Renovation of buildings – a step towards a more prosperous Latvia

Improving the energy efficiency of multi-apartment buildings is not just about heating houses, it is an important step for the development of the entire neighbourhood or even the city because it goes hand in hand with achieving sustainability goals, attracting highly skilled workers and funding, improving the quality of life of people and growing businesses. Incidentally, this does not only apply to the capital – there are excellent examples in the regions from which Riga could also learn. However, when it comes to renovating buildings and improving energy efficiency, the capital and the regions face common challenges, which means that many Latvian residents cannot live in better and cheaper housing, while Latvia is struggling to meet the energy efficiency targets set by the European Union.

Difficulties in agreeing on the start of work

Between 2016 and 2023, the development finance institution ALTUM financed 623 projects to improve the energy efficiency of apartment buildings. While activity was worryingly low last year, the pace has now accelerated. 51% of the €57.2 million available has already been booked this year, but ALTUM plans to accept applications until autumn this year.

There has also been sufficient activity among the population in applying for loans from banks. For example, SEB banka (as of 2009) has credited 453 building renovations and repairs throughout Latvia. At the moment, however, it looks as if we will not be able to meet the European Union's targets within the deadline. And why is that? It's a complex issue that needs to be looked at from different angles, explains Māris Saulājs, Head of SEB banka's Small and Medium Enterprises segment.

“If we look at the deeper issues, one of the biggest challenges is getting 51% of the building's residents to vote to start the renovation work. Not surprisingly, residents often find it easier to vote in favour of renovating buildings outside Riga. This could be because people there know each other much better and trust each other more, which is very important when you entrust the project management to one of the residents,” says Māris Saulājs, emphasising that the historical background significantly influences the desire to get involved in improving housing: The privatisation of housing, where ownership could have been done without financial investment, has led many to the mistaken belief that their responsibility ends with the front door. Those who have not invested anything in the purchase of a property are not obliged to have the awareness to maintain, care for and develop it, and expect someone else to do so. This is typical post-Soviet mindset that part of the population still cannot get rid of. But you have to realise that the buildings are getting on in years, the repairs to be carried out are getting bigger and more expensive and sooner or later they will have to be abandoned anyway. You also have to start looking at these costs as a long-term investment, because one of the biggest challenges at the moment is to dispel the assumption that the investments to be made will not pay off or that they will be a heavy burden on top of the existing housing-related payments,” adds the SEB expert.

Importance of the support from municipalities and managers

Renovating the building is not an easy task, it requires a lot of time and specific expertise, and few people are prepared to take on this task. A solution to this problem would be a professional project manager who could explain the whole process and ensure that the progress of the project, the achievable results and the planned payments are fully understood as soon as the project is realised. The support of local government or state programmes in preparing documentation and educating residents would also be important – it would be the responsibility of local governments and property managers to explain the options for renovation as well as the need for repairs to common property.

In SEB banka’s experience, the renovation of buildings is much faster in communities that offer such services to residents. Māris Saulājs cites Liepaja, where SEB banka has granted half of all loans granted in Latvia (besides Riga and in the vicinity of Riga) for the renovation and repair of buildings, and Valmiera with 22%, while in the region of Riga and Pieriga – the municipality of Olaine - 58% of loans were granted (comparatively only 18% in Riga). ALTUM data on funds granted in the period from 2016 to 2023 also confirms that Liepaja and Olaine districts are relatively more active than other regions.

Raising awareness among residents is one of the biggest obstacles as regards the renovation of buildings. “Neither is there defined benefits – what benefits do I get from this project as a resident if I have to pay for it for a long period of time? In the long run, however, it also helps to save money, because if you live in an energy-efficient building, you reduce your monthly utility bills. In addition, the buildings age, their technical condition deteriorates but houses in poor technical condition may be decommissioned or even considered for demolition, and then a new place of residence has to be found, which becomes very expensive,” Māris Saulājs says.

Housing renovation – an important role in the development of the business environment

The renovation of any building aims to save at least 30% of primary energy. In a renovated building, apartment owners can regulate a comfortable thermal energy temperature for themselves and only pay for the thermal energy they consume. The value of residential property in a renovated building also increases, as does the interest of potential buyers, because they have learnt how energy-efficient the property is due to the high energy prices.

“Of course, the biggest beneficiaries are the residents of the renovated buildings, but that would be too narrow a view. By saving money on energy resources, the money left over can be channelled into education, healthcare and everyday spending, which in turn benefits the surrounding economy as the population's prosperity increases. In addition, high-quality housing is one of the most important factors in attracting highly skilled labour to the regions. In general, renovating buildings and improving energy efficiency means much more than just promoting comfort – it can be a way to overcome the obstacles that prevent Latvia from becoming a prosperous country. But this will not work as long as short-term mindset dominates long-term planning and people only strive for immediate benefit here and now. Just as you should abandon the principle of “neither my staircase nor my problem", you should also think more broadly,” says Maris Saulājs, Head of SEB banka's Small and Medium Enterprises segment, urging everyone not only to work individually to improve their homes, but also to involve their neighbours and, if necessary, explain the benefits of renovation to them and contribute to a decision that benefits everyone.