Estonia moves to revamp Soviet housing

  • 2003-02-20
  • Aleksei Gunter
TALLINN

Estonia inherited a slew of problems upon gaining independence in 1991, but perhaps none is so widespread, so fundamental and yet so completely unresolved as the housing crisis.

It is a problem that affects over one-third of the population, and year after year it only gets bigger.

In Tallinn alone over 160,000 of nearly 400,000 residents live in the ubiquitous panel apartment houses that scar the capital's postcard skyline like sodden chimneys in industrial London.

Built in the 1960's up through the mid-1980s, the panel boxes ostensibly came with a guaranteed lifetime of over 50 years, though as any novice engineer could tell, the buildings will require major renovation long before that.

Thankfully, state help is on the way.

On Feb. 11 the government approved a national housing development plan for the next five years and authorized KredEx, a state-run agency that has been working on the housing market for three years, to guarantee bank loans aimed at improving the Soviet housing malaise.

The housing development plan will introduce a 10 percent discount to so-called housing associations (organizations uniting residents of a apartment building) for renovating foundations and electric systems in buildings completed before 1990, and a 50 percent discount for the building's technical assessment cost.

KredEx will also cover up to 50 percent of the rent, construction or renovation expenses of so-called forced tenants (people living in houses reclaimed by pre-occupation owners) and workers who choose to move from cities to the provinces.

Still, while the plans are ambitious, funds aren't. For 2003 the state budget allocated 40 million kroons (2.5 million euros) to finance KredEx's new service, only a fraction of what the country needs to make a dent in its phenomenal housing problems.

According to the state's development plan, KredEx will start issuing grants for both the reconstruction and enlargement of the rent-housing fund in Estonia, which should kick off by summer 2003.

KredEx is a self-sustaining fund founded under the auspices of the Ministry of Economic Affairs and Communications in 2000 to support the development of small and medium enterprises, exports and housing.

Devoted to backing loan facilities, KredEx has issued guarantees to over 3,000 young families seeking mortgage loans.

From 2000 to 2002, KredEx undersigned 312 million kroons in mortgage loan guarantees, and from 2001 to 2002 it guaranteed 253 million kroons in loans taken by small and medium enterprises.

Hansabank and Uhispank, Estonia's largest banks, already offer several loan products to housing associations, but these leasing and loan packages are guaranteed by local administrations.

Another promising development in the housing sphere arose recently when President Arnold Ruutel promulgated a new law on business support and state loan guarantees on Feb. 14.

Slated to go into effect starting May 2003, the law provides state counter-guarantees for KredEx's business and housing loan guarantees. The state will cover the business loan guarantee portfolio and the housing loan guarantee portfolio up to 500 million kroons and 700 million kroons respectively.

According to Maris Heinaru, communications manager with KredEx, the banks and leasing companies have not had a guarantee against the bankruptcy of KredEx. "Thus with the new law our loan guarantees will become even more trustworthy for the financial institutions issuing loans to small and medium enterprises and private individuals," she said.