By Volker Ziemann, OECD Economics Department
Like many other countries, Slovenia faces complex housing sector challenges that must be addressed to preserve the current high quality of life. High demand and a limited supply have led to low residential mobility, soaring prices, a high prevalence of commuting and increasing concerns about housing affordability. Slovenia’s investment in homebuilding lags behind both the EU and OECD averages (Figure 1). Insufficient investment is a major factor contributing to the housing shortage and rising prices.
Figure 1. Residential investment is subdued
Note: Data refers to the European Union including 27 countries. Unweighted averages for OECD and European Union aggregates.
Source: OECD Economic Outlook: Statistics and Projections database; Eurostat National Accounts database; OECD calculations.
The roots of Slovenia’s housing challenges can be traced back to the 1990s privatisations. While this led to high homeownership rates, it also had unintended consequences. The housing supply became restricted, mobility decreased, a private rental market remained in its infancy. As a result, many young families and first-time buyers find themselves today with limited housing options. Moreover, the ageing housing stock further defies ambitious climate goals. To address these challenges, the latest OECD Economic Survey of Slovenia proposes a comprehensive roadmap of reforms that would help to ensure that all Slovenians can access high-quality, affordable, and sustainable housing.
Inefficient spatial planning and cumbersome permitting processes have stifled residential construction. While there have been some recent improvements, the pace of investment remains insufficient to meet the growing demand. Streamlining spatial planning processes, notably through better coordination across levels of government (Figure 2), and establishing one-stop shops for building permits would help improve the governance of housing markets and unlock the potential for new housing.
Figure 2. Inefficient land-use governance restricts construction activity
Source: OECD Housing Governance Indicators Dashboard, https://www.oecd.org/housing/policy-toolkit/data-dashboard/housing-governance.
The private rental market is underdeveloped, and a more accommodating framework is needed to make it grow. A lack of standardised contracts, tax biases, and an imbalance in tenant-landlord rights have hindered its development. Slovenia can foster a thriving private rental sector that offers attractive long-term housing solutions by introducing clear regulations and ensuring fair treatment for both parties.
The proliferation of secondary homes and short-term rentals, fueled by favourable regulations and tax incentives, has further exacerbated the affordability crisis. These properties often sit vacant for much of the year, removing them from the long-term rental market and driving up prices. Harmonising the taxation of rental revenues and implementing a comprehensive recurrent tax on immovable property based on actual market values could incentivise owners to make these homes available for long-term rentals, increasing supply and easing pressure on the market. Taxing land more than the structure on it could further incentivise the construction of underdeveloped or idle land.
Figure 3. There is scope to expand the social housing stock
Source : OECD Affordable Housing Database (AHD).
Slovenia’s social housing sector is also underdeveloped compared to that of its European neighbours (Figure 3). The upcoming Housing Act presents an opportunity to rectify this situation. A revised social rent formula, coupled with incentives for potential providers, including limited-profit housing associations, could pave the way for increased investment in social housing, providing affordable options for low-income families and individuals.
Slovenia’s mortgage markets are small, limiting access to finance for aspiring homeowners. Promoting competition in the banking sector and empowering consumers with financial knowledge is crucial to expand housing finance and increase homeownership opportunities. Moreover, making more and better use of credit registers could reduce lending margins and fuel demand for mortgage financing.
Figure 4. Incentivising renovation is needed to accelerate the decarbonisation of homes
Note: Dotted line refers to projections.
Source: IEA Energy Efficiency Indicators, 2023.
Finally, the decarbonisation of Slovenia’s housing stock is a pressing concern (Figure 4). A significant portion of residential buildings are outdated and energy-inefficient. The recent energy crisis has underscored the urgency of transitioning to energy-efficient housing. While the investment required is substantial, a combination of fiscal support measures and enforceable regulations can help homeowners make the necessary upgrades.
Slovenia’s housing challenges are complex and multifaceted, but they are not insurmountable. By implementing comprehensive reforms that address inefficiencies and policy bottlenecks, Slovenia can create a more efficient, inclusive, and sustainable housing market.
Reference
OECD (2024), OECD Economic Surveys: Slovenia 2024, OECD Publishing, Paris, https://doi.org/10.1787/bc4a107b-en.