Rental subsidy program for IDPs under threat of closure – what went wrong
23 June 15:44
Minister of Social Policy Oksana Zholnovych has said that the program of rental subsidies for internally displaced persons (IDPs) may be closed, as its implementation has encountered a “shadow” rental market.
That is, unscrupulous landlords do not declare their income and do not pay taxes, although they should. And this is despite the fact that the program has only recently been launched. What are the main problems and what is the way out of this situation, "Komersant Ukrainian" found out.
Everything turned out differently than the government had planned. Subsidies for rent are provided to IDPs, or rather to landlords, but they, as it turned out, hide their income from the state. According to Minister Zholnovych, this is unacceptable.
“We have implemented the European model of housing subsidies, but its implementation, let’s say, has stumbled over the fact that today the vast majority of people who rent out their homes do so in the “shadow” economy, do not declare income, do not pay taxes,” she said at the forum “Human capital dimension at the URC 2025. Focusing on Return and Recovery” forum on June 17 in Kyiv.
The Minister of Social Policy said that if the program of rental subsidies for IDPs does not work as expected, the funds will be transferred to more effective programs. And this, as they say, hasn’t even been a year in the making.
At the end of October, the Cabinet of Ministers adopted Resolution No. 1225 “On the Implementation of a Pilot Project to Provide Subsidies to Pay for the Cost or Part of the Cost of Renting (Leasing) a Residential Premises and Compensation for Part of the Personal Income Tax and Military Duty.” The government has committed to helping IDPs with rent by compensating part of it, but only for two years.
Starting from January 29, 2025, IDPs who spend more than 20% of their income on rent will be able to apply for a subsidy. It will be available throughout Ukraine for six months with the possibility of extension for the same period. Previously, there was only a housing and utility subsidy, but now there is also a subsidy for renting a house. The former does not exclude the latter – they can be applied for simultaneously.
Who will receive a rental subsidy and how much
IDP families are eligible for the subsidy if they
- do not own housing with a total area of more than 13.65 square meters per family member,
- spend more than 20% of their total family income on rent,
- have destroyed or damaged housing to the point of being uninhabitable (there is an entry in the Register of Damaged and Destroyed Property or a relevant inspection report),
- do not receive payments for IDP accommodation,
- do not have child support arrears,
- are not participants of the Shelter program.
For families whose income does not exceed two subsistence minimums per person (UAH 5,840), the subsidy will cover a larger percentage of the rental cost.
The amount of the rental subsidy is determined individually and depends on the family’s income, the number of members, and the cost of rent in the region. The latter is calculated using the coefficients approved by the resolution.
The average cost of renting a one-room apartment (according to the State Statistics Service as of January 2024) is UAH 193.6 per square meter with an area of 35.22 square meters. The social norm is 13.65 square meters per person, but not less than 35.22 square meters per family. The maximum area is 130 square meters for an apartment and 230 square meters for a private house.
The government promises to compensate for the taxes that landlords have to pay on rental income. That is, homeowners will be compensated for personal income tax and military duty. Individual entrepreneurs will be compensated for the single tax and military duty. The tax amount is credited to the landlord’s account. The decision to grant a subsidy is made within 10 business days, after which the authorities must be notified of the IDP’s change of residence. A standard lease agreement is signed at the time of application, and the funds are paid immediately. Tenants are required to pay rent on a monthly basis. The agreement does not provide for a security deposit to cover losses, although the tenant must compensate for damage to the property.
Landlords don’t want to be “visible”
Tax liabilities have become a stumbling block. When the Minister of Social Policy speaks of “shadow” schemes, she means that most landlords do not want to submit their data to the tax authorities and prefer to rent out housing without government involvement, explains Vladyslav Kulishenko, Deputy Chairman of the Board of the National Apartment Association.
“No one wants to deal with the state, because today it pays, and tomorrow it doesn’t. Just like when buying an apartment, people choose cash, without banks. Although the program provides for compensation of part of the rental cost depending on the area, as well as a tax refund of 23% (18% personal income tax and 5% military duty) per month, the demand for rent is high, and no one wants to wait 10 days for a decision,” Kulishenko said.
“The idea is good, but the implementation – as always – fails. It’s easier to accuse landlords of tax evasion, although reducing the tax burden could change the situation. Today, only those who work on a single tax can “shine”. But 23% of the tax per month is too much. After all, today the tenant is an IDP, and tomorrow he will not be, but the landlord’s data remains with the tax office, and he has to pay continuously, explains the private realtor.
Moreover, if the landlord is found out by the tax authorities, the cost of rent will increase by this 23%, as it will be included in the cost of housing. Even now, when renting to companies and official documents are required, these taxes are taken into account. After all, today they started checking card transfers, the realtor emphasizes. “If taxes were lower, IDPs would be the first to benefit, because the choice of housing under the ‘white’ scheme would be much greater.
The most interesting thing: The Ministry of Social Policy still does not name the number of IDPs receiving this subsidy.
Author: Alla Dunina
