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Palo submits rental housing support bill to other ministries for approval

Municipal apartment buildings on Raadiku Street, Tallinn.
Municipal apartment buildings on Raadiku Street, Tallinn. Source: (Liis Treimann/Postimees/Scanpix)

Minister of Information Technology and Entrepreneurship Urve Palo has submitted to other ministries for review and approval a bill that would enable the government to support municipalities with the construction of municipally-owned rental housing.

In accordance with the plan, €2.5 million will be made available to municipalities for this purpose this year.

The subsidy can be used for two purposes: to build new houses in regions of market failure, and to reconstruct existing apartment buildings to ensure a sufficient supply of apartments for rent. According to the explanatory letter accompanying the bill, market failure is a situation in which the private sector is not offering a service on the required scale or is offering it at a price which is not accessible to a large portion of consumers.

The maximum amount for which municipalities are entitled to apply in 2017 is up to €1 million per municipality. Tallinn and Tartu, Estonia's largest two cities, will become eligible for the subsidy in 2018. The maximum amount to be disbursed to all applicants per year is €15 million euros.

The municipality receiving support under the measure must finance 50 percent of the project itself and can take out a bank loan or bring in a private investor in order to do so.

The house built or reconstructed with the subsidy must consist of at least eight apartments; the acquisition or reconstruction of single apartments will not be financed under the measure.

People who change their place of residence as a result of the location of their workplace or a change in the location of their workplace are seen as the target group of the incentive. A new structure built using the support measure must be used as rented accommodation for at least 20 years and a reconstructed building for at least 15 years.

Beginning in 2018, municipalities will likewise be supported in the construction and reconstruction of buildings to be taken into use as rented accommodation for disadvantaged socio-economic groups, including young people leaving a substitute home after reaching adulthood, people with disabilities and special needs, people with disability for work, families with many children, single-parent families, people released from a detention institution.

In accordance with the government's fiscal strategy, the measure would receive €60 million over the years 2017-2020, including €2.5 million in 2017. The funds are to be disbursed by the Kredex Foundation.

The bill's explanatory letter also states that while the normal ratio of renewal of housing stock is approximately one percent through new residential construction and up to two percent through reconstruction annually, in Estonia the ratio of new reconstruction has averaged 0.5 percent, and effectively zero outside of the Harju, Tartu and Pärnu Counties.

Editor: Aili Vahtla

Source: BNS

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