Affordable housing project to kick off this autumn in Latvia

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In September, funding of EUR 43 million will be available to implement a construction project for affordable housing in Latvia for the first time. It is expected that the interest of major real estate developers will be high, Latvian Radio reported July 18.

The project has been adopted to ensure affordable rental housing in the regions. Ministry of Economics State Secretary Edmunds Valantis said: “This is the first aid mechanism since the restoration of independence where we are building a new residential fund.” He pointed out that the opinion of the Organisation for Economic Cooperation and Development (OECD) shows that housing shortages in Latvia are a big problem because the existing housing is ageing, whereas new emerges slowly and mostly in Rīga.

“The fundamental problem is the purchasing power of households, which significantly lags behind Europe's average: at around 60% of Europe's average purchasing power. Consequently, paying for quality housing for a large proportion of households is a problem,” Valantis said.

The objective of the aid programme is to provide affordable housing, whereby rentals are initially set to not exceed EUR 5 per square metre (EUR/m2) and indexation of rentals is possible each year according to the average annual level of national inflation.

"Regional centres face a major challenge in creating new jobs due to the unavailability of housing. Merchants complain about it. With such a focus from September this year, let's call on investors to file applications. In total, we intend to build 700 units of housing in the regions of Latvia. The aim is for households with limited income. In view of the future and the availability of housing in the country, such a program should cover the whole country,” Valantis said.

The ministry predicts that demand from real estate developers to build rental housing will be sufficient.

“We've talked quite a lot. Of course, the industry has expected a higher return on profits, and they too seem to have a lot of different risks. But we are confident that demand in this program and the desire to build rental homes will be enough. We have created the most open-ended system for everyone who wants to realise these projects. We have not limited, for example, municipal capital companies or otherwise,” the Ministry's State Secretary said.

Real estate developer alliance spokeswoman Laura Bluša said the industry welcomed the new program, which will stimulate the construction of rental houses in the regions. Although no survey has yet been carried out on how many and which real estate developers will be prepared to build rental houses, Bluša said there would be demand.

“The construction of rental houses is only starting in Riga, where more than €50 million is invested. In the regions, the main problem for real estate developers is that there is less solvency, little liquidity, and there is no confidence in the demographic situation. Consequently, real estate developers have been interested in Riga and Pierīga so far,”  said Bluša.

The programme for the renovation of multi-apartment houses will also continue in Latvia with European support. Gatis Silovs, head of the Energy Finance Instruments Department of the Ministry of Economy, estimated that, despite the increase in construction costs, demand for the insulation of houses will not fade and more than €200 million could be invested in the energy efficiency of multi-apartment buildings.

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