Under the previous state-supported rental housing program, 21 rental buildings were constructed in collaboration with 18 municipalities, providing a total of 537 apartments. This included 12 buildings with 239 apartments for mobile workers and nine social housing buildings with 298 apartments. The total cost of the projects was €41 million, with €19 million in state funding.

No comprehensive public report has been compiled on the financial performance of these projects. However, the Ministry of Economic Affairs and Communications provided an overview of the measure in August 2022.

The state rental housing projects allowed for both municipality participation and collaboration with the private sector. For projects involving municipalities, the specific financial outcomes are not clearly visible, as related costs are embedded in municipal budgets and cannot be easily isolated. However, these costs are mentioned in budget explanatory notes. For instance, Järva Municipality's 2024 budget notes the potential benefits of building rental houses, citing positive outcomes in Imavere. Türi Municipality's budget highlights the need to cover costs for a building at F. J. Wiedemanni tänav 1, intended for so-called mobile workers.

Projects involving private investors, which create separate business entities for rental housing, provide clearer financial oversight. These include rental properties in Koksvere (Põhja-Sakala), Maali (Lääne-Nigula), Kuressaare (Saaremaa) and Otepää.

Three of these projects continue to operate as rental properties. However, the Otepää project, originally a collaboration between the municipality and a private developer, shifted from being a rental housing project to a standard real estate development. This change occurred after developers determined that they could not cover costs through rental income, leading the municipality to withdraw from the project.

The total planned cost for constructing the building was €2.1 million, with €1.1 million in state funding. The project has since transitioned from a rental property to a straightforward real estate development. According to the company's annual report, there are plans to find a way to repay the state subsidy.

Last year, an apartment in the building was sold for €127,077. All constructed units are now listed as inventory, indicating they are available for sale. The company estimates that the total value of the unsold apartments is €4.2 million.

Functional rental properties

The most successful rental property has been the Linnusemaja building located at Kitsas 16 in central Kuressaare. The owner of this property, Kitsas 16 Kodu OÜ, is 51 percent owned by Saaremaa Municipality, with the remaining 49 percent owned by Mart Loik, Olari Aavik and Erich Teigamägi through a holding company. The building comprises 18 apartments.

According to the property's website, there might be one 29.4-square-meter apartment available, with a monthly rent of €540, or €360 if rented under an annual contract, plus €15 per month for storage and €15 per month for parking. Despite this, the enterprise is not profitable. Last year, the company generated revenue of €109,632 but incurred a loss of €95,296. The construction of the building cost €1.9 million, with €952,800 coming from state funding.

Similar situations are seen in other rental projects. The joint venture OÜ Maali Üürimaja, owned by Lääne-Nigula Municipality and Koit Uus, which owns an 18-apartment rental building in Linnamäe village reported a loss of €97,970 last year, with a revenue of €80,490. The building's construction cost was €2.3 million, with the state's contribution being €1.1 million.

The Koksvere rental property, built in partnership between Põhja-Sakala Municipality and the agricultural company Mangeni, part of the Silikaat group, reported a rental income of €13,766 last year, but a loss of €41,678. The construction cost was €1.6 million, with the state contributing €775,065.

Many costs are associated with the depreciation of rental properties, which is typically accounted for as a way to plan for future repairs and maintenance. Additionally, interest costs have risen in recent years, reflecting the price of capital. Even when half of the funding is provided for free, the other half still has associated costs.

Meelis Nukki, head of Maali Üürimajad, noted that some costs are bookkeeping-related, and agencies have recommended raising the rent. Currently, the rent for a three-room apartment is €380, which is significantly lower than similar apartments in Haapsalu, located just 10 kilometers away, despite the building being in better condition. Nukki believes that the market could support increasing the rent for three-room apartments to €450 per month.

However, the project continues to run at a loss. Next year, the firm Koit Uusi Investeeringute Hooldus and Lääne-Nigula Municipality are expected to discuss the project's future. "On paper, if I remember correctly, the project should move into profitability in four to five years," noted Nukki.

Efforts to continue

The government is currently planning a new rental housing program, according to Minister of Regional Affairs and Agriculture Piret Hartman. She emphasized that from the ministry's perspective, apart from economic viability, the utilization rate of apartments is also a key indicator. "In these rental houses, all the apartments are actually in use," Hartman stated.

However, she noted that the conditions for establishing new state-supported rental housing need to be reconsidered. "If we want to encourage people to move to these smaller areas, not just those who are already living there, we need to think these things through," Hartman said.

"I can't fully comment on why the current projects have not been profitable. However, having interacted with many entrepreneurs with backgrounds in Ida-Viru County, several companies have shown interest in partnering with the state," she added.

Hartman suggested that future solutions might include varying levels of state support and the possibility for private sector investors to sell some of the constructed apartments.

"The work will intensify in the fall, and we will definitely discuss this with [Infrastructure Minister Vladimir] Svet, as several briefings are scheduled. I believe we will start concrete actions in the fall," Hartman concluded.

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