Business news from Ukraine

European Investment Bank is ready to assist Ukraine in launching social housing programs

21 April , 2024  

The European Investment Bank (EIB), in cooperation with the European Commission (EC), is ready to assist in launching social housing programs, Oksana Remiga, EIB Senior Lending Specialist, said in an interview with Interfax-Ukraine.

The Ministry of Infrastructure and Regional Development is currently engaged in housing policy reform, which aims to harmonize Ukrainian practices with the best European ones. One of the points that is only touched upon in the draft law, but is necessary to harmonize the overall framework, is social and affordable housing; a separate law will be developed in the future.

“The EIB, in cooperation with the European Commission, has pledged to provide assistance to launch this area. We are discussing the possibility of a EUR 200 million targeted loan, which will be supported by a significant investment grant from the EC. Plus a technical assistance package of EUR12 million, which can be used not only to develop technical solutions, implement and monitor them, but also to help develop the regulatory framework,” Remiga said.

She clarified that an active discussion is currently underway between the experts who participated in the development, technical assistance groups, and the future form of this sector.

“Together with the European Commission, we are trying to promote the model that was used in Europe after the Second World War to solve the problem of housing,” she said.

According to her, the model of social housing implies, among other things, that the facilities should be fully owned by the municipality, this sector should be self-sustaining and financially stable.

“What mechanisms can ensure this (financial stability)? One of the simplest ones used in European countries is that in a building under construction, 80% of the premises are allocated for social housing, which is rented by certain socially vulnerable groups at a reduced rent. This housing cannot be bought out. As for the rest of the premises – housing, commercial – it is rented at market rent, which allows to ensure the functioning of the facility,” explained Remiga.

Since it is more difficult to generate income from commercial space in small towns than in large cities, it may be more appropriate for smaller municipalities to establish joint regional offices.

Another key principle of social housing policy is to avoid ghettoization.

“The buildings of such a housing stock should not be located compactly, the buildings should harmoniously fit into the overall urban landscape. It is also important to provide social infrastructure and good transport links,” said Remiga.

At the same time, she noted that the EIB does not consider participation in affordable housing programs, social lease with purchase.

“We are considering programs aimed at creating and improving the quality of social housing packages in municipalities. However, I would like to emphasize that in general, the EIB does not offer programs whose ultimate goal is to provide loans to individuals for housing. Only the creation of housing owned and managed by municipalities,” said Remiga.

The start of the social housing program can be expected no earlier than mid-autumn 2024.

“The European Union and the EIB, which is the bank of the European Union, have a rule: legislative structural changes first. However, due to the extremely critical situation in Ukraine, we are ready to work in parallel. Since we are already working on the regulatory framework, this allows us to launch administrative procedures on our part in parallel. As soon as the (framework) parameters of the future legislation are clear, even before it is adopted and implemented, we can start working on projects,” Remiga summarized.

She added that the upcoming loan program for social housing with a budget of EUR 200 million is a pilot program.

“Given the needs of Ukraine, billions are really needed to solve housing issues. Only after the pilot project is launched and established, when we can see its effectiveness and the ability of municipalities to manage this pool of real estate, can we talk about launching the next stages. We are very interested in this,” said Remiga.