Affordable housing in Poland – benefits both families and investorsReal Estate Companies
Originally Published in March 2018
BGK Nieruchomości (BGKN) is a state-owned, yet commercially operating company, managing closed-end private asset investment funds. Its mission is to grow the availability of safe, stable and affordable rental housing for Poland’s low income and middle class families by reducing the country’s housing deficit and extending the market into new segments.
BGKN has a proven track record in both financing and developing affordable apartments for rent under Poland’s national housing program. Housing projects are being prepared both in large metropolises and in smaller cities, serving as a pro-growth stimulus for entire micro-regions. Moreover, now a plan for rural areas is being developed.
“Our projects are targeted at those segments of population who do not have access to housing at market rates. We carry out our investments in co-operation with both local governments and private developers. At each level of investment process – whether it’s land acquisition, financing, construction or renting – our projects are carried out based on fully commercial rules.” said BGKN Vice President Włodzimierz Stasiak.
BGKN has a proven track record in both financing and developing affordable apartments for rent. The growth potential in this market in Poland is significant.
The growth potential in the Polish affordable rental market is significant. At the moment, over one million Polish families have no means to rent or buy their own flat. The level of overpopulation in Polish apartments exceeds 44 percent while the EU average oscillates around 17 percent. The country occupies almost the last place in the European Union when it comes to numbers of apartments per one thousand citizens and living space per capita.
Poland builds roughly 150,000 units per year – less than half as much as is needed. BGKN is determined to provide an impulse to filling this gap. Its existing residential portfolio consists of 2,800 apartments for rent, worth about EUR 250 million. Since the launch of the national housing program, the company already has more than 2,000 apartments under construction. Moreover, there is about EUR 1 billion worth of investments in the pipeline, with another 25,000 apartments at various stages of preparation. Multiple Polish cities are already participating in the program, which grants access to large plots of land, from both local governments and private investors, allowing for comprehensive urban design solutions.
“We are going to offer our tenants optimum construction and furnishing standards. Our main focus is on proximity to functional centres, as well as accessibility to public transport and social and technical infrastructure. In co-operation with local governments, we make sure our affordable housing developments are linked to the wider urban planning process,” said BGKN Board Member Grzegorz Muszyński.
BGKN is optimizing costs without downgrading housing quality. The company is focusing on modern construction technologies and ready-made architectural solutions. This, in addition to economy of scale mechanisms, will allow BGKN to offer rents circa 25 percent lower than in today’s local housing markets. “We invite developers to cooperate with us, but we expect them to be willing to lower their margins,” emphasize BGKN managers.
BGKN’s funding strategy assumes seed investment from BGK Bank (Poland’s state development bank) and financial and land contributions from investors, complimented by debt financing (corporate bonds, bank loans, mortgage loans and related cover bonds). With plans to list their funds on the Warsaw Stock Exchange and convert it into a real estate investment trust (REIT), the company wants to create a brand new spot on the low risk investment map and a mechanism to generate stable and competitive returns for investors.