Case Study: Slovakian subsidies for residential energy efficiency

Written by Zita Kakalejcikova, Advocacy Assistant, Habitat for Humanity Europe, Middle East and Africa

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 Slovakia.

Slovakia is very often taken as THE “best practice” when it comes to the large scale refurbishments of the multi-apartment residential buildings. In line with the research for REELIH project of USAID and Habitat for Humanity we wanted to discover why.

Slovakia underwent the transition from a socialist regime to a market based economy pretty much at the same time as the rest of Central Europe and entered the European Union in 2004 together with seven other countries of the former socialist bloc. The ownership structure in Slovakia is very similar to other Central European Countries where more than 90% of housing stock is owner occupied.

According to the official state statistics a bit more than 50% of housing units are in multi-family buildings and 85% of these units are built with industrialized technology.

The biggest housing estate in Central Europe is located in a district of the Slovak capital Bratislava, with approximately 133 000 inhabitants living in these types of residential buildings. The same applies to other urban areas in Slovakia where prefabricated housing estates constitute two thirds of the total housing stock. This seems to be the main reason why the state of multi-family buildings became a crucial issue for the government in the 1990s.

Based on careful technical investigation of building stock in 1996-1998, the Ministry of Construction and Public Works of the Slovak Republic published a Building Renovation Concept. This document became the basis for all the future steps that the government took. The concept showed the bad state of the housing stock of pre-fabricated multi-family buildings and highlighted crucial problems, mainly systemic defects, which could be found in most of the buildings, as majority of them had been built with the same industrialized technology. Therefore, the main aim was first to repair the systemic defects (the number of defects was extended from originally proposed 6-11 in 2002, raising to 12 in 2006) and only then the energy issues were emphasized.

That is why today the Slovakian subsidy scheme is based on a dual system grant program from the Ministry of Transport, Construction and Regional Development for eliminating the most severe systemic defects of the buildings and the loan program from the State Housing Development Fund focusing on eliminating the rest of the systemic defects with the combination of energy efficient interventions.

Of course, both programs evolved through time, with the grant scheme now constituting 70% of the direct grant instead of the previous 30% and focusing on 6 instead of 12 systemic defects which is also a sign of improvement. The loan scheme eased the administrative barriers and became very popular, focusing much more on energy savings and quality of interventions than before, also thanks to the EU requirements.

Once the system had been established, commercial banks started to be involved as well. This happened mainly due to the fact that the new law on ownership of apartments and non-residential spaces (183/1993) obliged condominiums to have a fund for operations and maintenance that was to be kept in commercial banks. As a result, the banks could have a clear record of the condominiums’ cash flow and therefore were more willing to enter into collaterals with homeowners. Banks nowadays usually issue loans to co-finance state subsidies. However, homeowner associations started to take loans purely on the market basis as well in case they have been denied a state loan or a grant due to the lack of state funds. By now a substantial share of the housing stock in Slovakia has been renovated to some extent. The estimated share of multi-family buildings that carried out substantial renovation is about 50%, meaning approximately 500.000 dwellings out of which 300.000 were assisted by subsidies. This means that there was significant room for projects financed from homeowners’ private resources and/or the use of the EBRD or commercial loans.

To note, the Slovak scheme is largely based on the integrity and capability of homeowner associations that work on tendering documents, contract and pay for technical audits, contract out the construction and manage the whole process. Interestingly, the State Housing Development Fund pays directly the constructor and also takes part in the quality control process.

These high organizational demands coupled with relatively low subsidy share result in interventions only by the homeowner associations with the organizational and financial skills. In the long run this fact may become a serious barrier to including all buildings into the renovation schemes.

 

Zita Kakalejcikova has been with Habitat for Humanity area office for Europe, Middle East and Africa (EMEA) since 2014 working in the advocacy team that supports EMEA advocacy initiatives to change housing policies on the regional as well as national level. Zita works specifically on HFH and USAID project REELIH focusing on the regional level advocacy for residential energy efficiency. She holds a Master degree in International Relations and European studies from the Comenius University, Slovakia, having spent exchange semesters at Sciences Po Bordeaux, as well as at the Vienna University.

 

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