fiscal environment allows speculative demand to flourish, driving up prices and reducing availability for first-time buyers.
Reforming Housing Policies in WB cities requires a shift toward progressive taxation. Recommendations include introducing annual property taxes with higher rates for second and third properties, exempting primary residences to protect average citizens, and increasing transfer taxes on additional property purchases.
Additionally, lowering personal income tax rates for landlords who formalize rental agreements could encourage the transition from informal to formal markets. These fiscal adjustments must be implemented gradually to avoid market shocks, such as mass selloffs that could destabilize mortgage holders.
Strategic Recommendations for Comprehensive Reform
Addressing the housing crisis requires moving beyond fragmented, isolated reforms toward a comprehensive strategy. The analysis suggests three primary policy options, with the third being the recommended path:
- No New Policies: This option avoids immediate costs but leads to worsening inequality and continued emigration.
- Partial Reforms: Targeting only one aspect, such as tenant rights or vacancy, fails because the crisis is structural and interconnected.
- Comprehensive Policy Reform: This approach combines tax reforms, tenant protections, and vacancy management.
Key recommendations for governments include adopting interoperable property registers to enhance transparency, especially in BiH’s complex administrative structure. Laws should explicitly regulate short-term rentals to prevent the conversion of long-term housing into tourist accommodations. Furthermore, defining what constitutes a "vacant property" and imposing penalties or enabling local government use of such properties can help expand supply.
For NGOs and media, the role is crucial in advocating for evidence-based reforms. NGOs should highlight the risks of informal rentals, while media outlets should investigate links between construction booms and money laundering, which may contribute to inflated prices.
Transparent reporting on housing inequalities can shape public discourse and pressure policymakers to act. When implementing Housing Policies in WB cities, harmonization across jurisdictions is vital to prevent regulatory arbitrage, where investors shift activities to regions with laxer rules.
Conclusion
The comparative analysis of housing systems in Bosnia and Herzegovina, Montenegro, Denmark, and the Netherlands reveals that affordability is not just a matter of supply and demand but of regulatory design and fiscal discipline. The current state of Housing Policies in WB cities is defined by high informality, significant vacancy rates, and a negligible social housing sector.
However, the lessons from EU counterparts demonstrate that well-regulated systems built on transparency, tenant protection, and progressive taxation can stabilize markets.
While social housing expansion is currently hindered by governance weaknesses, immediate reforms in tax policy and rental market formalization offer viable pathways to improvement. By discouraging property hoarding and encouraging the formalization of leases, Western Balkan governments can unlock the potential of existing housing stock.
Ultimately, the success of future interventions depends on coordinated, evidence-based action that prioritizes long-term security over short-term gains. As the region continues its journey toward EU integration, aligning Housing Policies in WB cities with European best practices will be essential for ensuring equitable and sustainable living conditions for all residents.