Author: Klevis Paloka
Official data show that only in Tirana from 2018 to 2020, 6708 families requested housing, of which only 1800 families were given an opportunity. During the efforts to regulate the housing programs, in June 2018 the law "On social housing" was approved and at the end of April 2021, constitutional Court dismissed the claim of the Association of Builders for the repeal of Article 19 of Law no. 22/2018 "For social housing". In this article, it is provided that construction companies that apply for a permit with a residential area of 2000 m2 must give at least 3 percent of the surface in function of the fund for social housing.
However, the first findings of non-implementation of the law were exposed by an audit of the High State Control that uncovered the municipalities.
"The audit shows that social housing programs have not been fully implemented as a social policy, addressing only individual cases, but not the social phenomenon of homelessness, not playing a proactive role in mitigating or eliminating this phenomenon. There is a lack of a national register on the number of homeless people and investments in social housing, the stock of which is non-existent in most municipalities and insufficient in some others", it is said in the audit of KLSH.
Also, KLSH emphasizes that no municipality has built social housing by itself or bought it from the market.
"During the last 10 years, no municipality has built its own social housing or bought it from the market to offer it as low-cost housing. Moreover, this social function of the municipality is not included in urban planning or detailed local plans, for the construction of social housing, to include the concept of Areas of Social Interest", emphasizes KLSH.
The only municipality that has been able to act with this law is the Municipality of Tirana, which according to KLSH - since the entry into force of the law until March, has granted 4 construction permits with an area of over 2000 m2.
The struggle of the builders who opposed the 3%
But why do the Builders' Association reject this 3% and what are the consequences of article 19 of the law on social housing?
The representative of the Association of Builders, Ilir Hebovija, describes this obligation as an added tax on what burdens the builders.
"3% is an added tax on top of the tax that currently goes to builders which is the infrastructure impact tax which is 11% and 3%, it is an additional tax which is illegal, it is unconstitutional because you cannot tax a category of certain businesses to give back to the whole society. Everyone should pay for the whole society. If I pay 11% today for the infrastructure impact tax, I also have the social housing liability in it. Meanwhile, in addition to this obligation, you ask me for an additional 3%, only for the construction business, no one else to contribute to all businesses in Albania, to all individuals in Albania who produce income, but pay 3% to taxes I gave everything for social housing. It does not mean that you are building a building and you, as a builder, are the only one responsible for social housing in Albania, otherwise we nationalize the building, as it once happened, and the state uses it for its own purposes. The capitalist economy that we are in, the market economy that we are in today does not presuppose this kind of added burden on business, which is why we have opposed it. We are not against the tax system, we are against taxes that violate the right to do business, they are taxes even from the constitutional point of view, they are not in the right place and the burden falls only on an interest group, such as the builders", details Hebovija for ACQJ.
While he comments on the decision of the Constitutional Court saying that the Court did not deal with the essence of the case, but whether or not the Association of Builders was legitimate.
"3% was not overturned in the Constitutional Court, the manner, legitimacy or not of the builders' association, which has existed for almost 20 years and has been the same one that has brought cases before the Constitutional Court, has been overturned. So this is the change of this. Since the Constitutional Court is currently the highest body, we will certainly find other ways to bring this issue back to the judicial system, in order to decide whether it is constitutional or not 3%", says the representative of the Association of Builders.
Finally, Hebovija adds that even though this 3% tax was imposed, it was not calculated correctly.
"In these conditions as it is, the haste to establish 3% has left out many factors, which should have been well calculated, an area, a square meter in the center of Tirana, does not have the same value as a square meter in the outskirts of Tirana . However, you charge the builder who is building in preferential areas, i.e. with 3%, which is almost 5 times the value that a builder in the suburbs of Tirana will pay or give. So this is also expressed unevenly. Without saying the part, as I told you above, that it is a tax that is charged only to a subject such as construction.
This 3% does not remain with the builder, it goes to the consumer, generally the entire tax system goes to the consumer, it does not remain with the one who is taxed.
3% certainly affects the increase in the prices of all housing, all infrastructure, housing construction, business centers, shops, other elements of the construction infrastructure go to the sales market", concludes Hebovija.
Although the Constitutional Court has said its word, the debates continue. A legal expert explains for ACQJ, why this law and this contested article have some ambiguities. The expert explains that even though it is titled as "Contribution of the private sector to the creation of the public fund", while within this article, in point 1, it is written that "the passage without reward of at least 3% is ensured".
"Point 1 of Article 19 says: "Any private entity that, after the entry into force of this law, applies for a development and construction permit for constructions with a residential construction area of more than 2 square meters, ensures the passage without compensation of at least 000 percent of the functional area, with the conditions of a housing appropriate, in favor of the public social housing fund. This area, in case of impossibility to give it to the residential construction area that is being built, can be given to another residential construction area. The contract that is signed between the parties for the transfer of the construction area in favor of the public social housing fund, is registered in the Real Estate Registration Office.. "
"That is why it is titled contribution of the private sector, it has a mandatory character because it is said to provide passage without reward, so it is mandatory, it is not of a contribution character, of a voluntary character, but it is imperative and binding. From here there is an inaccuracy which seems to be of legal technique because the title given to the legal provision does not correspond to the content of the legal provision itself. On the other hand, if you look at the terminology that has been chosen, it says that at least 3% of the functional surface, at least 3%, what does it mean, or 3% or more, so it can be 100%. It seems clear that without going into very deep constitutional and legal interpretations that the nuances of the limitation that is made to the right of the developer or the right of the building society is unlimited. It says 3% and it can be applied, but it can be applied even more, because the law recognizes your right to start from a margin, from 3% onwards, that is, even up to 100%, and it is a complete stripping of the right that the construction company has. There is an undefined nature of restriction with an undefined legal nature, with an undefined quantitative nature, and the question that arises is how much 3%, 10%, 20%, 100% will be applied. The law has left this open", says the legal expert.
So the legal expert also shows the constitutional part and what freedoms and principles are violated by this law.
"The law itself has an unconstitutional nature, firstly because it violates the principle of legal certainty, the principle of freedom of economic activity, because the area that the construction entity has decided to develop, invest, is an area at its full disposal and you are it stipulates that 3% of this area, at least 3%, it can be even more, you will pass to the social housing fund. It is up to you how you will dispose of what belongs to you. We agree that the activity of economic freedom can be limited, it is not absolute, it is limited, the state has had cases where every freedom of people for a public interest is limited. We are talking here that the public interest and social justice cannot be realized by unconstitutional means, this is the essence and this is the thin thread that divides the situation, we can really talk about social justice, we can really talk about social welfare where social housing is also introduced. Why? Because what happens, the state is the mechanism that converts taxes and fees into social welfare programs, part of which is social housing. Now the construction subjects are taxpayers, they pay all the obligations they have in the state, so let's say that they have once indirectly contributed to the social administration scheme, because the state is supported by taxes, fees and other legal income . So as long as they pay all taxes and duties, they can be said to be contributors to social programs, including social housing. Now here we are talking about a second obligation, or an added burden only for construction subjects, and not for other subjects. Only for construction subjects, an added burden is imposed in the form of 3% either in kind or in cash as the City Council of Tirana has expanded the meaning, so here we are talking about an added burden, now you can say that it is a tax superimposed or a second tax. This is the problem because we cannot define it legally, what is 3%? It is a tax, it is not a tax, because the tax is always in monetary value. Is it a tax? It is not a tax, because the tax is paid against the provision of a public service, so it does not enter into the legal concept of tax and tax. Is it a donation? It is not a donation because there is no voluntary basis. So what is it? We do not understand the legal nature of this 3%, we understand the effects and consequences that the 3% has, as an added burden, as a burden that burdens the interests of construction entities, but we do not understand the legal nature of this it is a very big problem because not understanding the legal nature, the situation is completely unguaranteed legally and wherever it goes let's say the construction subjects. If we have an incorrect application of this percentage, where will they appeal, which law will we be subject to for the appeal procedures, so the law does not provide the necessary constitutional guarantees, which are the right to appeal, the clarity of the legal provision, and this creates a problem and a constitutional uncertainty, which is one of the fundamental principles of the rule of law.", concludes the explanation for ACQJ, the legal expert.
At the same time, even though according to the Association of Builders this tax is unconstitutional, they are obliged to pay it, because the Municipality of Tirana does not approve the construction permit without also calculating the 3% tax for social housing.
Municipality of Tirana: 3% has been implemented
In an official response, the Municipality of Tirana emphasizes that it has implemented the obligation of developer entities to implement the law "On social housing".
"The construction permits granted by the Municipality of Tirana include the entire territory that it has under its jurisdiction according to the provisions of Law 139/2015, dated 17.12.2015 on "Local Self-Government" (amended), Law no. 107/2014, dated 31.07.2014 "On planning and development of the territory" (amended) as well as by-laws in its implementation. For the period from the entry into force of the law no. 22/2018 until the entry into force of VKB with no. 105, dated 25.10.2019 Tirana Municipality, has left as a point in the Tirana Mayor's construction permit decision, the obligation of developer entities to implement the law "On social housing"
Officially, it results that for this period, about 53 permits have been approved, for which there is the burden of the obligation to pass without compensation at least 3% percent of the functional surface.
On the other hand, for the period of 2020, 61 construction permits were approved, where the total 3% taxable area is 15 m. Of them, 726 m2 are given in functional residential area and the area of 3986 m2 are given in the value of lek. The total amount collected by Tirana Municipality is 342 ALL.
"For the period January-March 2021, 22 construction permits have been approved, where the total 3% taxable area is 6789.1 m2, where of these 6044.3 m2 are given in functional residential area and the area of 744.3 m2 were given in Lek value, where the total value collected by Tirana Municipality is Lek 65", says the official response of the Municipality of Tirana.
Therefore, for the creation of social housing, the KLSH recommends that there be a cooperation with the private construction sector.
"Municipalities must have a proactive, not passive, approach to social housing, starting with the framing of social housing in urban planning and applying contemporary European methods, in cooperation with the private construction sector, to cultivate social housing.", it is said in KLSH report-'s.
While at the end, the representative of the Construction Association, Ilir Hebovija, emphasizes that: "If there will not be a legal way to overturn this article of this law, then they will be forced to sit down in talks with the Municipality of Tirana, or with the central government so that this law has a European standard, as we intend to enter The EU, while we make laws differently from the EU".
