Government approves new support programme for repairs to apartment buildings and improvement of surrounding areas

At its meeting on 6 July this year, the Cabinet of Ministers approved a new support programme developed by the Ministry of Economics for repair works on apartment buildings and the improvement of surrounding areas. Under the programme, residents will have access to state loans for construction works and area improvement works at apartment buildings, including buildings located in less developed regions, small towns or villages, as well as those that, for other reasons, do not meet commercial banks’ lending policies. The total funding of the support programme for issuing loans and covering losses is EUR 31 million. Residents are expected to be able to start submitting applications for support within the next two months.

“A significant proportion of the areas surrounding apartment buildings in Latvia have not been renovated since they were originally built; as a result, they have deteriorated and no longer meet the needs of apartment-building residents. For example, the number of parking spaces is not adequate for the current number of cars, children’s playgrounds are worn out and fail to meet safety requirements, many pedestrian paths are unusable, the asphalt surfaces in courtyards have deteriorated, modern waste-container areas have not been established, and the areas do not meet accessibility requirements, for example for residents with reduced mobility. Therefore, alongside the renovation of apartment buildings or the necessary repair works, it is also necessary to promote the faster improvement of courtyards,” said Minister of Economics Jānis Vitenbergs.

The loan will be granted for the implementation of the following measures in an apartment building:

• construction works on the enclosing structures of an apartment building, such as exterior walls and windows, and in common areas, including the modernisation or replacement of lifts;
• the renovation, reconstruction or installation of all types of engineering systems in an apartment building;
• improvement of the surrounding area;
• financing of ineligible costs under the programme for increasing the energy efficiency of apartment buildings;
• as well as project management, author’s supervision and construction supervision.

The maximum loan amount for one apartment building is EUR 400 000, while not exceeding EUR 120 per square metre of the apartment building’s total area. Apartment owners may receive several loans, provided that the outstanding principal of the new loan and the existing loans granted under these provisions does not exceed the specified total loan amount and the limit per square metre of the apartment building’s total area.

The maximum loan amount for one property owner is EUR 3 million. A property owner may receive several loans, provided that the outstanding principal of the new loan and the existing loans granted under these provisions does not exceed the specified maximum loan amount.

Applications for loans will have to be submitted by apartment owners through an authorised representative or by the property owner. The loans will be issued by the joint-stock company “Development Finance Institution Altum” (Altum). The deadline for making decisions on granting a loan and concluding the loan agreement is 31 December 2023.

The maximum loan term is 20 years. Altum’s loan interest rate is planned to start at 3.5% per year. For loans applied for by an authorised representative, the interest rate is planned to be fixed at 3.5% per year, while rates for property owners may vary depending on their credit rating.

Loans to apartment owners through an authorised representative will be granted if:

• the apartment building’s arrears for services received (property management, waste management, heating, water supply and sewerage services) related to the use of the apartment property amount to less than 10% of the total amount of invoices for these services during the past year;
• there are reasonable prospects for repaying the loan, which Altum assesses taking into account the principle of sound financial management.

When granting a loan to a property owner, Altum will assess the amount of funding required to implement the project, the collateral, the property owner’s current and future financial situation, the ability to repay the loan, as well as risks and other factors.

The informative report developed by the Ministry of Economics, “Long-Term Strategy for Building Renovation”, states that Latvia’s apartment-building housing stock consists of 38.6 thousand buildings with a total area of 54.4 million square metres, most of which were built before 1993. According to expert assessments, 70% of Latvia’s building sector can be renovated in a cost-effective manner; this would comprise approximately 27 thousand apartment buildings with a total area of 38 million square metres.

Taking into account the recommendations of both the OECD and the State Audit Office to find solutions for promoting the renovation of the housing stock, on 11 December 2020 the Cabinet of Ministers instructed the Ministry of Economics, in cooperation with Altum, to prepare a support programme in the form of a financial instrument for investments to improve the technical condition of housing (including building safety) and amenities (including the modernisation or replacement of lifts).

The conditions of the support programme are set out in detail in the Cabinet of Ministers regulations “Conditions of the Support Programme for Construction Works in Apartment Buildings and the Improvement of Their Areas”, which can be found on the Cabinet of Ministers’ website.

Author:

Ministry of Economics

em.gov.lv