Can Croatia’s Plan to Build 20,200 Homes Slow Skyrocketing Prices?

Croatia real estate faces a test: big targets, tight timelines

Croatia real estate buyers and investors have a new policy to watch. The government has presented an affordable housing bill that aims to slow rising property prices and increase the stock of affordable homes. The measures are ambitious on paper, but implementation will determine whether they change market dynamics or remain a political fix.

The plan is framed as a multi-pronged attack on supply constraints, vacant units and rising construction costs. For anyone with money in coastal apartments or city rentals, this law raises immediate questions about future price trends, rental yields and legal restrictions attached to subsidised housing.

What the affordable housing bill actually proposes

When Finance and construction policy meet housing need, the details matter. The bill presented by Physical Planning, Construction and State Assets Minister Branko Bačić sets out concrete numerical targets and several legal mechanisms:

• State plans to build and renovate 20,200 apartments and family homes over the next four years.
• Of those, 8,000 new units will be delivered through the state-owned APN real estate agency.
• 9,000 apartments are to be activated by converting or reusing empty units.
• Public and private funding is expected to cover €2 billion by 2030 and an additional €3.5 billion by 2034.
• Beneficiaries of affordable housing will be restricted from selling the property for 35 years, except in exceptional circumstances; local authorities hold the right of first refusal, followed by APN.

The bill also includes related measures touching on building maintenance, property tax and spatial planning to try to support a broader shift in housing provision.

Why the government says the bill is needed

Bačić told parliament that several structural drivers have pushed Croatia’s housing market out of balance:

• EU membership has increased the pool of buyers in Croatia, making properties accessible to citizens across the European Union.
• The energy crisis after Russia’s 2022 aggression against Ukraine raised construction costs, putting upward pressure on prices.
• Households have channelled excess savings into real estate, adding investment demand.

The minister said these factors have contributed to a situation where around 40% of Croatia’s 2.3 million housing units are not used for residential purposes, either left empty or used for short-term rentals and offices. That is a striking statistic for a market with reported shortages.

Political reaction: divided and public

The bill has sparked predictable partisan debate. Opposition parties accuse the government of offering a superficial fix rather than structural reform, while the ruling coalition calls the law a long-overdue policy step.

Criticism from opposition figures includes:

• Bridge lawmaker Ante Kujundžić called the law a policy that will help people with capital rather than young households without parental support.
• Anka Mrak Taritaš of GLAS labelled the proposed measures a “big colourful lie,” pointing to the meagre output of previous state-subsidised schemes: under Prime Minister Andrej Plenković, the POS subsidised housing programme delivered 920 apartments over ten years.
• Mišo Krstičević of the Social Democratic Party pointed to a 2021 Economics Institute study estimating a shortfall of 237,000 apartments, arguing this gap is an order of magnitude greater than what the current proposals address.

On the other side, ruling party lawmakers maintain the bill is progress:

• Predrag Štromar (HNS) said the state is finally taking an active role and that the bill clarifies what affordable housing means.
• Mato Franković (HDZ) framed housing as a social and demographic issue essential for family formation and keeping young people in Croatia.

The debate matters because political consensus affects speed of implementation, budgets and municipal cooperation.

What this means for buyers, investors and expats

We need to be practical about the likely outcomes for different market participants.

For homebuyers and first-time buyers:

• More supply targeted at affordability could ease entry costs in specific segments, but eligibility rules and the 35-year resale restriction will limit mobility and resale value. Buyers must read contract clauses carefully and consider how a long-term resale ban affects household planning.
• If municipalities hold a right of first refusal, buyers should expect local authorities to influence resale markets and possibly prioritise social aims over investor returns.

For investors and landlords:

• Activation of empty units and measures to curb short-term rentals may reduce inventory for holiday lets in tourist hotspots, which could lower gross yields in cities like Dubrovnik, Split and coastal towns.
• The rules on affordable housing do not directly target existing private rental stock, but increased state supply and reduced vacancy used for short-term rentals could compress yields.
• Properties tied to APN or under resale restrictions will be unattractive to speculative investors because liquidity is constrained.

For expats and foreign buyers:

• EU membership already allows many buyers to purchase property, a factor the government cites as driving demand. Changes in supply and activation of unused units may moderate price growth over time, but they will not remove legal or tax issues tied to foreign ownership in every case.

Practical investor takeaways:

• Monitor APN auctions and tender schedules for off-market opportunities.
• Expect more competition for centrally located rental units if short-term rentals are repurposed.
• Look for value in peripheral towns and suburbs where new infrastructure investment could follow housing expansion.

The numbers look big but may not be big enough

The headline figure of 20,200 units sounds substantial, but context matters. Critics point out several limits:

• The 237,000-unit deficit identified in 2021 dwarfs the government’s four-year target.
• APN’s plan for 8,000 new units by 2030 implies roughly 2,000 units per year, while the POS scheme historically delivered around 350 units per year, a big step up.

These comparisons highlight a key risk: if the state cannot scale construction, the bill will be a modest supply-side nudge rather than a structural correction.

Implementation challenges and execution risk

Scaling to thousands of new and renovated homes requires more than legal text. Main obstacles include:

• Planning and permitting bottlenecks. Municipalities will need capacity to approve projects quickly if the delivery schedule is to be met.
• Infrastructure funding and timing. Building units without accompanying roads, utilities and schools will not solve affordability in practical terms.
• Rising construction costs. The energy-driven increase in input prices that ministers cite will push budgets higher and could delay projects.
• Coordination between state, APN, local authorities and financial institutions. Multiple funding streams mean complex governance and potential delays.
• Political pushback and legal challenges. Opposition scepticism and local resistance to specific projects could slow roll-out.

Given these constraints, our analysis suggests the plan is realistic only if the government pairs strong delivery mechanisms with clear timelines and accountability.

How activation of vacant units could change the rental market

Bringing 9,000 empty apartments into use is a short-term lever with measurable effects.