In February 2025, the Ukrainian Association of Developers appealed to the President to help resolve urgent issues that slow down housing construction, reduce the investment attractiveness of the industry, and as a result, exacerbate the housing crisis.

One of the key problems in providing citizens with housing is its cost. The Association has proposed several measures that will help reduce prices, including revising the mechanism of equity participation in the development of engineering, transport and social infrastructure.

Equity participation or how developers transferred some apartments to the city

This practice emerged in the early 2000s as a result of two factors: high housing prices and correspondingly higher revenues for construction companies. The Kyiv authorities decided that developers should "share" and introduced a quasi-tax: depending on the construction site, the city had to own a certain part of the apartments, ranging from 7% to 20%.

In 2008, with the onset of the global economic crisis, the real estate market plummeted. Housing prices and developers' revenues fell with it. The authorities banned local authorities from requisitioning apartments, as this significantly affected the cost of housing for the end buyer - in fact, it was the buyer who paid for the property transferred to the city.

However, even after 2008, cities were still able to receive equity contributions from developers for the development of engineering, transport and social infrastructure. The amount of contributions was a certain percentage of the construction cost. At the same time, if the developer built external engineering networks or social facilities (e.g., schools and kindergartens) at his own expense and transferred them to municipal ownership, he could reduce the share contribution by this amount.

How the situation has changed in 2025

In 2019, the government recognized that equity participation had become a source of corruption. A law was passed to abolish it. According to this law, a special procedure for paying contributions was in place in 2020, but it was forbidden to transfer engineering networks and social infrastructure as part of the share contributions.

Starting from 2021, share contributions were completely canceled, except for cases where share participation agreements were concluded before 2020.

After the abolition of equity participation, local authorities began to massively demand that developers pay equity contributions through the courts not based on the existence of a contract, but on the date of issuance of a construction permit. In particular, if the permit was obtained before 2021, the developer could be obliged to pay the contribution even if the construction was not yet completed.

Law No. 132-IX did not provide a clear mechanism for regulating cases where a construction permit was obtained before 2021 and the project implementation stretched over several years. This created legal uncertainty.

The most affected were neighborhood development projects and large facilities that are being built in stages over a long period of time - 5-10 years. In such cases, a building permit was issued for the entire project, but individual phases began construction much later.

Consequences

A situation has emerged in which system developers implementing large-scale projects build main utility networks (electricity, water, heat, and sewage) at their own expense, modernize existing communications, build thermal and transformer substations, and develop transport and social infrastructure. At the same time, the city additionally demands payment of share contributions that were supposed to be used for infrastructure development.

When developers have to pay for infrastructure twice, these costs are included in the cost per square meter, and housing becomes more expensive. Ultimately, this falls on the shoulders of the final apartment buyer.

In addition, investments in social facilities are being reduced - fewer kindergartens, public spaces, and parking lots are being built.

Rising financial risks are also forcing developers to postpone or even curtail new projects. This reduces supply on the market and further raises housing prices.

Who should build engineering, transportation and social infrastructure

New residential complexes put an additional burden on the city's communications. However, the fact is that developers are now creating the entire infrastructure from scratch. Unlike in the 2000s, when there was relatively little new construction in the city and the existing networks had a backup resource that could provide new facilities. Now, these networks are either being completely rebuilt or largely modernized at the expense of developers.

To understand the scale: the cost of such networks in just one of the large residential complexes built by a member of the Association exceeds the annual budget for network modernization allocated for the entire city. We are talking about billions of hryvnias. Subsequently, these networks are transferred to the balance sheet of specialized municipal organizations, which not only receive them as their assets without spending a single penny, but also earn money by charging consumers for the maintenance of completely new networks.

At the same time, the developer is being sued for tens of millions of hryvnias.

Who has to pay

Large developers engaged in neighborhood development bear a double burden: they build engineering, transport and social infrastructure (schools, kindergartens, roads, networks) at their own expense and at the same time face the requirements of local authorities to pay share contributions. This increases the cost per square meter, and thus reduces the availability of housing that people would like to live in.

At the same time, single-site developers who build individual houses do not incur such costs, as equity participation has been canceled for them. They use the city's existing infrastructure without investing in its development.

How the authorities react to this

The Verkhovna Rada has already made attempts to amend the legislation, but they failed due to criticism from local authorities. Their argument is that such changes would reduce local budget revenues, which in turn would lead to fewer new schools, kindergartens, and roads.

But this is manipulation. These funds are not used directly for the construction of social or engineering infrastructure - they simply go into the general pot of the city budget and are then spent without reference to specific projects. If share contributions were really used for the construction of socially important facilities, new schools, kindergartens, and roads built at the expense of local authorities would appear in every district with new residential complexes.

Answer the question for yourself: how many new municipal schools, hospitals, and kindergartens have you seen built during the period of share participation from 2000 to 2019? Where did this money go is a rhetorical question.

What solution does the Association offer?

It is necessary to amend the legislation and eliminate the legal conflict. If we remove the double burden from developers, the cost of construction will decrease. This will help increase the number of construction projects, increase supply in the housing market, and help stabilize prices.

It is important to find a fair balance between the social obligations of business and the creation of favorable conditions for its development to meet the needs of the population for affordable housing.

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