UNECE issues recommendations to help Montenegro address urgent housing and planning challenges amid rapid urbanization

Montenegro has seen rapid economic development since gaining independence in 2006 and is progressing with EU accession, aligning legislation and standards across sectors. At the same time, the country faces enduring structural challenges such as pronounced regional disparities, the prevalence of informal settlements and illegal buildings, capacity problems in public administration, and lack of housing affordability for its population of around 625,000 people. 

In this context, the United Nations Economic Commission for Europe (UNECE) has released its Country Profile on Urban Development, Housing and Land Management of Montenegro, providing an independent assessment of trends, progress, and challenges and practical recommendations to support policymaking.  

The preparation of the review coincided with intensive legislative changes in spatial planning, construction, legalization and housing policy, including the Law on Spatial Planning, the Law on Construction, the Law on the Legalization of Illegal Buildings, the Spatial Plan of Montenegro until 2040, and the Housing Policy Strategy of Montenegro until 2034. 

Launching the study alongside the government in Podgorica, UNECE Executive Secretary Tatiana Molcean stated “as Montenegro continues a period of significant transformation, the recommendations of the UNECE Country Profile can help the government to navigate legislative and policy challenges to ensure long-term spatial development that benefits all members of society – from access to affordable housing, to shaping high quality, well connected and prosperous living environments.”   

Minister of Spatial Planning, Urbanism and State Property, Slaven Radunović, stated “This publication is very important for Montenegro because it provides a clear overview of key challenges, but also guidelines for further reforms and harmonization of our policies with European standards and good international practices.” 

Legalization of informal settlements a key issue amid rapid and uneven urbanization  

Montenegro is one of the most rapidly urbanizing countries in Europe, with more than two thirds of residents now living in urban areas. Settlement patterns of Montenegro remain highly dispersed and with regional disparities: only a few towns exceed 20,000 residents, while Podgorica accounts for over a quarter of the national population but does not reach the scale of major agglomerations found elsewhere in the pan-European region. 

Illegally built structures are estimated to affect up to a third of housing stock. Since the start of the 2017 legalization process, 3,397 buildings have been legalized out of 62,000 submitted applications. A related challenge is uncontrolled construction in desirable areas, such as the coastal town of Budva (referred to as “Budvanization”), symbolizing the risks of speculative real estate-led development and weak enforcement of building controls. 

In response to these trends, the Country Profile highlights the need to accelerate the legalization reform and upgrade informal settlements, and calls for new secondary legislation and technical standards to embed principles of urban sustainability, climate resilience and liveability into planning and design processes.  

Furthermore, the Profile encourages Montenegro to prioritize railway modernization, public transport and green mobility to support polycentric development and connectivity, both within the country and with its neighbours.  

It also recommends the development of innovative public participation mechanisms in planning, ensuring gender balance, and with targeted outreach for Roma and other groups. 

Pressures and Priorities in the Housing Sector 

The housing sector of Montenegro is characterized by a predominance of homeownership, limited public rental and social housing, and growing affordability concerns. The house price to income ratio is estimated at 1:8.6, more than double the affordability benchmark set by UNHabitat. Social and affordable rental housing represents 0.6% of the housing stock (2,331 units across 24 municipalities). 

In view of these challenges, the Country Profile recommends strengthening the overall housing policy framework through the effective implementation of the new Housing Strategy, including measurable targets, improved data systems and integrated budgeting. It also calls for  enacting a dedicated law on social and affordable housing, to introduce clear definitions, eligibility criteria and differentiated forms of support to address diverse social needs. To broaden access to adequate housing, the Profile proposes expanding the rental housing sector, including social and affordable rental options, through regulatory reform and incentive schemes.  

Improving Land Administration and Legal Certainty 

Montenegro’s land administration system remains structurally fragmented and institutionally underdeveloped, despite progress in aligning legislation with European standards. Key challenges include incomplete cadastral coverage—93 cadastral municipalities remain unfinished—unresolved restitution claims amounting to over €240 million, and the absence of a transaction price register.  

In line with these findings, the Profile proposes enacting a dedicated law on the transformation of usage rights into ownership and resolving outstanding restitution cases through clear procedures and compensation mechanisms. To improve legal coherence, the report calls for the development of a unified framework covering both land and building legalization and for accelerating completion of the Real Estate Cadastre.  

Financing Local Development Across Municipalities 

Municipalities continue to rely heavily on central government transfers, which limits fiscal autonomy and affects long-term investment planning. While some improvements have been noted, including increased Equalization Fund support and declining municipal debt since 2022, disparities persist between coastal municipalities with higher income generation capacity and northern municipalities with lower economic activity. 

In response, the Country Profile recommends further strengthening the financial framework for urban development, housing and land management. It calls for reforming the Equalization Fund and enhancing local government fiscal and administrative capacities, particularly for project preparation and development. To improve the functioning of the housing market, the report highlights the importance of better monitoring, the introduction of taxation of vacant housing stock, and antispeculation measures to address price pressures.  

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Prepared at the request of the Government of Montenegro, the Profile benefited from contributions by the Slovak Inclusive Growth Account of the Council of Europe Development Bank, international consultants, national and local authorities, different stakeholders in Montenegro, and representatives of international organizations.