In order to address market failures and to provide high-quality and affordable rental housing in regions for households unable to afford housing at a market price due to insufficient incomes, the Ministry of Economics has developed a completely new support programme, within which real estate developers will be able to receive support for the construction of low-rent residential rental houses in regions. At its meeting of July 14 this year, the Cabinet of Ministers approved the conditions for the implementation of the support programme.
The opportunity to live in quality and energy-efficient housing that meets the requirements of modern life at an affordable price is the basic need of every citizen of Latvia, affecting mobility and the opportunities to participate in the labour market and the economy as a whole. Unfortunately, a large proportion of Latvian households cannot rent quality housing at a market price due to insufficient income. In view of the extent of housing affordability challenges, the Ministry of Economics has developed a pilot project for a support programme for the construction of low-rent housing in the regions and will continue to work on solutions for the availability of new housing. Therefore, as part of the support programme, the Housing Affordability Fund is also being set up, the purpose of which will be to ensure that funding is available in the long term for the construction of low-rent housing,” the Minister of Economics Ilze Indriksone indicates.
The support programme has been developed within the framework of the Recovery and Resilience Facility Plan and funding of 42.9 million euro is for its implementation, and 700 low-rent apartments are expected to be built in the regions for this funding.
Within the programme, support for real estate developers for the construction of rental housing will be provided by the Development Finance Institution in the form of a long-term loan (up to 30 years) and a capital discount (up to 30% of the total eligible costs of the project). To receive a capital discount it will be necessary to meet certain conditions, such as the quality requirements for a residential rental house and the number of rented apartments.
The support programme does not limit the range of real estate developers and the support will be available to both commercial companies and cooperative societies, capital companies controlled by a public person or public-private capital companies.
The objective of the support programme is to provide affordable housing, therefore it is provided that the rent is initially set at EUR 5/m2 and indexation of the rent is possible every year according to the average annual level of inflation in the country.
In order to ensure sustainable solutions and access to financing for the long-term construction of low-rent housing, the Housing Affordability Fund is set up.