Darko Horvat, Minister of Physical Planning, Construction and State Property: Reconstruction After the Earthquake Will be a Generational Edeavour

Reconstruction after the earthquake is a lengthy process

The reconstruction is further emphasized by the Long-Term Strategy for National Building Stock Renovation until 2050, which will at some point become an obligation prescribed by the European Commission, thus completing the entire story in this process.

What we often emphasize when talking about reconstruction after the earthquake is that this will be a generational endeavour and one of potentially most fruitful periods of the construction industry, Darko Horvat, Minister of Physical Planning, Construction and State Property, states for Diplomacy&Commerce. We talked with the Minister also about the “National Development Strategy 2030”, subsidizing of housing loans, and about the development of communal economy in local self-government units.

1. After the mandate of the Minister of Economy, Entrepreneurship and Crafts, mid-year you took over a new, equally challenging department, which includes physical planning, construction and state property. But the biggest emphasis in the coming years will certainly be on reconstruction after the earthquake. In what stage are currently the preparations for organized reconstruction, when do you expect the works to start and where do you think there could be most problems?

When it comes to reconstruction of the City of Zagreb, Krapina-Zagorje County and Zagreb County, which were hit by the earthquake on that fatal morning of March 22, we need to point out that reconstruction of the buildings affected by the earthquake started immediately after the earthquake because already in April 2020, the Government of the Republic of Croatia has provided more than 100 million kuna in the state budget for emergency rehabilitation works. The public call for financial assistance for temporary and necessary protection and repair of buildings damaged by the earthquake was published on June 10, 2020, and 1,939 applications have been received so far for the return of spent funds, requesting a refund in the amount of HRK 111.1 million, which is an indicator of what has already been done and implemented. These requirements related to urgent repairs of gable walls, roofs, chimneys, staircases and elevators. In addition, HRK 41 million was provided from the Fund for Environmental Protection and Energy Efficiency for the purchase of condensing boilers. Due to all the above, we can say that many places where emergency interventions are underway or have already been completed are already visible in the field.

After that, we entered the process of creating a legislative framework that is a prerequisite for organized reconstruction. So far, we have successfully implemented this by adopting the Law on Reconstruction and accompanying bylaws in the form of First Program of Measures and the Ordinance, which determine the specific necessary steps to start the reconstruction, as well as all the supporting documentation that needs to be collected in order to determine the rights and needs for repair of individual damages. What we are working on at the moment is the operationalization of the Reconstruction Fund, which will be an extension of the Ministry and it will implement the decisions on reconstruction made by the Ministry.

When you create a completely new system on the basis of which the reconstruction will take place, of course challenges arise at every step, however, from my perspective, we are here with reason and responsibility to respond to these challenges in a transparent way, which I believe we did successfully so far, and we will continue on this path in the coming period.

2. How much do you estimate that the entire reconstruction could last and how will it affect the development of the construction industry, as well as other supporting sectors in the country, and how much will it ultimately cost?

From the very beginning, we emphasized that reconstruction will be a lengthy process. We pointed this out to the citizens in advance so that they themselves would be ready for such longevity and so that they could start repairing what is urgent. Long-term works, which need to be done as part of the renovation of buildings, should be considered in a way that will seismically strengthen the structure of buildings, but at the same time will provide energy renovation where possible, so that ultimately buildings could have lower costs, which would consequently also mean lower costs for our citizens.

The renovation is further emphasized by the Long-Term Strategy for National Building Stock Renovation until 2050, which will at some point become an obligation prescribed by the European Commission, thus completing the whole story in this process.

What we often emphasize when talking about the topic of earthquake reconstruction is that this will be a generational endeavor and one of potentially most fruitful periods of the construction industry. In the coming period, there will be a lot of work for everyone – for builders, architects, electricians, machinists and representatives of other professions, as well as for all supporting industries that will certainly have to show effort and contribute to the fastest possible reconstruction. Why do I emphasize the term “organized renewal”? Because that is exactly our goal. That the renovation does not take place on the principle of one building in one block, but that in one operation we start with renovation of the entire block in order to reduce traffic jams and maximally simplify the daily life of our citizens during the entire renovation process.

The estimated cost of renovating the damaged buildings is around HRK 42 billion, of which we have already managed to secure around HRK 12 billion from several different sources. Among other, these initial funds come from the EU Solidarity Fund, and there is also the World Bank loan of $200 million. In November, members of the European Parliament approved assistance to Croatia from the European Solidarity Fund for repairing the consequences of the earthquake in the amount of EUR 683.7 million. These are funds that continue on the record advance from the European Solidarity Fund, through which we were already paid EUR 88.9 million in August.

3) Although earthquake reconstruction will certainly be a major issue throughout the term, the Ministry also deals with a number of other topics of great importance to citizens. What would you single out as your priorities?

The Ministry’s Draft Plan for Legislative Activities for 2021 is currently in public consultation, according to which amendments to the Law on State Property Management and the Law on Management and Maintenance of Buildings are envisaged to be adopted in the first quarter of next year, while amendments to the Law on renting apartments, the Construction Law and the Physical Planning Act are planned for the second and third quarter.

Our priority is certainly the further development of Physical Planning Information System (ISPU) – a state-owned interoperable and multi-platform system for entry, verification, public announcement and exchange of spatial data. It was established with the aim of collecting spatial plans of all levels in one place, as well as data on spatial interventions, and to make these data available to citizens and professionals in order for them to be familiar with the situation with space and to speed up the process of issuing building permits. In this way, the investment procedure has been greatly facilitated for investors in terms of bureaucracy.

Amendments to the Act on Housing Loan Subsidies are also important, they allowed for this demographic measure to continue to be implemented until the end of 2023, and when it comes to state property management, there are two things we will be emphasizing in the next mandate. On one hand, as someone coming from the economy sector, it is my wish to make all inactive assets available to entrepreneurs and give them the opportunity to take them over, renew them, use them, and in the long run buy them on favorable terms. Second, we will consider the option of selling all state-owned shares in companies where the state has no influence when it comes to making business decisions.

4) Most of the things you mentioned are also the contribution of your Ministry to development of the “National Development Strategy 2030”, as the umbrella strategic document for the decade ahead, which has been sent to public discussion. It is obvious that quite ambitious goals have been set, so what specific proposals and measures from your department would you single out for their realization?

These are certainly the development of green infrastructure and circular management of space and buildings. A sustainable growth strategy for a climate-neutral and green Europe that seeks to transform the EU into a prosperous society with a modern, resource-efficient and competitive economy, free of net greenhouse gas emissions by 2050, where economic growth won’t be linked to resource consumption, is the cornerstone of the European Green Deal.

In order to contribute to the achievement of these goals, the Ministry, in cooperation with the Faculty of Architecture, University of Zagreb, is preparing a Program for the development of circular management of space and buildings for the period from 2021 to 2030. Priorities of the Program include the revitalization of unused spaces and buildings and guidelines for planning new buildings according to the circular economy model, and measures are aimed at increasing the durability and lifespan of buildings in space, increasing energy efficiency and reducing construction waste for sustainable development.

Likewise, green infrastructure, which seeks to improve the quality of life in urban areas through integrated, coordinated and sustainable solutions to urban issues, is recognized as an extremely important aspect of urban development.

Therefore, in the forthcoming period, the Ministry plans to develop circular space management and establish green infrastructure buildings in urban areas of Croatia, preserve existing resources, contribute to sustainable development and strengthen resilience to climate change and reduce waste generation and improve space efficiency.

5) You also mentioned the subsidies for housing loans, and this measure was recognized as successful and quality measure by the citizens, especially among young families. Recent amendments to the law extended the deadline for announcing public calls has also been extended, so when is it realistic to expect a new call?

After the interested and professional public had the opportunity to give their opinion, proposals and remarks at the Public Discussion, on December 9th, the Government adopted the draft law on Amendments to the Housing Loan Subsidy Act. Amendments to the old Act were necessary, especially because it did not provide for implementation of this strong demographic renewal measure after 2020. This deadline has now been changed, so the Croatia Real Estate Agency (APN) will be able to issue new public calls for subsidies by the end of 2023. The 2021 State Budget of the Republic of Croatia has set aside HRK 263.5 million for this purpose, of which 50 million is allocated for new subsidies to be approved in 2021. For 2022 and 2023, an additional HRK 50 million per year has been provided.

The subsidizing of housing loans is a housing program within which the state, i.e. the relevant Ministry and APN help to repay part of the housing loan when buying an apartment or house, or when repaying a loan to build a house for a period of five years. The success of the implementation of this measure is best illustrated by the fact that in the past four years over 17,000 subsidized loans have been approved, and more than 2,000 children have been born in families that use subsidies. All this is a good indicator to the Ministry and the Government that we are going in the right direction, and that we should continue with the subsidies in the coming years.

These amendments also made it clearer that loan subsidies shall not be granted to applicants who have exercised this right earlier, and defined in detail the status of minor children for whom additional subsidies are granted as for household members, and the deadline within which loan beneficiaries and household members are required to have registered residence has been set as well.

6) Recently, in the very north of Croatia, more precisely in Mursko Središće, you handed over contracts for communal development projects to local self-government units and announced the co-financing of such projects for 2021. What is the main purpose of this project and what are the conditions for obtaining the support of the Ministry?

Communal development projects are co-financed based on the Public Call for co-financing projects of cities and municipalities to encourage the development of communal economy and the harmonization of communal standards. This call, which defines the conditions for application, was announced by the Ministry at the beginning of this year with the aim of providing financial support for projects of local self-government units that encourage or contribute to better performance of communal activities and delivery of utility services, as well as for activities in projects that will contribute to raising the level of public services and higher quality of life of residents in the area of ​​a particular unit of local self-government.

397 local self-government units submitted their project proposals, with a total value of more than HRK 371 million. The Ministry was asked to co-finance their implementation with the sum of HRK 120.2 million, and in 2020 a total of 191 projects is being co-financed, for which we have provided more than HRK 26 million in the State Budget. Given that these projects provide strong support to local governments, we plan to continue the implementation of this activity in 2021.

7) An unavoidable topic this year is certainly the COVID-19 pandemic and the great need to help the economy and maintain business activity. What measures has your Ministry adopted to help entrepreneurs, and thus their workers as well?

At the suggestion of our department, on 3rd of December the Government of the Republic of Croatia passed a Decision on releasing the obligation to pay rent and write-off of receivables for the use of business premises owned by the Republic of Croatia for tenants and users of business premises who could not work in accordance with the decisions of the Civil Protection Headquarters of the Republic of Croatia. This decision also provides an exemption from the obligation to pay rent for users of state-owned business premises who have had a drop in income and which are managed by this Ministry and the company Državne nekretnine d.o.o., provided that they have retained workers. The decision refers to the period from 1 December 2020 until the Decisions of the Civil Protection Headquarters of the Republic of Croatia are in force.

Throughout this period, we have the priority of reducing the daily incidence of coronavirus infection. This is necessary to protect the safety and health of our citizens. But that is precisely why it is important that we, as the Government, make decisions like this, which will ultimately contribute to a faster economic recovery and job retention.