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Financing housing in Estonia

Financing housing in Estonia. Lauri Suu 6 th November 2013. KredE x - solid foundation. Founded in 2001 Under the jurisdiction of the Ministry of Economic Affairs and Communications State guarantee limit for: Business loan guarantees € 96 mio Export guarantees € 64 mio

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Financing housing in Estonia

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  1. Financing housing in Estonia Lauri Suu6thNovember 2013

  2. KredEx - solid foundation • Founded in 2001 • Under the jurisdiction of the Ministry of Economic Affairs and Communications • State guarantee limit for: • Business loan guarantees € 96 mio • Export guarantees € 64 mio • Housing loan guarantees € 96 mio • Fully accredited for using ERDF and ESF • Member of AECM, NEFI, IUHF

  3. Housing stock • ~95% housing stock is inprivate ownership: • ~60% of the housing stock has been built in 1960-1990 • ~30% before 1960 • ~75% population living in multi-apartment buildings • Low quality and low energy efficiency • Average energy consumption per year in buildings which have not been renovated 200-220 kWh/m2 • Energy used in buildings ~40%

  4. Who is responsible for the condition of the building? • Owner • Housing Associations - legal body • Community of apartment owners - no legal body • In all cases all apartment owners (private persons) are responsible for decisions and payments

  5. Measures for EE in housing • Studies about situation in buildings • Favorable loan from revolving fund • Grants (from state and municipalities): • energy audits, project design documents 50% • renovation 15-35% (Tallinn 10%) • Consultants to help by decision making at GA • Awareness raising campaigns • Best Practice Projects • Partners: • Local municipalities • Estonian Union of Housing Associations • Estonian Union of Facility Managers

  6. Holistic approach

  7. Previous measure – grant scheme 2003-2007 state grants all over Estonia: • For energy audits, building designs and technical expertise 50% of the costs • Supported 3 800 buildings • Totally 1,4 million € • For renovation, 10% of the costs • Supported 3200 buildings • 17 million m2, totally 11 million € • Problems: • Insufficient funding • Singel works • Grant available after payments

  8. From renovation grants to revolving fund – why? • Revolving character (re-usage of the funds) • Funds stay in state • Leverage effect (1/3 ERDF, 2/3 additional funds) • Support scheme (10% support) versus loan scheme (state support is even bigger) • Loan is needed for reconstruction anyway • Opportunity also to smaller buildings • Easier to administer, lower administrative costs • End-beneficiary is used to take loan

  9. State guarantee Revolving fund Fund € 72 mio CEB loan € 28,8 mio ERDF to fund equity € 17,7mio State loan 16 mio Favorable funding to the commercial banks KredEx funds 9,5mio EE loanto HOA, Commercial bank takes the risk of lenders

  10. Renovation Loan • Multi-apartment buildings: at least 3 apartments • Main purpose - energy efficiency (at least 20% energy saving for the buildings up to 2000 m² or 30% for bigger buildings) • Self-financing 15% (grant or own funds or loan) • Energy audit is obligatory, renovation according to energy audit • Supervisory is obligatory • Loan maturity: up to 20 years • Interest: from 2013 ~ 3,5%, before up to 4,5% fixed for 10 years, average 4% • No collateral is needed, credit against cash flow • Decision by buildings: at least 50% +1 one owner at general assemble, decision with simple majority

  11. Average loan amount €/building

  12. Grant for reconstruction Fund for the grant from Green Investment Scheme (selling AAU) An Assigned Amount Unit (AAU) is a tradable 'Kyoto unit' or 'carbon credit' representing an allowance to emit greenhouse gases comprising one metric tons of carbon dioxide equivalents calculated using their Global Warming Potential In total 30 million € ~ 140 million € for investment Goal is to renovate multi-apartment buildings completely, to achieve: energy saving from heating costs, considering all requirements for indoor climate Achieve higher energy class To increase use of renewable energy

  13. Grant 15, 25 or 35% Do more – get more • 15% • fulfill the terms for renovation loan, • energy saving 20 or 30%, according to the size of the building • Energy label E, energy consumption < 250 kWh/m² • 25% • roof, facade, windows (U 1,1), heating system, • energy saving at least 40% • Energy label D, energy consumption < 200 kWh/m² • 35% • roof, facade, windows (U 1,1), heating system, ventilation system with heat recovery, • energy saving at least 50% • Energy label C, energy consumption < 150 kWh/m² • In all the cases it is obligatory to fulfill the criteria for indoor climate!

  14. Results Loan (€ 65 mio) Grant (€ 24,2 mio) Start 30.09.2010 Pos. decisions – ca 500 houses 15% € 4,2 mio 288 25% € 7 mio 182 35% € 13 mio 107 24,2 mio € = ca 95 mio€ Finished: 460 houses Ca 1,1 mio m² Avg 26%, 41 300 €house Expected saving 41% • Start 24.06.2009 • By 30.09.2013: • 650 contracts • Ca 21 000 apartments, 50 000 inhabitants • Ca 1,35 mio m² • Total €72 mio

  15. Results combined (15.04.2013) • 635 buildings, 23 500 apartments, 54 000 inhabitants • Ca 1 550 000 m² (6,7% from total ap. m²) • Total € 49 mio credit, € 20,8 mio grant • Investment € 87,2 mio, average € 137 000 • Expected saving 39%, 75 GWh per year (1 year production of Kuressaare Soojus) • Expected saving 20 years 1 500 GWh • 390 renovated, ca 110 in process • Changes in behavior: • From single works to complex renovation • Heating costs are measured by apartments

  16. Apartmentbuildingloanguarantee • Whohashigher risk (debtors, ruralarea, low market value) • Whenreconstructioncostperm²ishigher (complexreconstruction) • The guarantee amount for apartment building is up to 75% of the loan amount. No collaterals needed • Can be applied via banks

  17. Awareness raising • Campaigns since 2006 • Info days/seminars/workshops - to end beneficiaries, builders, energy auditors, project designers, local municipalities • Advertisements in newspapers/magazines • Internet (website, banners, news, articles) • Direct mails • Leaflets/booklets • Cooperation with banks • Energy week in November (since 2010)

  18. Golden Drum Grand Prix

  19. Example: Sõpruse pst 202, Tallinn • 11 375 m² (162 ap. 2012-2013) • Investment € 2 062 000, 181 €/m² • Grant 35% € 721 600, 63 €/m² • Credit € 1 340 000, 20 years • Expected savings 65% ~500 MWh - Triple windows Brought to the frontage of facade - Heating system - Ventilation system - Facade, roof

  20. Lessons learned • Preparation took long time – 2 years • Many different partners to negotiate (international banks, local ministries, local commercial banks) – do it parallel • Funds stay in the measure and are used several times • Economical situation in the country can change dramatically and influence the behaviour of end-beneficiaries • Legal framework to support the measure – decision making process, building permits, supervisory … • Combination of different measures is a key to success • Information to market participants and end-beneficiaries – it takes couple of years for end-beneficiaries to be as active as you expect • No actual opportunity to persuade end-beneficiaries, only raise awareness and motivate

  21. Thank you! Lauri Suu KredEx Hobujaama 4 10151 Tallinn, Estonia Tel: +372 6674 111Fax: +372 6674 101 E-mail: lauri.suu@kredex.ee www.kredex.ee

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