Why is building an extra floor made legal again?

Many observers believe that the legislation that came into effect this year is only designed to increase state revenues and to serve a few landlords.

Why is building an extra floor made legal again?

The president of the union of real estate agents in Lebanon, Walid Moussa, is against the application of the new floor-construction law in Beirut. (Photo P.H.B.)

During the Dec. 7 parliamentary session designed to pass a series of social measures amid the crisis, a law authorizing the construction of an extra floor on top of existing and future buildings was unexpectedly approved.

The text of the law, which was published in the official gazette on Jan. 5, had been under discussion since 2019 (Budget Law No.144 of 2019).

The goal behind the text calls to mind the law to build 20,000 housing units, which was promised in 1980 by then Telecommunications, Cooperatives and Housing Minister Michel Murr, aka Murr’s Law or Murr’s floor (simply because it encourages adding an extra floor to buildings), or even the draft law proposed by then Prime Minister Najib Mikati in 2013, which was not adopted (see boxed text).

Since 2019, the law has raised the uproar of Public Works, an NGO focused on urban planning, and the Order of Engineers and Architects of Beirut, which enumerated its flaws and has called for its annulment.

This outcry raises questions on the probable impact of the new law in a near-bankrupt country, where buildings erected illegally during the 1975-1990 Civil War and the lack of urban coherence have defaced both urban and rural settings.

An attic rather than a floor

The latest version of the new law, whose implementing decrees are to be drafted and published by Public Works and Transport Minister Ali Hamiyeh, authorizes any real estate landlord — without specifying whether or not this measure is limited to residential buildings — to build an extra storey on top of already existing or planned ones.

The terms vary depending on if the building is already erected and on the number of floors.

For existing buildings, the owner must obtain from all tenants a notarized authorization. The text does not specify what procedures need to be followed for future buildings.

Buildings located in villas, areas designated for private housing, or in areas that have their own building regulations, and buildings to which an extra floor was already added are not included in this law.

When it comes to this extra floor, the letter of the law refers to the term “attics,” in other words a top story that serves to support the roof.

Walid Moussa, president of the Real Estate Syndicate of Lebanon (REAL), explained that the extra floor consists of an attic for buildings located outside Beirut, and a floor for those inside the capital.

For attics, the height from the ground to the roof ridge — which is the horizontal junction between different roof slopes, with an angle of inclination not exceeding 25 degrees — may not exceed 4.5 meters. The distance from the floor to the ceiling at the side of the building must not exceed 1.8 meters in elevation.

The roof shall be covered with tiles, or any other roofing material, in accordance with the municipal building codes. At least 15 percent of the roof area shall be allocated for the installation of rooftop solar panels, which an increasing number of residents are resorting to as an alternative source of energy in a bid to compensate for EDL’s electricity cuts that have only worsened with the crisis.

Revenues for the Treasury

The law also requires that the builder classifies as a common area a minimum surface area of the attic space. In case the regulations in force in the area where the structure is built do not set a maximum elevation or number of floors (which is the case of many buildings constructed during the war), the common area shall be at least 40 square meters.

This surface area drops to 35 square meters for buildings that have yet to be built, and whose height and floors number are usually set in the regulations or by the authorities.

The common area in the attic shall also include a water treatment plant and rainwater harvesting tanks with a minimum capacity of 5 cubic meters per household.

Moussa underscored the value of the provisions regulating the attic, and explained that they will contribute in time to ending, at least outside Beirut, building’ terraces hoarding tanks, antennas and other residential equipment that pollute the landscape.

Beyond the technical specifics, the law set a compulsory charge that could affect the newly built floors.

The owners of the building — not those of the different apartments comprising it if they are not the same person — will have to pay an amount equivalent to 30 percent of the value of the floor in lira, during the first year after handing it over.

This charge would increase to 40 percent and then 50 percent in the two years that follow.

The tax revenue would be distributed between the Public Treasury (35 percent), the municipality of the district where the building is built (35 percent), and the Banque de L’Habitat — Lebanon’s housing bank that grants housing loans and whose capital is partly held by the state.

According to an old version of the law, dated 2019, it was the housing bank that assumed the largest share of the proceeds from the tax(80 percent), while the Treasury and the municipality each obtained 10 percent of the amount.

This amendment suggests that the law aims to increase the state’s revenues at a time the government is looking for ways to finance its expenses, no longer able to borrow on world markets after it defaulted on its debts in March 2020.

The only estimate concerning the repercussions of such an amendment on the Treasury was carried out by the Order of Engineers and Architects of Beirut and Tripoli (North Lebanon).

According to their conclusions published in 2019 — based on the old version of the law and an average of prices and interest rates over seven years prior to the crisis — this law could potentially bring in “$150 to $300 million per year” to the Treasury.

This estimate, however, is far greater today, given the depreciation of the national currency and the situation of the real estate market, where prices fell after a temporary increase between the end of 2019 and during 2020.

This increase can be explained by the fact that many depositors turned to the real estate market to use their funds — called Lebanese dollars, or “lollars” — that were blocked by banking restrictions put in place at the beginning of this period.

The security risk

For Public Works and the Order of Engineers and Architects in Beirut, this law has nothing but flaws.

In a press release on Dec. 7 [2021], the order highlighted the “security” risks that the construction of an additional floor could create, particularly in the event of an earthquake or a major explosion similar to the Beirut port blast that rippled through the city on Aug. 4, 2020 with a force equivalent to a magnitude 3.3 earthquake.

They also reproached the legislator for having approved a law without studying its potential repercussions on the water, electricity and sewage distribution networks’ capacity, or even on traffic and parking spaces.

Finally, the Order of Engineers lambasted the fact that the MPs are willing to promote the already existing construction and urban planning anarchy to generate extra revenues, instead of addressing the reasons behind the crisis into which the country has been plunged for more than two years.

Public Works had lamented in September that the law drafters did not rely on any updated study whether on its fiscal implications, or any other dimension related to its implementation.

The NGO also underscored that the law would encourage violations. Under Lebanese law, the attic shall not be usually used as fully-fledged living space; it is sold as part of a unit including a property that may be considered as such.

Finally, the NGO perceived the law as unnecessary, since there were already 150,000 empty apartments in the country in 2019, according to figures by the Order of Engineers.

Speaking to L'Orient-Le Jour, Abir Saksouk, a co-founder of Public Works, said, “In the officials’ eyes, real estate and constructions serve as drivers for the economy, while in reality, they consist of attributes of a rentier economy” which Lebanon predominantly turned to after the end of the Civil War in 1990, to the detriment of the productive sectors.

She added that the drop in real estate prices makes this way of understanding things meaningless.

This drop would hit nearly 50 percent according to Ramco, for whom this trend is due to the fact that most owners are now requiring that the buyer pays in fresh dollars,in cash or via money transfer from abroad.

Saksouk lamented that it is very likely that the law will ultimately serve a few privileged people paid in fresh dollars and who will have the means to finance the work of building additional floors, in addition to contractors and real estate developers.

She recalled that building materials are expensive, since they are billed in dollars.

This reality is also likely to result in limiting the anticipated contribution of the law in terms of revenues to the treasury, which would shorten the list of pro-law arguments.

For his part, Moussa is against the enforcement of this law in Beirut, because this extra floor will put further pressure on road traffic, sewer and electricity networks.

However, he indicated that this law will have a positive impact if applied outside the capital and will prove useful in “4 or 5 years,” as it guided the design of new real estate projects which will necessarily kick start as soon as the worst part of the crisis has passed, particularly by regulating the roofs and pushing builders to install solar panels and rainwater harvesting tanks.

While he underlined the fact that the law would legalize numerous violations in mountain communities, he admitted that it is hard to apply the law to already existing buildings, especially in Beirut, where urban infrastructures can hardly accommodate the additional load that the law will bring.

Another source of knowledge of the matter fears the risk of a conflict of interest among the engineers who do not support this law, but who will be forced to accept such projects given the economic crisis.

Flashback: Murr floor and Mikati proposal

The new law authorizing landlords to build an extra floor has been called by its many detractors the “new Murr law,” aka the Murr floor, which is named after Michel Murr, who served as Telecommunications, Cooperatives and Housing Minister in 1980 and died in February 2021.

The Murr law was passed on May 17, 1980, and was renewed on several occasions for nearly 20 years. The text was welcomed by then-President Elias Sarkis, industrialists, traders and a large part of the employee’s unions.

This law aimed “to finance and build 20,000 housing units in all parts of Lebanon,” in three years, Murr said in March 1980. He indicated that 7,000 units were to be built in the first year.

According to then press reports, 14,000 units were intended for low-income people, i.e. whose income does not exceed LL18,000 i.e. $4,931.5 per year — Lebanon’s exchange rate was LL3.65 to the dollar in late December 1980, according to Banque du Liban data­.

In parallel, 4,000 other units would be allocated to middle-income citizens, whose income ranges between LL18,000 and LL36,000 (between $4,900 and $9,800).

Lebanon’s housing bank, Banque de l'Habitat, was to finance these units by increasing the floor area ratio (which is the percentage of the land that can be exploited, including in height), so that the land owners pay the housing bank 30 percent of the capital gain resulting from this increase.

This measure calls to mind the law that was passed in late 2021, while Murr had explained in October 1979, during the war, that he did not want to cause the state LL2 billion in debt, “because it would increase the treasury’s debts and lead to more taxes.”

Back then, this sum was worth more than $604.23 million, based on the average exchange rate of LL3.31 against the dollar that month, according to BDL.

The Lebanese public debt amounted to $913.9 million in 1979, or 26.6% of the GDP. This law was enforced for nearly 20 years, because it was an important source of revenues for Banque de l'Habitat, and subsequently for the state.

For instance, its temporary expiry on Aug. 1, 1997 had resulted in Banque de l'Habitat losing around LL100 billion (i.e. more than $66.33 million).

In 2013, then-Prime Minister Najib Mikati – who was in the same post when the 2021 law was passed – tried to have a new law that was similar to Murr's law, adopted.

It was called the green building law or sustainable building law, aka the Mikati floor.

However, academics, researchers, urban planning professionals, activists and civil society members opposed the draft, arguing that it would raise population density and real estate prices, and called for its suspension.

This law was designed to finance the new salary scale, according to the Council of Ministers’ agenda, at the time.

This article was originally published in French in L’Orient-Le Jour. Translation by Joelle El Khoury.

During the Dec. 7 parliamentary session designed to pass a series of social measures amid the crisis, a law authorizing the construction of an extra floor on top of existing and future buildings was unexpectedly approved. The text of the law, which was published in the official gazette on Jan. 5, had been under discussion since 2019 (Budget Law No.144 of 2019).The goal behind the text calls to...