Today, 2 October, in Riga, the heads of 13 local governments signed letters of intent to participate in the affordable rental housing programme “Rental Housing for Latvian Professionals” promoted by the Ministry of Finance, thus committing to provide suitable land for the construction of the housing units. The consulting partner for the private-public partnership (PPP) programme, Vice President of the European Investment Bank Thomas Östros, with whom a cooperation agreement was signed earlier in September, also attended the event. In the first phase of the project, it is overall expected that up to 2266 (but not less than 1000) affordable rental apartments will be built in Latvia by 2030.
The programme “Rental Housing for Latvian Professionals” will provide modern, energy-efficient, and affordable apartments for young professionals and their families in sectors of national and regional importance in Latvia (i.e. teachers, firefighters, police officers, military officers, State and local government employees, etc.). The first phase of the programme provides for economic calculations for the implementation of the programme that will be carried out in the local governments that signed letters of intent today, i.e. Daugavpils (120), Rēzekne (60), Kuldīga (50), Liepāja (250), Jelgava (130), Jēkabpils (130–150), Valmiera (150), Ķekava (48), Olaine (50), Alūksne (48), Cēsis (100), Sigulda (110), and Rīga (1000), thus planning to build at least 1000 but not more than 2266 rental housing units. The exact number of apartments will be determined after the financial calculations in 2025. Local governments will have to allocate land and co-finance rental apartments after they are available, taking into account the paying capacity of the population and the market situation.
“The shortage of new energy-efficient apartments in Rīga, Pierīga, and regions has been a topical issue for several decades and I am therefore pleased with the high interest of local governments in participating in the affordable rental apartment programme. By combining public funding with private investment, we can address the housing affordability challenges more effectively and contribute to the economic stability of our society. Today we have taken an important step to ensure that by next summer the programme promoter, the State Real Estate, in cooperation with experts from the European Investment Bank and local governments, will have made the financial calculations for the projects, which will allow us to move towards the selection of a private partner,” the Minister for Finance Arvils Ašeradens points out.
According to the decision of the Cabinet of Ministers, SJSC “State Real Estate” has been entrusted with the implementation of the programme in Latvia. The European Investment Bank (EIB) consultancy support starts today and it covers the necessary financial and economic calculations and consultancy services to ensure the quality of the programme implementation and to accelerate the implementation of the affordable housing programme. This is the first consultancy contract of such scale that has been concluded with the EIB in Latvia and the contract will ensure that international institutional investors could also finance the construction of affordable rental apartments. The EIB consultancy support will bring together an international team from across Europe with expertise and experience in developing such projects. The EIB consultations under the programme are provided free of charge to Latvia and financed by the European Commission.
“It is our pleasure to collaborate with Latvia to introduce a new approach to the accelerated and expanded delivery of affordable housing. We see a clear underinvestment in the segment of affordable and social housing across Europe and also a huge need for renewal of the existing housing stock. The EIB is strongly committed to addressing this investment gap. This is one of our eight strategic priorities,” said the EIB Vice President Thomas Östros.
A number of programme implementation models will be assessed, institutional capacity at both national and regional level will be analysed, a project selection strategy will be developed, a pilot project will be prepared, and a public-private partnership agreement will be drafted in cooperation with the EIB.
“The State Real Estate team is honoured by the trust placed in its competence to manage a project of this scale in cooperation with the local governments of Latvia. We have seen a lot of interest from local governments, as evidenced by the letters of intent signed today. Public-private partnership is a good tool to successfully address the affordable housing problem and promote sustainable development of Latvian regions, therefore we are determined to use our expertise to represent national interests and ensure the implementation of the programme according to the highest quality standards and within the planned deadlines,” informs Andris Vārna, the Member of the Board of SRE.
The project is developed according to the “design-build-finance-maintain-operate by private partner” model and the public sector availability payment will be included in the State and local government budgets from 2030 alongside the availability of housing to residents. In addition, the programme provides that at the end of the project, local governments take ownership of the land and the constructed housing units.
A study conducted earlier this year covered interviews of 19 local governments and also an analysis of statistical data, resulting in an estimate of future demand for affordable rental apartments in each of the mentioned local governments. The study confirms that poor housing quality, overcrowded housing, low market activity are among the challenges of Latvian housing policy, and also there is an additional challenge of the lack of access to mortgages by part of the population.
At the end of last year, a steering group was set up by an order of the Minister for Finance to develop such PPP solutions. Its task was to develop a framework for possible PPP solutions for low-cost and affordable rental apartments, the proposed PPP structure, implementation conditions and timetable. The steering group developed the affordable rental apartment development programme after assessing the current situation, identifying 17 local governments, the problems in the market, the regulatory framework for affordable rental housing, and the experience of other Member States, making sure that the affordable rental apartment programme meets the respective criteria.
The steering group is composed of members representing the Ministry of Finance, the Central Finance and Contracting Agency, the Ministry of Environmental Protection and Regional Development, the Development Finance Institution ALTUM, the Alliance of Real Estate Developers, SJSC “State Real Estate”, SJSC “Latvian State Roads”, the Ministry of Economics, and also the freelance adviser to Prime Minister on regional development issues.
About SRE
Currently, 110 projects with a total investment of EUR 410 million are being implemented under the guidance of SJSC “State Real Estate”. SRE provides professional real estate management and maintenance for 427 building and structure properties, comprising 1089 buildings with a total area of 0.996 million m2, as well as land beneath structures with a total area of 591 ha, and 3261 land properties with a total area of 895 ha. SRE is one of 17 Latvian companies that in 2023 received the highest platinum award as part of the Sustainability Index of the Institute of Corporate Responsibility and Sustainability, confirming the good governance and sustainability of its operations. The company was founded in 1996, the State of Latvia holds 100% ownership and the Ministry of Finance is the holder of State capital shares.
