Estonian study: Tallinn housing prices should be lower by 1/3 to be affordable

TALLINN - A study into affordable housing policy in Tallinn, conducted by researchers from the University of Tartu and the Estonian Academy of Arts, concludes that housing prices in the capital should be lower by about one-third to be considered affordable for residents.

Currently, only one-fifth of apartments in Tallinn are priced affordably, and just one-third of rental units have affordable rents. Housing costs place a burden on 14 percent of Tallinn residents, about 32,000 households, for whom housing expenses exceed 40 percent of their monthly income. The most vulnerable are low-income families, nearly one-third of whom are overburdened by housing costs.

The study finds that affordable housing is concentrated mainly in Tallinn's Lasnamäe and Mustamäe city districts, making it difficult for people to find suitable and reasonably priced homes elsewhere. The lack of affordable housing also undermines the city's long-term competitiveness. These neighborhoods have homogeneous building stock and modernize slowly.

Apartments often do not meet the needs of families or the expectations of young people. The high share of housing costs and overall economic insecurity also hinder renovation and modernization of housing environments. Housing built by or with the support of the city is crucial for a more equitable housing system, but currently meets only a small portion of demand and is spatially concentrated in the said districts.

Low-wage tenants in the private rental market are in the most difficult situation, with the majority severely overburdened by housing costs. Meanwhile, new developments and renovated buildings in the city center are often out of reach for middle-income families. Young people of family-forming age are increasingly forced to seek more spacious housing outside Tallinn or settle for cramped living conditions, which can influence decisions about starting a family.

Anneli Kährik, associate professor of urban geography at the University of Tartu and head of the study group, said that active land policy is key among municipal intervention measures.

"The city should not sell off its land but manage it responsibly. Across Europe, cities are now repurchasing land to develop housing in partnership with private-sector and cost-based developers, allowing for more affordable pricing. Offering affordable housing also helps stabilize sharp price fluctuations," Kährik said.

Tallinn's housing policy must consider the specific character of each district and provide a diverse housing stock for different socio-economic groups. The study presents roadmaps illustrating different combinations of measures to help shape a fairer and more sustainable housing market.

The proposed framework for developing a fair housing sector is based on four pillars -- strategic planning and monitoring, active land policy, strong public-private cooperation, and diversification of funding models.

Implementing these principles requires consideration of each district's context and current housing stock and affordability indicators, with a focus on spatially balanced development. In addition to new developments, attention must also be paid to renovating existing housing and modernizing living environments.

Based on these pillars, the researchers propose three possible development directions -- relying on the free market, supplementing the free market, and creating a diversified housing market.

The city's future choices will depend on political decisions and will significantly shape the future of Tallinn's housing policy -- especially in terms of affordability, segregation, and the diversity and quality of living environments. Success will also require close cooperation with the state and the development of new cooperation and funding models.