Improving living conditions in Romania: national subsidy schemes supporting energy efficient renovations

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 Romania.

Romania made its first attempt to introduce a subsidy system supporting energy efficient renovations in the beginning of the 2000s. Its structure very much resembled the Hungarian subsidy system in which the state provided one third of the renovation costs in case the local municipality also contributed one third of the expenses of the intervention. Very soon this subsidy scheme was declared unsuccessful because of the very low number of applications. The main reason behind the failure may have been the fact that complex renovation was required by the state. Unlike in the Hungarian subsidy scheme where technical requirements were not high at the beginning, the Romanian scheme required a whole renewal of the internal heating system in addition to the insulation of the envelope. This would result in relatively high upfront costs. Therefore even the one third of the total costs that Home Owners’ Associations (HOA) were required to pay under the scheme happened to be too high for most of them.

The failure of the first try resulted in reconsideration of the whole subsidy system and the increase of the subsidy intensity. The subsidy scheme (the National Program of Thermal Rehabilitation) that was relaunched in 2006-2007 and modified in 2009 provided 50% non-repayable grant by the state with an additional 30% grant from the local municipality. At the same time reaching at least 30% energy saving through the intervention was compulsory. Thus, the share of home owners was reduced to 20% half of which they could get covered as a loan from the municipality.

In 2007-2013 the European Structural Funds provided additional resources in addition to this national subsidy scheme. In December 2010 the Regional Operational Program (ROP) 2007-2013 was modified by introducing a new area of intervention ‘Supporting investments in energy efficiency of residential buildings’. Under this programme the state and the EU provided 60% of the cost of interventions, while 40% of total costs had to be paid by home owners and local authorities. Based on the income level of home owners local municipalities could cover up to 30% of the renovation costs. Later on it was decided to use a 20% flat rate in the 2014-2020 budgetary period instead of the individual investigation of income level that required a lot of effort.

Securing the HOAs’ share of the costs still remains a crucial issue, as there are no joint loans for HOAs. To be more precise, there are joint bank loans but only with individual liens, which is practically not an option, that is why – in the absence of bank loans - home owners’ share should either be already available at the HOA’s account or should be gathered by the owners individually.

In both subsidy schemes (the national one and the EU financed one) the role of the municipalities is quite substantial: local municipalities inform HOAs about the possibility of applications, they partially finance the interventions, carry out technical audits, help in preparing grant applications (that are afterwards sent to the Ministry), and carry out public procurement for construction works. One of the most controversial elements of the eligibility criteria for the subsidy scheme regards the spaces with non-residential use. The call for the subsidy scheme states that owners of spaces with non-residential use (shops, offices, etc.) have to cover the costs of energy efficient renovations entirely by themselves – without any subsidy. This creates a big impediment for applications and paralyzes the process in many buildings.

In spite of the difficulties both subsidy schemes (the national and the EU financed one) turned out to be popular, so now the demand exceeds the supply. Therefore the Romanian Government decided to continue with these schemes also in the 2014-2020 budgetary period without making any substantial modifications.


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.

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