Prague's new building rules want developers to help build a better city

In the absence of high tax income, Prague City Hall wants to fill coffers for infrastructure developments with fees from developers.

 William Nattrass

Written by William Nattrass Published on 01.02.2022 16:15:00 (updated on 02.02.2022) Reading time: 3 minutes

Prague is one of the EU’s fastest growing cities. Prior to the outbreak of Covid-19, it came second only to Dublin in a ranking of EU cities expanding at the quickest rate, according to a Central and Eastern Europe Investment Report by consultancies Skanska, Dentons and Colliers. This growth is being driven by huge housing demand, with flats and houses in Prague doubling in value over the last eleven years.

With this growth, though, comes significant strain on vital city infrastructure such as schools, parks, playgrounds and public transport. New rules approved by Prague City Hall now aim to make sure that companies benefiting the most from the expansion of the Czech capital are also contributing to making its growth sustainable.

Guidelines have been set out for cooperation between developers and local city districts, including the requirement that large developers either ensure the construction of certain infrastructure elements, or pay a financial sum to the local authorities.

The changed rules are part of a move by City Hall to change the city’s zoning plan. This will make the value of some investors’ land increase significantly, so the authorities want to make sure that the benefits of the change accrue to the city itself, instead of developers.

Developers will be subject to a calculation determining the extent of their mandatory contribution to infrastructure developments. “It will be either a financial contribution directly linked to the implementation of public facilities in the area, or a non-financial undertaking such as creating green spaces such as parks or planting trees in streets, creating schools or kindergartens, necessary transport infrastructure, or the transfer of housing construction to city ownership,” said Filip Foglar, an architect who coordinated work on the new rules.

City Hall hopes the rules will provide a solution to the significant shortfall in funds for city infrastructure projects. Prague has a relatively low tax income given its size and prosperity, as far more people live and work in the city than have their permanent residence there for tax contributions.

Until now developers had to negotiate infrastructure contributions with city district authorities on a case-by-case basis. They have welcomed the new rules for the clarity they will provide when negotiating new projects.

“This methodology creates a unified, equal and transparent tool for negotiations with developers, giving them with the ability to read the city’s behavior, as well as predictability and stability for their projects,” said Petr Hlaváček, Deputy Mayor for Spatial Development and Spatial Planning.

Yet developers argue that in the long term, funds for schools, playgrounds and parks should come from expanded public coffers rather than private sector contributions.

“We agree with setting uniform and clear rules for cooperation between the municipality, city districts and investors. But we see this only as a temporary solution, in light of the tight budget for the capital, which due to unbalanced tax redistribution does not have enough funds from the state for necessary public buildings,” said Dušan Kunovský, owner of the Central Group, told Forbes.

Whether or not the new rules provide a long-term fix, they’ve already been shown to work in raising funds for necessary city developments. At a large planned construction at the Žižkov Freight Station, investors will be obliged to create a primary school, six kindergartens, three new parks and land for a new tram line.

Amid a rapid pace of developments in Prague, it’s hoped that the city’s new rules for developers will ensure that the city’s infrastructure keeps pace with its expansion.  

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