There has been much in the news recently about the housing shortage, caused by a combination of factors that have intensified in recent years.
In this article I summarise what has caused the housing shortage, the solutions put forward by Government to address the issue, and other suggestions.
Housing shortage cause & effect
One major factor is increased demand from foreign investors, particularly through the Cyprus Investment Program (Golden Passport scheme), which granted citizenship to nearly 7,000 individuals from its launch in 2007 to its ignominious termination in November 2020. This led to rising property prices, making homes less affordable for locals.
The rise of short-term rentals on platforms like Airbnb has further reduced long-term rental availability, increased rents and making housing inaccessible for local residents.
Additionally, insufficient new housing supply has worsened the issue. Economic uncertainties, including the COVID-19 pandemic, have slowed construction, leading to an imbalance between supply and demand.
Housing costs have also risen significantly relative to income, with many households spending over 40% of their income on rent or mortgage payments. This has made homeownership difficult, especially for middle-income and young buyers.
Finally, declining homeownership rates reflect the growing affordability crisis. Two decades ago, 78% of Cypriots owned homes; today, that figure has fallen to 68.8%, slightly below the EU average.
Government solutions to the housing shortage
To tackle the crisis, the government has launched several initiatives. A €77 million housing investment plan (2023-2028) aims to provide financial aid to middle-class and young homebuyers.
The Renovate-to-Rent program incentivizes property owners to renovate unused homes and rent them at affordable rates, with a target of adding 1,000 units in two years.
For low-income families, building plots are being allocated, with around 1,300 beneficiaries since 2019 and plans for 300-500 more in the next three years.
The government is also exploring funding from the European Investment Bank (EIB) as part of a €10 billion initiative to support affordable housing projects and help the housing shortage..
The Interior Ministry has implemented a fast-track building licence procedure designed to simplify and shorten the time taken to issue building permits and speed the delivery of new homes to market.
Lastly, the Cyprus Land Development Corporation (CLDC) is implementing a development program to expand affordable housing for purchase and rent.
Other suggested measures
A call to limit the number of short-term Airbnb rentals by allowing each person or company to register only two properties has been rejected by the Attorney-General’s office.
Another suggestion is changing rules by which non-EU citizens are permitted to acquire as many properties as they wish through companies. Although EU countries generally permit non-EU citizens to own property, many impose restrictions.
AKEL has proposed scrapping the 5% reduced VAT rate for non-EU citizens buying or building homes in Cyprus arguing the reduced VAT rate should help lower and middle-income families rather than benefiting foreign investors.
Summary
The housing shortage in Cyprus remains a major issue, affecting both the property market and residents’ daily lives.
Addressing this crisis will require collaboration between the government, the construction sector, and the local community to ensure affordable housing for all.
There are hundreds of properties being let short term eg AirBnB that are NOT registered yet no one is doing anything about it.
The owners are just ignoring the Law and are actually putting their clients at risk where trading illegally nullifies any insurance policy.
Perhaps the first case of an owner being sued for negligence will waken the authorities up to the fact.