Successful financial instrument for renovation: a combination of loans, grants, and guarantees


Last October, the European Affordable Housing Consortium, SHAPE-EU study tour took the participants in the renovated district of Mustamäe, in Tallinn, Estonia. Our partner, EKYL introducing now some of the solutions developed in Estonia for renovation of apartment buildings that can be used for district-level renovation already today or in the nearest future. Anu Sarnet tells you more.

Since most of the housing stock in Estonia consists of privately-owned apartments, the focus of the housing policy is on the modernization of outdated and energy-intensive housing in multi-apartment buildings. The Estonian government approved the long-term building renovation strategy in 2020, the main goal of which is to cost-effectively renovate the existing building stock into nearly zero-energy buildings by 2050.

Two of the many challenges with reducing the energy consumption of the buildings are a lack of financing (renovating old buildings requires significant resources that are not attainable for many low-income households) and finding innovative ways to accelerate the renovation project design process. Therefore, the solutions developed by different stakeholders in Estonia to scale up renovations for energy efficiency in multi-apartment residential buildings and residential districts are often focused on financial mechanisms as well as future-looking digital solutions.

Successful financial instrument for renovation: a combination of loans, grants, and guarantees

The financial scheme in Estonia is to fund particularly ambitious, deep energy renovations by public financial institution KredEx, established in 2001 and owned by the government. The scheme design and financial legislation allows apartment associations, local authorities, and private persons to obtain common loans and receive grants. Legislation allows also a combination of grants (usually between 30-50% of the project cost depending on the region) and loans to achieve energy efficiency and indoor climate conditions comparable to modern apartment buildings, with high upfront costs that need high capital investment.

In addition, to support the renovation in more vulnerable districts and regions, apartment building renovation loans are provided for apartment associations, that have received a negative response to their renovation loan application from a bank or an offer with unreasonable terms; and loan guarantees for apartment associations who want to take a bank loan for financing work performed to raise the quality of life for their residents but whose risk is deemed by banks to be higher than normal.

The core principle of the financing program for the renovation of apartment buildings in Estonia has been that the loan and grant recipient is an apartment association (non-profit housing organization established for joint management of the building by the apartment owners) not an apartment owner individually or a management company. Applying for support is round-based, the next call planned to the spring 2023.

High variety of costs are eligible for support, including reconstruction and insulation of the facade, balconies, roof, basement, heating system, water supply system, electrical system, lifts, replacement of windows and doors, construction of a heat-recovery ventilation system, installation of equipment necessary for using local renewable energy, preparation of the building design documentation, carrying out the site investigation and building audit, use of the services of the technical consultant and owner supervision.

Digital twins will test the district renovation projects in virtual reality

Data and services related to the built environment and the life cycle of the building are often available in a fragmented manner, through various information systems and service providers. When planning and carrying out district renovation, too much time is spent on gathering information from different sources, checking its consistency, and using services in a related manner. Due to the fragmentation of input information, mistakes can be made especially in the planning and design stages, the later correction of which are many times more expensive.

Estonia is developing a solution for that, being the first country in the world where the entire building stock has its digital twin. It will soon allow building owners, architects, urban designers etc. gather data and visualize real-life situations so accurately that, in the future, it’s possible to test and work on construction and renovation projects in virtual reality, before putting them into practice in real life.  Estonian 3D e-construction platform of the digital twin enables the user to look at all Estonia’s buildings from every angle and visualise their surroundings spatially, using a 3D model. The existence of accurate geodata reduces the necessity of real-life measuring. This can be assessed on an individual building level as well as by district or city.

Right now, data can be found on the platform mostly about existing and planned buildings, but soon the data movement will also be implemented in the opposite direction, meaning that users can also enter their own digital models and apply for the necessary permits.



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