Between 2021 and 2024, nearly PLN 3.5 billion was spent from the Government Housing Development Fund (RFRM) outside the national budget framework. According to the Supreme Audit Office (NIK), the distribution of these funds lacked transparency, limited parliamentary and public oversight, and, in practice, contributed more to building company structures than to building housing. Instead of thousands of rental units, the program primarily resulted in the creation of new Social Housing Initiatives (SIMs), where positions were filled non-transparently, and real investment outcomes remain negligible.
The Fund Was Meant to Build Housing, Not Companies
The RFRM was launched in January 2021 to support housing investments carried out by SIMs and Social Housing Associations (TBS). It was financed with money from the COVID-19 Countermeasure Fund and the issuance of government securities. These funds were provided to municipalities as non-repayable support for acquiring shares in SIMs and TBS entities.
The initial goal was ambitious: by 2031, the Fund was expected to help create about 48,500 affordable rental apartments for people unable to take out a mortgage but capable of paying regular rent. However, according to NIK, by the end of July 2024, only 2,143 homes had been built—just 4.4% of the target.
The performance of the newly established SIMs was especially poor. With support totalling approximately PLN 2.31 billion, they delivered only 23 apartments (0.07% of the target). Most units—2,120 apartments, or 12.8% of the target—were built by existing TBS entities, which received roughly PLN 650 million in support.
A Quiet Ministerial Change and Undermining of Statutory Powers
NIK notes that the regulations governing the Fund were amended several times and failed to meet good legislative standards from the outset. One of the most heavily criticised changes came in August 2022, when responsibility for managing the Fund was shifted from the minister in charge of housing and construction to the minister for regional development.
The change was introduced during the second reading of an amendment to the Commercial Companies Code and—according to NIK—had no substantive justification nor any connection to the official division of ministerial responsibilities. Instead, it appeared to reflect the transfer of oversight of the National Property Stock (KZN) to the minister for regional development.
Although the law grants the managing minister exclusive authority to allocate support to municipalities, in practice, the entire process—from application evaluation to payout instructions—was delegated to the President of the KZN. NIK found that PLN 2.9 billion in support was awarded in violation of the law because the minister neither participated in nor supervised these decisions.
Discretion, Delays, and Failure to Enforce Claims
The audit showed that the KZN President reviewed municipal applications in violation of the law in 10% of cases, and applied highly discretionary practices in 41% of cases. These included reviewing applications out of order and issuing payout instructions to the state-owned BGK bank with unjustified delays of up to 209 days.
At the same time, the minister managing the Fund did not enforce claims against municipalities for failing to fulfil project obligations or violating support conditions—despite NIK estimating potential claims at up to PLN 203.4 million.
Money Spent on Salaries and Marketing, Not Construction
An analysis of 14 audited SIMs shows that only a small fraction of Fund money went toward real investments. By 31 March 2024, just PLN 58.3 million—6.5% of the PLN 891.3 million provided to these companies—had been spent on investment and construction activities.
Far more resources were directed toward operating the companies themselves. Over 51% of SIM expenditure consisted of employee salaries (PLN 26.1 million), half of which went to management board members and supervisory board members. Despite the low level of progress on construction projects, 10 out of 14 SIMs increased CEO salaries, and only two municipalities published justifications for these decisions.
The SIMs employed between two and fifteen staff members, yet still outsourced accounting, legal, technical, and marketing services. Marketing expenditures varied dramatically—from PLN 8,000 in SIM Łódzkie to as much as PLN 3 million in SIM Opolskie, including at least PLN 2 million spent on information campaigns and advertising.
NIK challenged expenses such as SIM-funded children’s sports activities, mountain excursions, beach volleyball tournaments, support for a local sports club, and even the purchase of 3,000 amusement park tickets—none of which were related to the legally defined mission of building housing.
In nearly half of the SIMs, NIK found PLN 8.1 million in wasteful or unlawful spending, including violations of public procurement rules, excessive management salaries, questionable consulting and marketing services, and passenger car purchases.
A Missed Opportunity and Profits from Interest
Of the 48,500 homes planned for 2024–2031, 31,983 (65.8%) were meant to be built through SIM investments and 16,602 (34.2%) through TBS projects. In practice, the opposite occurred—existing TBS entities built apartments, while the newly created SIMs mainly accumulated cash.
By the end of 2023, the audited SIMs had earned PLN 59.7 million in financial income from depositing Fund money in banks—more than the amount they spent on actual investments (PLN 58.3 million). NIK concludes that large sums were allocated before construction had actually begun, enabling SIMs to profit from interest without any guarantee that the money would be used for housing purposes.
In five SIMs, investment delays met the legal criteria for municipalities to request the cancellation of their shares in the SIM and the return of up to PLN 120.7 million to the Fund. None of the municipalities took such steps.
Excessive Powers for KZN and Opaque Appointments
The National Property Stock took part in establishing 47 new SIMs. In 19 cases, NIK deemed their creation premature and unnecessary because the State Treasury had not contributed any property to the companies.
In all SIMs involving KZN, the organisation secured personal rights to appoint between one and three supervisory board members, to select board chairs, and to nominate candidates for CEO positions. In 19 companies where the KZN’s capital contributions ranged from just PLN 100 to PLN 1,000 (totalling PLN 9,200—equal to 0.0002% to 0.004% of capital), NIK deemed these powers grossly disproportionate.
The KZN President nominated 58 CEO candidates and appointed 147 representatives to supervisory boards in 36 SIMs and two TBS entities. These selections were not based on any formal procedures or open recruitment—no job notices were published, and no selection criteria were developed. Candidates were submitted through informal channels—via KZN, municipalities, local networks, or ministries.
KZN spent PLN 3.7 million on remuneration for its representatives on supervisory boards, including nearly PLN 500,000 for companies in which its capital involvement was negligible. NIK found these expenditures unjustified and wasteful. Additionally, 18 experts, advisers, and SIM coordinators received a total of PLN 2.7 million—often without written job descriptions or documented work results beyond travel expenses.
Legal Gaps and a Funding Shortfall
NIK highlights fundamental flaws in the legal framework governing the Fund. The Act on Social Forms of Housing Development did not clearly define the Fund’s objectives or expected outcomes, nor did it require the managing minister to monitor results. The regulations also failed to ensure equal access to funds based on actual social housing needs.
Moreover, no institution—the Ministry of Funds and Regional Policy, the Ministry of Development and Technology, or BGK—calculated how much additional financing SIMs would require beyond Fund support. NIK estimates that the financing gap could reach nearly PLN 8 billion over the next five years, and existing tools—such as the Subsidy Fund and BGK’s preferential loans—are insufficient to close it.
NIK’s Conclusions: New Legislation and Real Oversight Needed
NIK concludes that RFRM funds were used primarily to create and maintain the structures of 47 new SIM companies, with strong and disproportionate influence from KZN over their governance, and without matching investment results.
NIK submitted recommendations to the Prime Minister, including:
• drafting coherent, comprehensive legislation on housing policy and financing social housing within the state budget;
• clarifying Fund rules to allow SIMs to continue investments without automatically losing support due to contractual errors or delays;
• equipping the managing minister with tools to obtain information on spending and requiring him to monitor and evaluate outcomes.
NIK also addressed recommendations to the Fund’s managing minister, calling for limiting KZN’s personal powers in SIM companies to match its financial stake, ensuring transparent governance procedures, and reviewing ongoing investments to assess their feasibility and justification for further funding.
NIK estimates the total financial impact of identified irregularities at more than PLN 2.1 billion, including PLN 1.27 billion spent in violation of the law and hundreds of millions more classified as depleted, improperly obtained, or at risk of loss.
