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National subsidies for renovation of multi-family buildings in Poland

Written by Éva Gerőházi and Hanna Szemző, Metropolitan Research Institute, Budapest

Upon the request of Habitat for Humanity International, Metropolitan Research Institute (MRI) has completed an in-depth research of energy efficiency renovation subsidy schemes in Central European countries (Hungary, Poland, Romania, and Slovakia) and assessed the potential of Bosnia & Herzegovina and Armenia for introduction of similar programs. The study was done within the framework of USAID project Residential Energy Efficiency for Low Income Households (REELIH) in order to strengthen the research potential of the project. This article is a summary of the case study of Poland.

Unlike the Hungarian subsidy scheme, the state interventions for supporting the renovation of residential units were not introduced in Poland as a part of a large housing subsidy package, but together with environmental and energy policies. The renovation of the housing stock was regarded as one of the tools to decrease energy consumption of the country and decrease the pressure on the environment. On the other hand subsidies for the renovation of cooperative buildings had existed from the late 1980s  focusing on the removal of the results of certain technological shortcomings (including some toxic materials) as well as renewing the system for the provision of energy (central heating and hot water) in form of state credit, which could be entirely amortized. This subsidy lasted till 1997 and was partly replaced by the subsidy based on the Act on Supporting Thermo-modernization and Repair of Exploited Buildings in 1998. Both multi-family and family houses were eligible for the subsidy, but the conditions favored multi-family buildings and family houses rarely took part in the program.

The Thermo-modernization Fund that is operated by the State Development Bank is a combination of state interventions and market mechanisms. The state fund provides non-repayable subsidies up to 25% of a commercial loan (currently at 4-7% interest rate) that must be taken for the purpose of renovation. The process is the following: the Home Owners Association (HOA), a condominium or a cooperative, is obliged to turn to commercial banks designated for this purpose that after a careful underwriting procedure provide a loan for the renovation covering up to 80% of the renovation costs. In case the renovation has been successfully completed the state provides 25% of the loan (thus 20% of the total costs) directly to the bank in order to reduce the amount of principal, which automatically reduces the amount of monthly installment. By this state authorities delegate all the administrative tasks to the banks thus ensuring that only the creditworthy HOAs are able to get the loan and the subsidy at the same time.

This was a bottleneck in the beginning of the subsidy scheme, as banks were not prepared to evaluate HOAs and require proper collateral. It took some years for the underwriting procedures to be developed and the collateral system to be eased by requiring mostly the cash-flow of the HOA as the main collateral instead of liens or deposits.

The loan with the incorporated subsidy could be used for any kind of interventions that resulted in energy savings (at least 10-25% saving was required depending on the type of interventions). The interventions must be preceded by energy audits.

The subsidy scheme has stayed rather stable with minor changes, for example the subsidy rate was reduced in 2009 to 20% of the loan amount from the original 25%.  Besides the Thermo-modernization Fund a renovation bonus and a compensation bonus were also introduced in 2009. These focused on the structural renovation of buildings that were in a critical state, such as those built before 1961. The subsidy content was more or less the same as in case of the thermos-modernization subsidy. Nearly €50 million was used annually for the thermo-modernization fund. From 1999 to 2015 altogether approximately 32.700 applications were received (one application means one multi-unit building) and nearly 30.000 premiums were granted – a relatively low number compared to the number of multi-unit buildings in Poland.

Although the Polish subsidy program has operated with low subsidy intensity, it has been very reliable, as the budget for it was granted by the state almost every year. However, the low subsidy level and the operation through commercial banks most probably have led to the exclusion of HOAs with low-income residents.

The Thermo-modernization Fund was the leading subsidy scheme for the renovation of multi-family buildings up to the end of 2015. However, as a result of the financial resources provided by the European Union in the 2014-2020 budgetary period new and quite generous subsidy schemes were created. These schemes provided 30-90% grants and soft loans for energy efficient renovations of family and multi-family buildings. However, it is important to note that these sources are meant to be used for a number of purposes, with the renovation of multi-unit buildings being just one of them. They concentrate on complex interventions and application of renewables which results in higher upfront costs, so the number of grants is quite limited. Given that, experts think that the importance of the Thermo-modernization Fund will remain the same as before.

You can read the full study here.

 eva-mri  

Éva Gerőházi (MSc in Economics) has twenty years of experience in research and consultancy in the field of regional and local economic development, housing policy and urban renewal. She has worked in several projects of the European Commission and has been assisting the Budapest Municipality and several Hungarian ministries and local governments in policy and program development. She researched and developed a programme for marginalised neighbourhoods and the use of European funds in these urban areas. She worked as a project manager of USAID financed condominium rehabilitation program in 1997-1999. She is also a co- founder of the Hungarian national subsidy scheme for complex renovation of multi-family buildings.

hanna-mri Dr Hanna Szemző has been working for MRI for 15 years. She has experience in research and consultancy in the fields of energy efficiency policy, urban renewal, city governance and real estate analysis and welfare policy. She has participated in numerous framework programs of the European Union, prepared strategic development concepts for local governments, and participated in the preparation of a study on the demographic future of European cities. Hanna worked on the health impact study of the energy efficient renewal program of the Hungarian housing estates. Lately, she has been working on the possible impact of collective self-organised housing on the European housing market. She has also focused on the possibilities of small business development in the areas of self-build and housing renewal and has been providing consultancy for Habitat for Humanity Europe, Middle East and Africa on the issue of energy efficiency in the framework of the REELIH project.

Written by Éva Gerőházi and Hanna Szemző, Metropolitan Research Institute, Budapest

Upon the request of Habitat for Humanity International, Metropolitan Research Institute (MRI) has completed an in-depth research of energy efficiency renovation subsidy schemes in Central European countries (Hungary, Poland, Romania, and Slovakia) and assessed the potential of Bosnia & Herzegovina and Armenia for introduction of similar programs. The study was done within the framework of USAID project Residential Energy Efficiency for Low Income Households (REELIH) in order to strengthen the research potential of the project. This article is a summary of the case study of Hungary.

One of the Central European counties whose experience was analysed in the framework of the REELIH project was Hungary. The national subsidy scheme to support the energy efficient renovation of multi-family buildings was introduced in 2001.

By that time some important preconditions were already present:

In 2001 a whole package of subsidies regarding housing interventions was introduced, among them a subsidy for the energy efficient renovation of multi-family buildings. Condominiums and cooperatives were eligible to obtain 1/3 of their renovation costs from the state in case the local municipality provided another 1/3 and their application was supported both on the local and national levels. Condominiums or cooperatives came up with their own 1/3 of the intervention costs mostly by taking subsidized commercial loans that in most cases incorporated an interest rate subsidy scheme to support the renovation of multi-unit buildings and a Bausparkasse scheme to further decrease the financial burden. With the combination of the interest rate subsidy and the Bausparkasse scheme a nearly interest free loan was provided by the banks directly to the condominiums and cooperatives in a form of joint loan with the main collateral of the regular income stream of the building. This form of joint loans was developed by the mid-2000s and boosted the renovation market.

From 2001 to 2009 the subsidy was announced nearly every year and the scheme underwent slight changes (e.g. increasing technical requirements, the termination of the compulsory participation of the local municipalities, the increasing eligible subsidy amount/flat, requiring more complex interventions, etc). After 2009 six years passed till the next call appeared in spring 2015, and there has been no calls ever since. In the call of 2015 the subsidy rate was maximized at 50% by the state (some local municipalities still provided co-financing in addition), however the rate depended on the energy efficiency rate achieved (the higher the predicted energy saving is the higher the subsidy rate was). Despite very high subsidy rates, evidence shows that a large part of the refurbished buildings have higher operation costs after the intervention as a result of the installments of loans that are not compensated by the energy saving.

There is no exact data on the share of the multi-family housing stock affected by the subsidy, since many buildings were able to take part in the scheme two or three times. However, according to a rough estimate, about 1/3 of the multi-unit stock may have undergone some refurbishment by means of the subsidy.

Looking from the condominium’s point of view, it seems that successful applications really required administrative and (sometimes) financial support of the local municipality, commitment of housing managers, and a home owners community that is able to make decisions.

Besides the visible results of the Hungarian scheme it is important to mention some of its drawbacks, like low control of quality or subsidy dependency, meaning that people preferred to wait for subsidies to come and rarely conducted any interventions without them. Besides that, increased prices and distortions on the supply side limited the number of potential contractors, as their selection was often politically motivated.

Currently, one of the biggest issues in connection with the subsidy scheme regards its continuation. The Hungarian state decided not to provide non-repayable subsidy to private home-owners any more but prefers interest free loans instead which the society and the experts seem to debate strongly.

You can read the full study here

eva-mri Éva Gerőházi (MSc in Economics) has twenty years of experience in research and consultancy in the field of regional and local economic development, housing policy and urban renewal. She has worked in several projects of the European Commission and has been assisting the Budapest Municipality and several Hungarian ministries and local governments in policy and program development. She researched and developed a programme for marginalised neighbourhoods and the use of European funds in these urban areas. She worked as a project manager of USAID financed condominium rehabilitation program in 1997-1999. She is also a co- founder of the Hungarian national subsidy scheme for complex renovation of multi-family buildings.
hanna-mri Dr Hanna Szemző has been working for MRI for 15 years. She has experience in research and consultancy in the fields of energy efficiency policy, urban renewal, city governance and real estate analysis and welfare policy. She has participated in numerous framework programs of the European Union, prepared strategic development concepts for local governments, and participated in the preparation of a study on the demographic future of European cities. Hanna worked on the health impact study of the energy efficient renewal program of the Hungarian housing estates. Lately, she has been working on the possible impact of collective self-organised housing on the European housing market. She has also focused on the possibilities of small business development in the areas of self-build and housing renewal and has been providing consultancy for Habitat for Humanity Europe, Middle East and Africa on the issue of energy efficiency in the framework of the REELIH project.

Written by Anna Bajomi,Programma Housing of the Compagnia San Paolo

At the end of November the Energy Poverty Handbook was published in Brussels. The aim of the Handbook is to offer a complex overview and up-to date knowledge for those who are concerned about the levels of energy poverty in Europe and want to contribute with their own capacities to eliminate it. Policy makers, NGOs, business and social professionals, academics and students can all use the handbook throughout their work.

 

The eight articles of the Handbook, provided by organisations and academic researchers active in the fields of energy poverty, describe the various aspects of energy poverty. The book starts with a description of social and health impacts of energy poverty, which is followed by a detailed overview about definitions of energy poverty and the state of the European housing stock. Then an article offers us a good understanding of macro-regional differences regarding levels and causes of energy poverty.

The second part of the handbook focuses on practices: articles describe the actual regulations aiming to protect vulnerable consumers, the available funding sources and good practices tackling energy poverty. The article about good practices would like to offer inspiration for policy makers and practitioners to develop and deliver their own projects after reading through case studies. The listed case-studies cover projects such as large-scale physical interventions, energy advice and advocacy services and finally grass-roots but still complex initiatives. Among the case studies the Residential Energy Efficiency for Low Income Households (REELIH) project of Habitat for Humanity  and USAID is presented as a good example for international interventions in building energy efficiency in countries where policy support and advocacy is highly needed to move forward the issues of energy efficiency.

The Energy Poverty Handbook initiated and edited by the office of Tamás Meszerics, Member of the European Parliament (The Greens/EFA group).

The contents of the book are the following:

You can read the full publication here.

 anna-bajomi  

Anna Zsófia Bajomi holds a Masters in Social Policy from the Eötvös Lóránd University of Budapest in Hungary. She has worked at the Municipality of Budapest on the Social Urban Rehabilitation Thematic Development Programme for local stakeholders, and at the office of Tamás Meszerics at the European Parliament. Her field of research is housing and energy poverty especially energy poor tenants, grass root initiatives and good practices tackling housing and energy poverty. Currently she is working on Social Rental Agencies, and studies other innovative housing solutions at the Programma Housing of the Compagnia San Paolo in Turin, Italy, in the frame of the Erasmus For Young Entrepreneurs Program of the European Commission.

Written by Susana Rojas Williams, Director of Int’l Shelter Initiatives at Habitat for Humanity and Lindsay Grier, Int’l Shelter Initiatives Fellow at Habitat for Humanity

As shared in a previous blog, last month at the Third United Nations Conference on Housing and Sustainable Urban Development (Habitat III), 167 nations adopted a global strategy for sustainable urban development called The New Urban Agenda. Implementation discussions were focused on addressing our cities’ biggest challenges, among them: access to clean and affordable energy as well as energy efficiency in Cities. Habitat for Humanity was actively involved in conversations leading up to Habitat III, as well as in negotiations around creating the New Urban Agenda. As part of Habitat for Humanity’s participation in this global dialogue, delegates advocated for affordable energy solutions to climate change, using REELIH as a model for energy efficient residential building, and had the opportunity to present the model as part of both Conference events and pre-events.

Highlighted last week was the presentation given by Habitat for Humanity’s Advocacy Manager for the EMEA Region, Gyorgy Sumeghy. Sumeghy spoke at a Habitat III networking event focused on people public private partnerships, where he cited REELIH as an inter-sectorial approach to battling energy poverty. Outside of this session, REELIH was featured as part of a presentation given by Susana Rojas Williams, Director of International Shelter Initiatives. Rojas Williams delivered a keynote speech at the EcoMaterials 5 Conference in Riobamba, Ecuador (12-14 October, 2016), one of Habitat III’s global pre-events and a platform for developing innovative solutions to energy inefficiencies. The Conference, organized primarily by the EcoSur Network and the Global Network for Sustainable Housing, set the week in motion by bringing together over 200 participants to discuss the construction, maintenance, and upkeep of habitat in developing countries. At the Conference, Rojas Williams emphasized the power of using energy efficient residential building as a strategy to alleviate poverty, build better living conditions, and reduce CO2 levels in the atmosphere. She initiated conversations on how to link the REELIH Model with the creation of inclusive, safe, resilient communities, concluding that we cannot focus on global poverty until we are intentionally battling energy poverty.

The New Urban Agenda has recognized that “urban form, infrastructure, and building design are among the greatest drivers of cost and resource efficiencies, through the benefits of economy of scale and agglomeration, and fostering energy efficiency, renewable energy, resilience, productivity, environmental protection, and sustainable growth in the urban economy” (paragraph 44).  Furthermore, it encourages governments to “develop sustainable, renewable, and affordable energy, energy-efficient buildings and construction modes, and to promote energy conservation and efficiency” (paragraph 75) as well as to “promote the development of adequate and enforceable regulations in the housing sector, including … energy and resource efficiency” (paragraph 111).

The New Urban Agenda also provides very specific recommendations regarding energy efficiency and encourages the “adoption of building performance codes and standards, renewable portfolio targets, energy efficiency labelling, retrofitting of existing buildings and public procurement policies on energy, among other modalities as appropriate, to achieve energy efficiency targets. We will also prioritize smart grid, district energy systems, and community energy plans to improve synergies between renewable energy and energy efficiency” (paragraph 121).

Our hope is to continue advancing, advocating for, and implementing global development goals  - contextualized at the local level - that recognize the need for sustainable energy and energy efficiency solutions. With the example of REELIH and the support of its stakeholders, our future is looking bright.

 susana-rojes-williams  

Susana Rojas Williams is the Director of Int’l Shelter Initiatives at Habitat for Humanity and provides technical support to housing programs around the world. She is an urban planner & architect with extensive technical and policy experience in urban development, housing, land & infrastructure (water, sanitation and energy) with focus on pro-poor and people-centered approaches. Susana is from Lima, Peru and holds Masters in City Planning and of Science in Architecture Studies from MIT, and a Professional Degree in Architecture from the University of Kansas.  Before joining Habitat, Susana worked with UN-HABITAT, the World Bank, the IDB, the Center for Reflective Community Practice, and the Special Interest Group in Urban Settlement at MIT.  She has professional experience in Latin America, Southeast Asia, South and Central Asia, Eastern Europe and Northern Africa.

lindsay-grier  

Lindsay Grier is a 2016 Davidson College graduate with a BA in Hispanic Studies. Prior to joining Habitat for Humanity International as part of the Global Programs team, she spent time in Costa Rica, Ecuador, and Kenya working with human rights and poverty alleviation organizations. For her research on the role that language plays in mediating our world, Grier was awarded a presentation slot at the 2015 Midwest Association for Latin American Studies Annual Conference as well as the 2016 Hispanic Studies Award at Davidson College. She just returned from Habitat III in Quito, Ecuador, and will continue her fellowship with Habitat for Humanity through July 2017.

With the Europe 2020 Strategy, as well as ones that followed (2030 Energy Strategy and 2050 Energy Strategy), the European Union aims to address global energy challenges and achieve sustainable growth through an unprecedented collective action – the Energy Union. By adopting this plan the EU seeks to promote energy security, renewable energy production, and higher energy efficiency. This initiative is of central relevance to the residential energy sector in Europe.

Earlier EU initiatives to improve energy efficiency of existing housing stock and to establish energy efficiency standards for construction of new buildings (e.g. Energy Performance of Buildings Directive and Energy Efficiency Directive) are now being revised within the framework of the Energy Union, with new overarching legislation to follow.

A report conducted by Central European University assesses how this new initiative of the European Commission will affect residential energy efficiency countries of Central and Eastern Europe.

What is the Energy Union?

On February 25th, 2015 the European Union took a historic step forward in its endeavor to enhance energy security in the region. The EU Directorate General for Energy launched The Energy Union, a strategic framework designed to benefit the EU in five key dimensions:

The document sets out fifteen action points and a roadmap how to achieve the Energy Union. Among other things, the roadmap will have a considerable impact on residential energy use. Thus, energy retail sector will see a phase-out of regulated prices and new measures to protect vulnerable consumers will be introduced. Investments in energy efficiency will be supported more strongly, while a strategy for Heating and Cooling approved by the European Parliament this year will see practical implementation. Reviews of legally binding directives that deal with energy efficiency and energy performance of buildings are to be conducted. In addition, the European Commission will create a comprehensive pool of data on energy issues in the EU in order to make accessible all relevant knowledge that the Commission and Member States have on the matter.

What does the Energy Union mean for countries in Central and Eastern Europe?

All EU Member States are directly affected by the Energy Union.  However, the Strategy will have a considerable impact on the rest of Europe as well. Its principles will be furthered through two partnerships the EU has with its neighbors, namely The Energy Community and the Eastern Partnership (see also previous energy efficiency related initiatives in the EaP countries such as Eastern Europe Energy Efficiency and Environment Partnership (E5P) and Eastern Partnership Technical Assistance Trust Fund (EPTATF)).

The Energy Union will not only impact the EU, but also the Energy Community and the Eastern Partnership countries. There are numerous financial instruments at the European and national levels that can be used by firms and authorities to fund their energy projects.

This article is based on the report ‘Impact of the Energy Union on Residential Energy Efficiency in Central and Eastern Europe’ that was prepared for Habitat for Humanity by D. Paden Chang, Fabian Steuer, and Anastasia Zabusova from the Central European University in Budapest.

 

You can find the whole report here.

Written by Gyorgy Sumeghy, Advocacy Manager, Habitat for Humanity Europe, Middle East and Africa

Habitat III is a United Nations conference on housing and sustainable urban development that took place in Ecuador on 17-21 October 2016. At the end of the conference a comprehensive document called New Urban Agenda was adopted by UN member states. Habitat III has become an historic gathering of 30,000 global delegates (governments, NGOs, academia, urbanists, corporate, housing activists) who discussed the future of cities in light of rapid urbanization. Housing was a key topic of numerous discussions, with multi-stakeholder partnerships appearing as a crucial factor to ensure implementation of the New Urban Agenda. György Sümeghy, Habitat for Humanity EMEA Advocacy Manager, has also spoken on this matter at the conference.

As a part of a huge HFHI delegation to the Habitat III Conference I participated in a panel discussion Triple Win:  People, Public, and Private Partnerships for More Livable Cities and Communities. In this session, practitioners and participants in successful People Public Private Partnerships (PPPPs) diagnosed and presented practical advice on how this approach works by bringing public and private resources into alignment with community priorities through active collaboration among stakeholders. In this framework I was invited to present our project Residential Energy Efficiency for Low Income Households (REELIH) in Eastern Europe.

The presentation was based on HFHI’s and USAIS's experience in Macedonia, Bosnia and Herzegovina, and Armenia. All these countries have an underdeveloped market for residential energy efficiency and a complex tenure structure which often becomes a barrier to effective community decision making and proper building maintenance. There is also lack of awareness among home-owners about the relevance of energy efficiency investments. Therefore, what is really needed in order to improve the situation is, first of all, the empowerment of the local community of home-owners so that they can pro-actively engage in energy efficiency projects. Second, facilitation among home-owners, local government, financing institutions, national government, and construction companies is required to make the “eco-system of stakeholders” work.

We regard our work with USAID's REELIH as a specific example of a PPPP, as through our project we bring together all the stakeholders representing the four different ‘P’s in order to scale up investment in residential energy efficiency in Eastern Europe.

The presentation was well-received and was complemented by interesting case-studies by real estate developers from the United States and Brazil. A lively discussion afterwards was focused on questions like:

-  How important is trust in PPPP's?

- What are the key reasons that PPPP's work?

- Does the size of the project matter?

- What role does the public sector play in setting the stage?

- Are PPPP's "equal partnerships"?

Residential Energy Efficiency for Low-income Households project is one of the many assistance projects supported by the American people through the United States Agency for International Development (USAID). Since 1992, the American people through USAID have provided a broad range of development programs in Armenia and Bosnia and Herzegovina, shifting from an initial humanitarian emphasis to assistance for economic, political and social transition.

György Sümeghy received his MA in English and Hungarian Literature in 1995 in Budapest. He spent ten years in public education and later at a private business college. Based on his management experience in education and volunteerism and interest in social development he joined Habitat for Humanity Hungary as National Director in 2005. Under his leadership, Habitat for Humanity Hungary has become an advocacy led organization where field projects support strong awareness raising and advocacy initiatives to change housing policies in the country. Gyorgy joined HFHI EMEA in 2013 to lead regional advocacy initiatives and support national advocacy programs in the EMEA region. He represents HFHI in Brussels and all over Europe at regional conferences and meetings.

 

Written by Gyorgy Sumeghy, Advocacy Manager, Habitat for Humanity Europe, Middle East and Africa

The title of this new website captures very nicely that Habitat for Humanity International’s main focus when it comes to the energy efficiency of residential buildings are: the people. All our efforts are focusing on combatting energy poverty so that families should get  warmer homes and save money on their heating bills as a result of the retrofitting of their buildings.

We started to address residential energy efficiency more than 5 years ago with the support of USAID. We have run projects in Macedonia, Armenia and Bosnia and Hercegovina. We learned a lot from these projects and we also worked with researchers to better understand the context of residential energy efficiency in Central and Eastern Europe. We also engaged with many stakeholders both at the national level and at the European level and learned that our experience is worth sharing. That’s why we endeavored to develop a knowledge platform and launched this website to foster further knowledge sharing and policy dialogue among all the relevant actors in residential energy efficiency.

The current English version of this website will be soon complemented with an Armenian and Bosnian subpage targeting home-owner associations offering practical information how to start the retrofitting of their own buildings.

Because we all want to get warm homes!

György Sümeghy received his MA in English and Hungarian Literature in 1995 in Budapest. He spent ten years in public education and later at a private business college. Based on his management experience in education and volunteerism and interest in social development he joined Habitat for Humanity Hungary as National Director in 2005. Under his leadership, Habitat for Humanity Hungary has become an advocacy led organization where field projects support strong awareness raising and advocacy initiatives to change housing policies in the country. Gyorgy joined HFHI EMEA in 2013 to lead regional advocacy initiatives and support national advocacy programs in the EMEA region. He represents HFHI in Brussels and all over Europe at regional conferences and meetings.

 

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