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.


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.