Acting as a representative of the state, SJSC “SJSC “State Real Estate” (SRE) is signing an agreement with the European Investment Bank (EIB) on performing the necessary financial and economic calculations and provision of advisory services in order to implement the private-public partnership (PPP) development programme for affordable rental apartments in Latvia promoted by the Ministry of Finance, informs Renārs Griškevičs, the Chairperson of the Board of the SRE.
The first lot will evaluate the possibility of implementing the programme in Daugavpils, Jelgava, Jēkabpils, Jūrmala, Liepāja, Ogre, Rēzekne, Rīga, Valmiera, Ventspils, Ādaži, Cēsis, Ķekava, Mārupe, Olaine, Salaspils, as well as Sigulda. According to estimates, construction of at least 1000 apartments will be completed by 2030 with total investment amounting to around EUR 100 million. The goal of the programme is to create modern, energy-efficient and affordable housing tailored for young professionals and their families in sectors of national and regional importance (specifically, for teachers, firefighters, police officers, military personnel, state and municipal employees, etc.).
“For Latvia, this is the first advisory service agreement of such scale signed with the European Investment Bank to ensure that also international institutional investors could finance the construction of affordable rental housing. This programme will significantly improve the situation in the regions, especially in the cities where most of the economic development is taking place, and I very much appreciate the interest shown by municipalities. Moreover, cooperation with highly qualified and experienced experts from the European Investment Bank will provide the public administration with new skills for successful implementation of similar projects in the future,” says the Minister for Finance Arvils Ašeradens.
A number of programme implementation models will be discussed, institutional capacity at both national and regional level will be analysed, a project selection strategy will be developed, a pilot project will be prepared, and a public-private partnership agreement will be drafted in cooperation with the EIB.
“We are honoured by the trust and confidence in the SRE and the opportunity for our organisation to be a key partner in this important programme. Cooperation in the public-private sector is an essential tool for successfully tackling societal challenges and promoting sustainable development. Our goal is to create a long-term and stable solution for affordable housing throughout Latvia, which can be only achieved through close cooperation between the SRE and municipalities, thus allowing to meet the needs of society at the highest level. We are already seeing a lot of interest from the municipalities about participation in the programme. At the beginning of October we will sign the letter of intent on the basis of the decisions adopted by the local government councils on the conceptual participation in the project,” says Renārs Griškevičs, the Chairperson of the Board of the SRE.
It is planned that the letter of intent on participation in the project will be signed with the municipalities on 2 October of this year. In accordance with the decision of the Cabinet of Ministers adopted on 11 June of this year, the SRE has been instructed to develop financial and economic calculations of the project, as well as to obtain the necessary opinions from the competent authorities. The SRE will be the main representative of the public partner and will work together with the municipalities involved in the project. Taking into account the solvency of residents and market conditions, municipalities will be required to ensure the allocation of land plots and co-financing for the rental apartments.
The study carried out this spring involved interviews in 17 municipalities and an analysis of statistical data, resulting in an estimate of future demand for affordable rental apartments in each of the 17 municipalities. The study confirms that poor housing quality, overcrowded housing, low market activity are among the challenges of Latvian housing policy, and also there is an additional challenge of the lack of access to mortgages by part of the population.
The affordable rental apartment development programme aims to ensure that construction of the new housing stock in municipalities would be completed in the shortest possible period and would meet the highest quality standards. The project is developed according to the ‘design-build-finance-maintain-operate by private partner’ model and starting from 2030 the public sector availability payment will be included in the national and municipal budgets alongside the availability of housing to residents. In addition, the programme provides that at the end of the project, municipalities acquire ownership of the land and the constructed housing units.
At the end of last year, a steering group was set up by an order of the Minister for Finance to develop such PPP solutions. Its task was to develop a framework for possible PPP solutions for low-cost and affordable rental apartments, the proposed PPP structure, implementation conditions and timetable. The steering group developed the affordable rental apartment development programme after assessing the current situation, identifying 17 local governments, the problems in the market, the regulatory framework for affordable rental housing, and the experience of other Member States, making sure that the affordable rental apartment programme meets the respective criteria.
The steering group is composed of members representing the Ministry of Finance, the Central Finance and Contracting Agency, the Ministry of Environmental Protection and Regional Development, the Development Finance Institution ALTUM, the Alliance of Real Estate Developers, SJSC “State Real Estate”, SJSC “Latvian State Roads”, the Ministry of Economics, and also the freelance adviser to Prime Minister on regional development issues.
About SRE
Currently, 110 projects with a total investment of EUR 410 million are being implemented under the guidance of SJSC “State Real Estate”. The SRE provides professional real estate management and maintenance for 427 building and structure properties, comprising 1089 buildings with a total area of 0.996 million m2, as well as land beneath structures with a total area of 591 ha, and 3261 land properties with a total area of 895 ha. SRE is one of 17 Latvian companies that in 2023 received the highest platinum award as part of the Sustainability Index of the Institute of Corporate Responsibility and Sustainability, confirming the good governance and sustainability of its operations. The company was founded in 1996 and the Ministry of Finance is the sole shareholder thereof.
