Czech Republic: Residential hotels make a profit on housing the poor

No other business in the current climate of economic uncertainty is blossoming in the Czech Republic as much as the business of housing socially deprived families, most often members of the Romani minority. All one has to do is to acquire a dilapidated building at a relatively low cost, move the new tenants in, and wait for the state to send many thousands of crowns every month. News server iDnes.cz has published an article on this issue entitled “Parasitism on the social system: Business is booming” (available in Czech only at http://zpravy.idnes.cz/parazitovani-na-socialnim-systemu-byznys-ktery-proziva-zlate-casy-11k-/domaci.aspx?c=A111129_1692819_ostrava-zpravy_jog).

In the town of Vítkov, it’s a former office building. In Budišov nad Budišovkou, it’s the former headquarters of the forest administration. In Fulnek, it’s an older single-family home. All of these buildings have been purchased by entrepreneurs who house the socially deprived in them and turn a profit. In Kružberk, locals want to prevent the development of any more residential hotels through a petition which has been signed by 1 500 people already. Residential hotel operators are making money on the socially deprived throughout the entire Moravian-Silesian Region, if not the entire country.

The landlords receive a publicly-funded subsidy per each individual housed. “This is parasitism on the social system, entrepreneurs are abusing it,” says Rostislav Kyncl, the Mayor of Budišov nad Budišovkou.

For a five-member family, the owner of a residential hotel can receive almost CZK 20 000 per month. “Here in Vítkov they charge CZK 3 000 per bed per month. The people live in rather small spaces with communal kitchens and washroom facilities,” says Pavel Smolka, the Mayor of Vítkov. In other parts of the Moravian-Silesian Region, landlords charge as much as CZK 3 500 per tenant.

Some of that money is paid to the landlords by local social welfare departments, some by the Labor Office. In Karviná, where there are three residential hotels for the socially deprived, tenants must also pay separate fees for various services. “Fees for using the electric stove, watching the television, are billed to them separately. It’s a profitable business. Our social welfare system is very poorly configured,” comments Šárka Swiderová, spokesperson for Karviná municipality.

Kumar Vishwanathan, chair of the Life Together association (Vzájemné soužití) in Ostrava, usually encounters similar practices during his work. “This happens often, and it’s hard to blame the entrepreneurs alone for the situation. This is unequivocally a systemic problem,” Vishwanathan believes. In his view, the lack of an adequate social housing policy is to blame. “In Western countries they have apartments set aside for the socially deprived which serve to house those who have no money. In the Czech Republic, all of the apartments have been privatized and the market has spawned businesses like these,” Vishwanathan says, adding that the European Union already has programs in place through which towns and villages could draw on funding for the provision of social housing. In his view, Czech municipalities should take advantage of that opportunity.

The Czech Labor and Social Affairs Ministry admits the system is being abused. “The housing subsidy can be provided directly to a landlord to cover rent or services related to housing even without the consent of the beneficiary. The disbursing authority sends the money directly to the landlord or service provider,” says Táňa Švrčková of the ministry’s press department.

The ministry is promising things will change at the start of next year. “The situation is being addressed by the social system reforms taking effect on 1 January 2012. Decisions to award aid in material distress benefits and their disbursal will be administered by one body only, the Labor Office. The procedures will be unified and residential hotel owners will not be able to directly influence the amount of the subsidy awarded,” says Švrčková, adding that in future a ceiling on the housing benefit will be legislated.