Making the decision and taking the first step is the most difficult. If it is successful, the rest will happen gradually and everyone will be satisfied with the result. This is how the situation with insulation of residential buildings, which has been carried out in Latvia for more than ten years with the help of EU funds, can be described in two short sentences. However, the biggest obstacle in achieving significant results so far has been taking the first step or getting the residents' consent to renovate the building. The situation may change this year given the increase in heat tariffs and the more active involvement of municipalities.
In the Lost Heat section of the LSM.lv portal, ten times more houses have been insulated in Lithuania compared with Latvia in the last decade, with about a billion euros invested in the renovation programme (about 500 million euros in Latvia). The main obstacles have always remained the same: the inability of the population to agree on the renovation of the building and the fear of making commitments. Our experience as financiers of residential building renovation shows that the population is often unconvinced, even when real examples are shown where heating costs have dropped by half after insulation. The situation is not hopeless, however, because both “barriers” are emotional rather than rational and can be overcome by actively involving property managers and communities in the process.
What municipalities can do
One of the good examples near Riga is the Olaine municipality, which has taken a great initiative and developed community support mechanisms and can be proud of more than 30 renovated buildings. In the case of Olaine, it was crucial that the municipality hired a team of experts to be proactive, rather than waiting for someone to take an interest in insulation. This meant organising meetings with residents and supporting elders living in the buildings to demonstrate all the benefits of renovating buildings (lower bills, higher home value, healthier air because the home can be ventilated more frequently, etc.). The fact that the Olaine municipality was able to allocate funds in the budget to finance the interest payments on a home insulation loan also plays an important role. In practice, this means that ALTUM co-finances 50 percent of the loan and people only have to repay the principal amount of the loan. In a hyperinflationary environment, this means that people actually pay back less than they borrow (because the money loses value).
In addition, the Olaine municipality finances energy audits, the preparation of a technical design, the preparation of an application for EU funding for a renovation project, and when the building is fully renovated, the apartment owners receive a 90% property tax rebate for five years (from the date of signing the acceptance and transfer declaration). In the Olaine county, there are apartment buildings in the localities of Olaine, Jaunolaine and Stūnīši. In order to motivate residents to participate in the ALTUM support programme for the renovation of multi-apartment residential houses, the Olaine municipality covered 100% of the cost of repairing the staircase of the first renovated house in each of these localities. It turns out that with such a subsidy “package”, the support of the population for insulation increases, moreover, the scale effect also plays a major role - the more renovated houses appear, the more the interest of the residents of neighbouring houses increases. After all, when people meet and talk about monthly heating bills, they find that even with the loan rate, they are lower than in an uninsulated house. It should be taken into account that in communities where heating is mainly gas, heating bills will increase much more this year. And while consumers have no real influence on the global processes that cause energy prices to hit their wallets from time to time, residents of multi-apartment buildings can influence heat consumption by insulating the building.
As heating becomes more expensive, the importance of thermal insulation increases
Given the expected increase in heating costs, as well as the announcement of a new ALTUM funding programme for residential renovation in the fall, a greater number of applications are expected both in the regions and in somewhat slow-moving Riga (so far, only a few percent of the required amount has been insulated). As heating costs rise, so will the benefits people can derive from renovating their homes. However, past experience has shown that this process should not be left to its own devices, as it is difficult for people to organize themselves, even when there are significant benefits. People are not always able to assess them by themselves and estimate the future losses if the house is not renovated. Referring to the examples of Olaine as well as the leading cities at the national level - Liepāja, Valmiera and Ventspils - other municipalities and large cities could be more active in talking to people, explaining the benefits and reducing various prejudices. However, there is an important nuance here, i.e., the so-called “tick by” events (brochures or information in staircases) are unlikely to change anything. It will take proactive individuals hired by the community to trigger a “wave” of apartment insulation.
Renovation and the building getting the “second wind”
There is another important aspect of why the municipalities should play the role of an intermediary between the population and the resources available for housing rehabilitation. It is about the technical condition of the houses built in Soviet times. Indeed, energy efficiency measures include not only the insulation of the dwelling (replacement of windows and external doors, basement and roof insulation, etc.) but also other works to improve the technical condition of the building. The investments, half of which are financed by EU funds, help the building to get a “second wind” and significantly increase its value compared to the buildings that remain unrenovated. Although they will be habitable for some time, heating bills and urgent repair costs may reach “unbearable” amounts for the population in the coming years. So the argument often made – that we are too poor to renovate – is in fact just the opposite: not insulating a building is wasteful. With energy prices so high, municipalities should make renovating their buildings one of their top priorities and create incentives to reach out and involve people so that the majority of the population in each building (50% plus one apartment) is aware of the “weight” of their decision and of the benefits they might lose due to being passive or irrationally fearful.
Arnis Škapars
Member of the Board, SEB banka
