The Ministry of Climate will manage the state-backed pilot project, which launches next year. The ministry's deputy secretary general Ivo Jaanisoo said the aim is to make quality housing available across the country.

A third of Estonia's population lives outside the Tallinn and Tartu regions and would like to have modern homes.

"At present, the private sector does not build apartment buildings in places like Paide or Põlva, for example, because construction work costs just as much there as in Tallinn, but the sale or rental price of a new apartment remains significantly lower. In addition, developers and financiers fear that tenants may not be found for all the apartments immediately or in the longer term," Jaanisoo said.

The ministry is now working to develop a financing model with the European Investment Bank. The scheme would bring together new residential developments in small towns into a larger portfolio. The idea behind the model is that economies of scale would help reduce costs and attract private banks to support apartment buildings with loans.

Who will pay for empty apartments?

The apartment building pilot project is due to start in 2027.

"We have currently received proposals from local governments for more than 100 plots of land across Estonia. A selection will have to be made from these, and the local governments themselves will also have to give their final say on whether they really want to participate in this project. All of this will happen at the beginning of next year," Jaanisoo said.

The main question is who should foot the bill for empty apartments.

One solution would be for the city or municipality to guarantee the developer rental income when an apartment has no occupant.

However, Jaanisoo said there are several options under discussion.

"There is also the possibility of having the developer assume some of the vacancy risk themselves, but this is, of course, another cost that could push rents unreasonably high. [...] The financial risk could also be assumed by a local employer, for example. It could be assumed in some form by the central government or the developer. We will arrive at a solution in the coming months," Jaanisoo said.

Once the financing model and plan are in place, the state will announce a tender to find builders and operators. Jaanisoo said detailed plans are already in place for many of the plots, which would allow developers to quickly plan new buildings.

The first new apartment buildings could be completed by 2030.

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