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Housing strategies and programmes

The Lithuanian Housing Strategy (approved)

2000-05-28

GOVERNMENT OF THE REPUBLIC OF LITHUANIA  

RESOLUTION No. 60

ON APPROVAL OF THE LITHUANIAN HOUSING STRATEGY

January 21, 2004.

Vilnius

For the implementation of the measures included in the Program of the Government of the Republic of Lithuania for 2001 - 2004 approved on 4 October 2001, the Government of the Republic of Lithuania resolves:

  1. To approve the Lithuanian Housing Strategy (enclosed).

  2. To authorize the Ministry of Environment, within 3 months from the effective date of this Resolution, to prepare and, having coordinated with other ministries, to submit the Implementation Measures of the Lithuanian Housing Strategy for 2004-2006 to the Government of the Republic of Lithuania.

Prime Minister Algirdas Brazauskas

Minister of the Environment Arunas Kundrotas

APPROVED by

the Government of the Republic of Lithuania

Resolution No. 60, January 21, 2004

THE LITHUANIAN HOUSING STRATEGY

1. GENERAL PROVISIONS

1. The Lithuanian Housing Strategy (hereinafter Strategy) prepared in compliance with the implementation measures of the Program of the Government of the Republic of Lithuania for 2001-2004, approved by Resolution No. 1196 of 4 October 2001 (Valstybės žinios, 2001, No. 86-3015). Taking into consideration the existing housing situation in Lithuania and the housing policy principles of the European Union (hereinafter EU), as well as the Public Long-Term Development Strategy approved by Resolution No. IX-1187 of 12 November 2002 by the Seimas of the Republic of Lithuania (Valstybės žinios, 2002, No. 113-5029), the Strategy aims for the establishment of the long-term housing policy goals and priorities while seeking for the improvement of the legal acts regulating the housing sector, the management and public communication system, the preparation and implementation of housing development, the renovation and modernisation, the financial and social support programs and measures. The Strategy implementation period is until 2020.

2. The Strategy has been prepared with the assistance of the World Bank, the Japanese Government, and the Nordic Council of Ministers, as well as with the use of analytic studies of external and Lithuanian consultants, including the existing housing situation analysis and the housing programs under implementation, the substantiation of the Strategy goals and its objectives.

3. The Strategy is based on the principals of sustainable development, subsidiarity, broad partnership and social equity, which are oriented towards the EU housing model, including a wide range of housing types, standards and tenure forms, population mobility.

4. Setting forth the Strategy goals and objectives, the provision that Lithuania will be an EU market player in 2020 was followed. Having upgraded the state economic policy and using EU financial and technical support, Lithuania is expected by 2020 to increase its gross domestic product (hereinafter - GDP) 2,5 to 3 times. The GDP share per capita is anticipated to reach the existing EU average.

5. The Strategy includes as follows:

5.1. The analysis of the housing situation in Lithuania;

5.2. The Strategy goals and priorities;

5.3. The Strategy implementation objectives and measures;

5.4. The final provisions.

II. ANALYSIS OF THE HOUSING SITUATION IN LITHUANIA

Economic and demographic situation

6. With Lithuania restoring its independence in 1990, the essential economic sector reforms were implemented. Within 12 years Lithuania coped with a complex transitional period and became a state with an open market economy, a state which will become an EU member in the near future.

7. The economic development of Lithuania encouraged housing policy changes, which resulted in the restructurisation of the housing sector, abolishment of the direct regulation of the housing market, the population acquired their housing ownership. In 2001 the private housing sector accounted for 97% of the total housing stock. The existing quality of housing often does not comply with the effective technical requirements, however, the housing stock value accounts for the major share of national assets, with a market value of LTL 35-40 billion. The appropriate use and development of these assets will encourage stable development of the national economy.

8. Acquisition of housing, proper maintenance, renovation and rehabilitation of the existing housing stock is directly related to both the national economic situation and the income level of the population. The average income of the population is only 32% of the average of EU countries. The average price of an apartment in an average apartment building is 8 times higher that the average annual net income of the households, and the average price of a single family house - even 20 times. This ratio in the EU member states is not higher than 4-5 times.

9. The formation of households is directly influenced by a change in population and households. The population has been decreasing in Lithuania in recent years. The number of elderly people has been increasing (25% of the households are over 60 years of age). The number of children under 14 years of age has been decreasing, with 18% of the population younger than 30 years of age. The majority, i.e. 57% of the population, is older than 30 years of age. The decreasing number and ageing population reduces the housing demand, however the increasing number of households (due to decreasing size) maintains a stable housing demand.

  • Provision of the population with dwellings and housing choices

10. As of the end of 2002, Lithuania had 1.356.160 dwellings and 1.461.065 households. The housing shortage accounts for 7%, while in Western and Northern Europe - 2%. Lithuania has 365 dwellings per 1.000 population, while in the above countries - 450 dwellings, thus the useful floor space area per capita accounts for 22,1 m2 and 30 m2 respectively.

11. In Lithuania, housing construction declined significantly compared to the situation in 1990 when 22.100 dwellings were constructed, while in 2002 - 4.562 new dwellings. The annual construction of new housing accounts for 0,3 % of the total housing stock, and the annual turnover on the market accounts for 2,7% of the existing housing stock, while the average EU indicators are 1,5% and 3,5% respectively.

12. The reduced construction scope within the above period resulted from a fall in direct public funding, and the private sector did not compensate for such a decline. This resulted from the reduced income of the population, high expenditure for the new infrastructure, the limited supply of plots for construction, and the unresolved issues in relation to the restoration of ownership rights to land. The Studies assessed the construction of new housing as being insufficient due to high prices and poor variety.

13. In Lithuania the housing rental market does not exist. In EU countries, rental housing accounts for 10% of the total housing stock. Lithuania feels a shortage of rental housing, especially for low-income families(young and elderly families). The prices of private rental housing vary depending on location and housing standards, and the prices of municipal social housing are lower by tenfold. Social housing accounts for only 2,4% of the total housing stock. The development of social housing has been slowing down as a result of reduced public and municipal investments.

14. One of the major problems is that low-income families, which cannot afford to maintain their housing, have poor opportunities for selecting housing. Young low-income families cannot afford to purchase or rent housing on the market. This leads to restricted mobility and does not encourage market dynamics.

  • Administration, maintenance and rehabilitation of residential buildings

15. The majority of the Lithuanian population, i.e. 66%, reside in multi-apartment buildings constructed between 1961-1990. The publicly owned rental housing stock was privatised to a high extent, however no sufficient attention was paid to the establishment of an institutional and legal system for its maintenance and exploitation, and for this reason housing maintenance problems arose. Only 17% of the total number of apartment buildings are managed and maintained by the housing owners who establish home owners' associations.

16. When establishing home owners' associations, the owners often lack initiative, as well as information and organisational-technical support by the public and local government institutions. Home owners' associations usually are not able to ensure appropriate maintenance of common ownership in the multi-apartment buildings and they can contract maintenance companies operating on the market, however, shortage of companies providing good quality services is noticed.

17. The housing stock without proper maintenance deteriorated. Prior to 1996, no housing rehabilitation and maintenance projects were implemented. In 1996 the Government of the Republic of Lithuania and the World Bank initiated and implemented the Energy Efficiency/Housing Pilot Project. Over 500 multi-apartment buildings were renovated in towns and cities throughout Lithuania. Much attention was focused on the implementation of the energy efficiency measures. Having implemented such projects, home owners reduced energy consumption by an average of 24%. A reduction in energy consumption has resulted in the reduction of subsidies for energy costs (up to 40%) for low-income families. The successful project implementation showed that home owners can implement complex rehabilitation projects in multi-apartment buildings, provided an appropriate legal, organisational-technical support system exists.

18. In 2000, having adopted the Law On Amendments to the Law on Home Owners' Associations of Multi-Apartment Buildings of the Republic of Lithuania, as well as other legal acts, numerous local governments began to accumulate special funds to support the home owners' associations. These funds are used to encourage the home owners to establish home owners' associations, to rehabilitate residential buildings and implement energy efficiency measures.

  • Housing development funding and implementation programs

19. Since 1990, residential construction investments have decreased and currently account for about LTL 500 million annually. The decline in residential construction is caused by the fact that more than 90% of the investments into this sector include own and borrowed funds of the population, while the capital of undertakings accounts for only 4-5%. Public investments in the housing sector is also 5-6% and has no major impact on the housing construction development. Borrowing for housing needs is limited by the low income of the population, and an unwillingness to borrow (only 30% of those who acquire housing borrow from banks). In recent years, more mortgages have been taken out. In the second half of 2001, these loans accounted for 6% of the loans provided to the population. The Private Company Insurance of Housing Loans, founded by the Government of the Republic of Lithuania, insures housing loans, and in the last two years this Company insured loans for the amount of LTL 244 million. Though the volume of mortgages on the market is increasing, the supply of new products on the market remains scarce.

20. Currently 6 housing programs are financed from the state budget of the Republic of Lithuania. Besides, in addition to earlier commitments of the Government of the Republic of Lithuania. In 2001 the housing expenditure from the state budget of the Republic of Lithuania accounted for about 1,5% of all expenditures, i.e. 0.3% of the GDP.

21. Based on the Law On Provision of Residents with Dwellings of the Republic of Lithuania (Valstybės žinios, 1992, No. 14-378) effective until 1 January 2003, interest on privileged housing loans was partially subsidised, and these commitments of the state in relation to the credits extended are valid until 2012.

22. The Law On Personal Income Tax of the Republic of Lithuania (Valstybės žinios, 2002, No. 73-3085) effective from 1 January 2003 provides tax deduction, i.e. the amount of interest on the housing loan is deducted from the annual income and the borrower is reimbursed the respective amount of income tax.

23. The Law On State Support to Acquire or Rent Housing of the Republic of Lithuania (Valstybės žinios, 2002, No. 116-5188) effective from 1 January 2003 provides additional support to families raising children, i.e. 10% of the housing loan will be covered and 20% of the credit is covered for orphans and group I and II invalids.

24. Subsidies to cover the insurance premiums of the housing loans are applied together with the state support measures as in paragraphs 22 and 23 of this Strategy and provide an opportunity to reduce the downpayment by up to 5%.

25. The biggest subsidy share includes the subsidies that partially cover housing, hot and cold water costs, which are received by the majority of support beneficiaries. Prior to 2002, these two figures had grown quickly. In 2001, the subsidies were provided to 13.5% of the Lithuanian population, and payments out of the budget exceeded LTL 98 million.

26. The annual allocations, amounting to LTL 2 million from the state budget of the Republic of Lithuania, are provided to support the home owners' associations in multi-apartment buildings implementing residential energy efficiency projects financed from the World Bank loan (according to the Energy Efficiency/Housing Pilot Project).

27. The social housing development is unevenly funded: in 2000 the funding allocated was LTL 5.5 million, in 2001 LTL 19.5 million, and in 2002 and 2003, there was no funding allocated.

28. A considerable share of the subsidies includes indirect subsidies which are not reflected in the Government programs of the Republic of Lithuania, i.e. a shortfall in the budget revenue (for example, due to low rent tariff applied to the state-owned or municipal housing). The annual amount of hidden subsidies amounts to LTL 100-200 million.

29. The programs currently under implementation are not sufficiently effective to attain the strategic housing goals. Taking into consideration the commitments, the necessity to ensure control of the fiscal deficit and the macroeconomic stability in the country, it would be expedient to reallocate the funds aiming at compliance with the needs of the population and goals established in the Strategy, targeting the poorest population.

  • Housing sector management

30. For the housing sector, competence of the Government of the Republic of Lithuania is dispersed horizontally across 7 ministries as follows: technical and physical management of the housing stock is assigned to the Ministry of Environment, funding of the housing programs is managed by the Ministry of Finance, the Ministry of Social Security and Labour is authorised to provide heating, hot and cold water subsidies to low-income families, issues related to energy use are decided by the Ministry of Economy, the Ministry of Agriculture manages land matters, the Ministry of Justice is responsible for the real estate register, The Ministry of the Interior formulates and implements regional development policy, ensures coordination of the state and local government interests, and establishes legal and economic provisions for the functioning of the local communities.

31. Though the main institution formulating the housing policy is the Ministry of Environment, it does not manage funds allocated to the housing programs and the housing policy implementation agencies. Both the Public Institution Housing and Urban Development Foundation (now the Public Institution Central Project Management Agency) and the Private Company Insurance of Housing Loans are directly or indirectly accountable to the Ministry of Finance. The Ministry of Finance also manages the funds of the Special Program to Finance State Support to Acquisition of Residential Buildings and Apartments.

32. As no common information system exists it is difficult to analyse the housing situation and to adopt political decisions in due time based on objective information.

33. The counties possess state-owned land and are responsible for its rational management and use. The local governments manage land transferred to them for the use, administer provision of social housing, perform supervision of the use of construction works, issue licences for construction and demolition. Both the counties and local governments do not have enough institutional and financial resources to carry out these functions.

  • Legal System

34. The Lithuanian housing sector is mainly regulated by 6 laws: the Civil Code of the Republic of Lithuania (Valstybės žinios, 2000, Nr. 74-2262), the Law On Home Owners' Associations of Multi-Apartment Buildings, the Law On State Support to Acquire or Rent Housing of the Republic of Lithuania, the Law On the Restoration of the Ownership Rights to the Existing Real Property of the Citizens of the Republic of Lithuania (Valstybės žinios, 1997, Nr. 65-1558), the Law on Land of the Republic of Lithuania (Valstybės žinios, 1994, Nr. 34-620) and the Law On Construction of the Republic of Lithuania (Valstybės žinios, 1996, Nr. 32-788; 2001, Nr. 101-3597). The Lithuanian legal system provides the right of a creditor to the apartment of a borrower, thus providing loans based on a mortgaged apartment became the main crediting model in Lithuania. Mortgages and transactions related to the common ownership right in a multi-apartment building are eligible solely in the cases when certain parts of a building may be distinguished as separate objects.

35. The Civil Code of the Republic of Lithuania effective from 1 July 2001 regulates the property relations and establishes the management forms of common ownership as follows: the home owners' association in a multi-apartment building, the management based on an agreement of joint activities or assigning of an administrator of the common use facilities.

36. The Law On Home Owners' Associations of Multi-Apartment Buildings does not provide the mandatory membership in the association. It hinders the common ownership management in multi-apartment buildings.

37. In aiming for better maintenance of the existing housing stock and ensurance of its longer exploitation period, it is necessary to improve existing legislation, providing more favourable provision for housing development, modernization and maintenance, and to encourage the private sector and also various financial institutions to participate in these activities.

  • Public Awareness Raising

38. The majority of apartment owners having privatised apartments faced the responsibilities arising from the ownership right. Unwillingness of a part of the apartment owners to maintain and repair the common use facilities in the building, and to manage the surrounding area inhibits the initiative of the rest of the home owners to implement measures that restore and increase the building value.

Thus, using legal, public awareness raising and educational measures, it is necessary to develop awareness of the housing owner, and the capacity to duly manage and maintain their real estate.

39. Currently no continuous and well-targeted system exists for public awareness raising, training and education for housing sector parties. These measures are implemented fragmentarily, using external technical assistance resources.

  • SWOT Analysis: Strengths, Weaknesses, Opportunities and Threats

40. Strengths:

40.1. a rather stable political and economic situation;

40.2. the main market agencies established and the economic development provisions provided;

40.3. integration into the EU;

40.4. stable growth of investment rating of Lithuania;

40.5. favourable loan terms and conditions;

40.6. insurance of housing loans;

40.7. a strong housing construction basis.

41. Weaknesses:

41. 1. Lithuanian economic development stands behind the EU members;

41.2. low income of the population;

41.3. limited housing choices;

41.4. a weak rental housing sector;

41.5. inefficient residential energy consumption;

41.6.issues related to land use and restitution of ownership rights;

41.7. dispersed and rather weak institutional capacity to coordinate the implementation of housing policy;

41.8. ineffective use of budget funds for housing subsidies;

41.9. no comprehensive information system for the housing sector;

41.10. an incomplete legal basis;

41.11. insufficient ownership awareness of owners.

42. Opportunities:

42.1. a bigger national budget resulting from the growing economy and EU membership benefits;

42.2. development of banks and other credit institutions, their increasing capital, bigger supply of new crediting products;

42.3. the construction sector getting stronger;

42.4. the organizational and technical capacity of the housing market players underdeveloped;

42.5. more active participation of NGOs, non-profit organizations and communities when solving the housing problems;

43. Threats:

43.1. demographic changes due to migration and ageing;

43.2. increasing social segregation.

III. STRATEGY GOALS AND PRIORITIES

  • Strategy Goals

44. Following the analysis of the current situation, the Studies and principles mentioned in paragraphs 2 and 3 above the following Strategy goals have been established:

44.1. To expand the housing choices to all social groups of the population. It is necessary to expand the housing product variety to ensure the housing choices to households (families) with different income levels, mobility of the population due to the changing labour market.

44.1.1. It is important to increase the supply of non-profit and social housing for average and low-income households. Cheap rental dwellings are of major importance to young people who do not have strong positions in the labour market and a permanent place of residence. It is necessary to achieve a level where the rental housing share would account for 18% of the total housing stock in 2020 (in 2003 it accounted for 10%), with the EU average being 30%; including social housing 4-5% (the EU average is 15-20%)

44.1.2. It is necessary to construct more new dwellings so that average and high income households could acquire or rent better dwellings, to increase the annual construction scope from the existing 4.000 dwellings to 6.000-8.000 dwellings in 2010, and 12.000-15.000 dwellings in 2020. In aiming to reduce the construction costs, measures will be implemented for the reduction in land acquisition and infrastructure development, ensurance of construction competitiveness and transparency.

44.1.3. Housing choice is facilitated by the development of affordable demand. In aiming for this, substantial financial support is provided to the households with insufficient income, i.e. their housing aquisition and rental costs are partially covered, with priority given to families with children, as well as handicapped persons.

44.2. To ensure efficient use, maintenance, renovation and modernization of existing housing, as well as efficient energy use. The condition of the existing housing stock will improve, with its value being preserved and increased where possible, the dwellings will be adapted to the new needs of households, the social segregation will be mitigated.

44.2.1. Prior to 2020 it is necessary to modernize based on the economic feasibility principle of heating systems in the existing multi-apartment buildings, to renovate and insulate roof structures, to change or replace windows and entrance doors, to remove joint defects of panel walls and increase the thermal resistance of external walls, to reduce heat energy costs per unit of useful floor space up to 30%.

44.2.2. It is necessary to foresee efficient state social allowances to low income households, also to apply other financial measures, i.e. lifelong rent and other types of rents. The dwellings that are not in demand on the market and have low value will be adapted to the needs of social housing.

44.3. To strengthen capacity of the housing sector parties to participate in the housing market, aiming for the establishment of a sustainable housing sector management system on the national, local government and community levels, their interaction mechanisms, to ensure protection of the consumer rights, also to facilitate public communication, continuous training and education of the housing sector stakeholders.

    • Strategy Priorities

45. In reference to the first goal, i.e. expansion of dwelling choices for all social groups, the following priorities have been established:

45.1. Development of the rental housing sector. The survey showed that 1/5 of the Lithuanian households (families) have a very low income (not exceeding LTL 500) and can live only in a social dwelling or afford their housing only if supported by the state. The rental housing development would enhance the mobility of the population, and young people in particular who have not yet strengthened their positions in the labour market and have no permanent place of residence, or plan to use their own or borrowed funds for other purposes. About 20% of the average income households (families) in cities would not be able to afford their own housing on the market and would gladly rent non-profit housing. The rental housing sector should be developed with the following methods:

the maximum use of opportunities in the private sector and its existing housing stock;

the development of the social housing stock using public and local government funds. This stock should be formed, first of all, by purchasing low-demand dwellings on the market and adapting them to social housing needs (the sellers would be provided with an opportunity to acquire better dwellings);

the establishment of conditions facilitating the non-profit rental housing sector, following experiences in the EU member states, and drafting legislation to regulate the development of such housing stock.

45.2. Development of residential construction. The demand of new dwellings is established by new households (young families, etc.), the internal migration and immigration processes, average and high income households seeking to acquire and rent better dwellings.

45.2.1. In aiming for the construction of new dwellings, management of land and urban infrastructure should be improved, competitiveness and transparency of the construction market should be ensured, leading to reduction of construction costs. Also, it is necessary to improve the quality control of construction.

45.2.2. Legal provisions facilitating residential construction involving cooperated funds of the population should be improved based on the establishment of cooperative construction associations or companies (non-profit organizations).

45.3. Increasing efficiency of the housing credit market. Currently Lithuanian banks provide housing loans to purchase, construct and renovate dwellings on very favourable conditions, i.e. with 5-6% annual interest for a term of 25 years or sometimes up to 40 years. However, the interest rate may vary. Thus, efforts should be taken to reduce housing acquisition and construction crediting costs.

45.3.1. Development of a mortgage bond and mortgages leads to reduction of long-term credit costs.

45.3.2. A credit information bureau would facilitate the reduction of the housing credit costs and risk of such credits, it would gather and process information regarding the clients, would prepare and provide reports to the banks participating in the program. The credit information bureau would be founded upon the initiative of the banks, with the respective legal and regulatory basis being drafted.

45.4. Effective and targeted financial support to low-income households for housing acquisition. The household survey shows that about 40% of the households can acquire or rent housing without state support in the market.

45.4.1. It is necessary to further implement and improve the effective Law On State Support to Acquire or Rent Housing of the Republic of Lithuania and the Law On Personal Income Tax of the Republic of Lithuania, the existing state support programs for housing acquisition or rent, including:

improvement of housing credit insurance providing opportunities for households (families) with insufficient income and assets to obtain credits at with a lower down paymentthan that established by a bank and to cover the insurance premium or its part;

covering a part of the credit (up to 20%) to the target social groups with insufficient income and assets, i.e. orphans and handicapped, families raising children;

tax deduction, i.e. to deduct the amount of interest paid on the housing credit (construction or acquisition) from the income amount (as limited amount expenditure).

45.4.2. The housing support programs should be targeted better towards social groups and coordinated with the other Strategy objectives and the housing subsidy system. The budget savings should be allocated to other housing support programs. They could be used to partially cover a rent to low-income households which rent dwellings in the private sector (thus leading to the reduction of social housing development needs), also to fund the social housing development.

46. In reference to the first goal, i.e. to ensure effective use, maintenance, renovation, and modernisation of existing housing, the following priorities have been established:

46.1. The improvement of maintenance administration of multi-apartment buildings aiming at the optimisation of their value. The deterioration and relative value reduction of the majority of multi-apartment buildings are related to inefficient management of the common use property, poor maintenance of the buildings. The majority of the residential buildings are maintained by administrators assigned by local governments, without actual participation of the home owners. Such maintenance and management not complying with the new ownership relations does not enable the home owners to use market opportunities and does not encourage them to maintain their buildings.

46.1.1 It is necessary to encourage the establishment of home owners' associations, to increase the home owners' capacity to appropriately manage and maintain housing and thus to ensure the owners' right to acquire the best quality affordable services on the market. Local governments, NGOs and counselling organisations should contribute more actively to this problem.

46.1.2. It is necessary to amend and improve the legal and regulatory basis for housing maintenance, i.e. to establish the rights and obligations of the parties involved in multi-apartment common ownership, qualification and technical requirements for the maintenance providers of common use facilities. The activities of the maintenance administrators of multi-apartment buildings should be licensed.

46.1.3. The local governments should facilitate the implementation of the function to supervise the use of construction works established in the Law On Local Self-Government of the Republic of Lithuania (Valstybės žinios, 1994, No. 55-1049; 2000, No. 91-2832) resulting in ensuring appropriate control of the use and technical maintenance of common ownership in multi-apartment buildings.

46.2. Encouragement of renovation and modernisation of the residential buildings to increase their energy efficiency, improvement of the funding mechanism. The thermal-insulation features of the majority of the residential buildings constructed prior to 1992 (i.e. prior to the changes introduced to the thermal resistance standards for buildings) do not comply with the effective requirements. Compared to the EU states with similar climate conditions, energy consumption for residential heating in Lithuania is 1,8 times bigger. The majority of the buildings are physically worn, their condition does not satisfy the residents' needs. Due to poor maintenance, their market value has been declining. The technical-economic feasibility study on the condition of the residential panel buildings show that it is economically expedient to renovate and modernise them. No economic conditions to modernise the existing residential areas by mass demolition of multi-apartment buildings exist.

46.2.1. It is necessary to seek renovation, taking into consideration the potential and economic expediency to modernise the existing residential buildings and their engineering facilities. Firstly, the major structural defects of roofs and walls should be eliminated and energy efficiency measures should be implemented within an economically feasible period.

46.2.2.The financial demand for the implementation of the most urgent measures accounts for LTL 8-9 million (at prices in 2002). In aiming for this goal, an appropriate financing mechanism should be introduced.

46.3. Support to low-income households to maintain housing and promotion of social cohesion in the society. The household survey shows that about 20% of the households do not have sufficient income to pay their utility costs, and a bigger share of the households cannot afford renovation of their housing and its value preservation.

46.3.1. The current system of subsidies to low-income households for heating and hot and cold water should be improved. It is expedient to adjust the housing subsidy system to cover other necessary expenditure related to the housing maintenance and renovation. Such social assistance in-cash to households should be provided, taking into account their income and assets.

46.3.2. Seeking to retain the social diversity in multi-apartment buildings, it is planned to use different forms of rents, including lifelong rent, established in the Civil Code of the Republic of Lithuania on a broader scale, and to implement a support system for local initiatives. Local governments should encourage NGOs, associations of home owners' associations in multi-apartment buildings and individuals to actively participate in the preparation and implementation of rehabilitation of the residential areas and social development plans.

47. For the third goal, i.e. strengthening the capacity of the housing sector parties in the housing market, the following priorities have been established:

47.1. The establishment of a sustainable housing sector management system.

47.1.1. Seeking to ensure efficient housing sector management, it is necessary to separate the housing policy formation and implementation functions, i.e. to establish all necessary institutional structures to perform these functions and the capacities to accumulate and analyse information, to formulate the state housing policy, to administer the state programs, to carry out the supervision and monitoring of the implementation of the programs. The objective, market-based information would facilitate these functions very efficiently. Thus, in aiming for fully integrated management, it is necessary to establish a common information system which would improve the quality of decisions and enable their duly implementation.

47.1.2. It is necessary to expand the functions of the local government and financial resources for the housing policy implementation, i.e. to provide more powers to them to use state-owned land, to introduce infrastructure, and to form and use the social housing stock.

47.1.3. It is necessary to create strong institutions (associations) representing the home owners and housing users to ensure appropriate ownership management and protection of the owners' interests in the housing market.

47.2. Public awareness raising and education. In aiming to have a full-fledged housing market participant and a consumer that's able to manage their assets, it is necessary to prepare measures to improve training, education and awareness raising. For building administrators and providers of other services, it is necessary to provide opportunities to raise their qualification level on a regular basis or acquire the respective housing sector management and maintenance professions.

    • IV. STRATEGY IMPLEMENTATION: OBJECTIVES AND MEASURES

Development of the Rental Housing Sector

48. This priority goal, i.e. development of the rental housing sector, includes the following objectives:

48.1. To facilitate opportunities for the population to choose rental housing in the private sector. Currently only a small share of the population rents municipal or private dwellings. Contrary to EU countries, rental housing owned by private companies or organisations is scarce. It restricts household mobility and housing choices. In aiming for the implementation of this objective, the following has been envisaged:

48.1.1. To strengthen legal guarantees in respect of relations between the private housing lessees and lessors, and also to establish mandatory quality requirements for rental housing.

48.1.2. To establish opportunities for low-income households (families) to rent dwellings in the private sector, i.e. to partially cover the rent from the state or local government budgets of the Republic of Lithuania (relating this measure with the social housing demand and development issues).

48.2. To establish legal and economic conditions facilitating a non-profit rental housing sector. Such housing would be provided to households with an average income insufficient to acquire their own housing, but too high to give them eligibility to social housing for low-income households. The non-profit housing sector would be developed by the construction associations - non-profit organisations supported by the local governments and the state. In aiming for this goal, objective legal acts to regulate this housing rental sector will be established.

Prior to drafting such legal acts it would be expedient, with technical assistance of external or international organisations, to prepare a feasibility study regarding the emergence of non-profit housing in Lithuania.

48.3. To increase the social housing stock, as in paragraph 44.1.1. of the Strategy. The social housing development will help low-income households to provide with the minimum standard housing.

48.3.1. The annual development of the social housing stock will be gradually increased, taking into account the state budget resources of the Republic of Lithuania. This objective is most feasible to implement by buying low-demand housing on the market, renovating and adjusting it to the social housing needs, and also partially covering rent costs to low-income households (families) that rent housing in the private sector, as in paragraph 48.1.2. of the Strategy.

48.3.2. It would be expedient to transfer the functions of social housing development and funding to the local governments, having amended the legal framework regulating the management and use of social housing, and formation of the local government budgets.

    • Development of New Housing Construction

49. This priority goal, i.e. development of new housing construction, includes the following objectives:

49.1. To improve land and infrastructure management. In aiming for the implementation of this objective, it is necessary to prepare a feasibility study regarding land and infrastructure management improvement. It is necessary to establish the most appropriate funding and use methods of infrastructure development in areas to be built up, and to better use urban land. The prepared measures will facilitate a reduction in construction costs, enliven the new housing construction and sales market, and provide better housing choices.

49.2. To strengthen the control of territorial planning and construction. Measures for the implementation of this objective will be envisaged, having analysed the application of legal acts regulating territorial planning, issuance of licences, commissioning of construction works, and also having analysed the objective information and opinion of the market parties.

49.3.To improve the legal provisions for the construction of residential buildings using cooperated funds of individuals. Currently the individuals who want to construct residential buildings using cooperated funds establish construction associations of residential buildings, the activities of which are not regulated. These associations are established based on the Sample Articles of Association of a Construction Association of a Residential Building approved by Government Resolution No. 280 of 23 April 1993 of the Republic of Lithuania (Valstybės žinios 1993, No. 14-369). The activities of such associations should be regulated more clearly in order to ensure their credibility and transparency. Based on EU experiences, it is necessary to regulate the establishment and activities of the construction associations (cooperatives) of residential buildings.

    • Efficiency Improvement of the Housing Credit Market

50. This priority goal, i.e. efficiency improvement of the housing credit market, includes the following objectives:

50.1. Development and improvement of the mortgage bonds and mortgage crediting system to encourage commercial banks to attract long-term financial resources for the housing credits.

50.2. To provide legal provisions for the establishment of credit information bureaus. This would facilitate risk reduction of housing loans, as well as lending costs. The credit information bureau will gather and process information about loan beneficiaries or denied clients, and provide reports on credits to the banks participating in the program of the bureau. The credit information bureau will be established upon the initiative of commercial banks, having prepared the necessary legal basis covering legal provisions regulating the sharing of bank information, standardisation and the scope of information provided to the credit information bureaus, and also data basis protection.

    • Efficient and Targeted Support to Housing Acquisition

51. This priority goal, i.e. efficient and targeted financial support for acquiring housing for households with insufficient income, includes the following objectives:

51.1. To improve existing state support for housing acquisition programs.

It is foreseen to further implement and improve the existing programs based on the Law On State Support to Housing Acquisition of the Republic of Lithuania and the Law On Personal Income Tax of the Republic of Lithuania:

to cover insurance premiums of housing credits or their part provided to acquire the first appropriate housing from the state budget of the Republic of Lithuania;

to partly cover a credit from the state budget of the Republic of Lithuania for targeted social groups, i.e. orphans, disabled, families raising children;

to get a tax deduction, i.e. to deduct the amount of interest paid on the housing credit to construct or acquire housing, on the income.

51.2. To prepare and implement a program of rent subsidies for low-income households. The rent subsidies should be provided to low-income households renting in the private sector or municipal social housing. The subsidies to households renting in the private sector would allow for a reduction in the demand for social housing and investments from the national budget to this sector respectively. The subsidies to low-income households would enable the social housing owners to increase the rent without any social conflicts and cease indirect housing benefits paid to such lessees. Respective legal acts need to be prepared for the implementation of this program.

  • Administration of Multi-Apartment Buildings

52. This priority goal, i.e. improved maintenance administration of multi-apartment buildings aiming at the optimisation of their value, includes the following objectives:

52.1. To amend and improve the legal and regulatory framework for administration of the use and maintenance of residential buildings.

52.1.1. The Law on Construction of the Republic of Lithuania was amended by Law No. IX-1780 of 16 October 2003 (Valstybės žinios, 2003, No. 104-4649) with a new chapter “The Use and Maintenance of Construction Works” that established the rights and obligations of construction works (including residential buildings), technical supervision of construction works, and the procedure of public control of supervision of the use of construction works. The regulations, including technical regulations of maintenance of residential buildings, will be drafted and improved respectively.

52.1.2. A licensing system for maintenance managers of buildings will be introduced. The implementation of this system will improve the quality of housing maintenance. Legal requirements for the implementation of this measure, a system for the preparation of housing maintenance managers and training, will be introduced.

52.2. To encourage the establishment and activities of the multi-apartment home owners' associations. The establishment of home owners' associations will enable housing owners to make a bigger impact on the improvement of the housing maintenance and administration of service quality. Housing modernisation programs for the residential buildings, managed by multi-apartment owners' associations, will be prepared. Effective laws will be amended to abolish the legal hindrances for the activities of multi-apartment home owners' associations related to housing maintenance.

  • Renovation and modernisation of residential buildings

53. This priority goal, i.e. promotion of renovation and modernisation of residential buildings which increases their energy efficiency, and improvement of financing mechanisms, includes the following objectives:

53.1 To establish a mechanism of renovation and modernisation of multi-apartment buildings and crediting, using the experience gained in the implementation of the Energy Efficiency/Housing Pilot project financed by the World Bank, crediting resources of Lithuanian banks, credit insurance and state assistance in-cash to low-income households, and also potential support of international financial institutions and funds.

In aiming for the ensurance of credit repayment by multi-apartment home owners, it is necessary to resolve the mortgage risk problem and, taking this into account, to improve laws and other legal acts regulating shared risk and creditors' rights.

53.2. To establish a system of financial support for low-income households implementing efficient projects of renovation and modernisation of multi-apartment buildings.

Support to Maintain Housing to Low-Income Households and Promotion of Social Cohesion in the Society

54. This priority goal, i.e. support to maintain housing to low-income households and promotion of social cohesion in society, includes the following objectives:

54.1. To improve a system of social assistance in-cash to maintain housing to low-income households. It is necessary to improve a system of subsidies to cover maintenance costs when implementing the Law On Social Assistance In-cash to Low-Income Families (Persons Residing Alone) (Valstybės žinios, 2003, No. 73-3352). These benefits will be provided taking into account the household's income and assets. The subsidies to housing maintenance should cover also other necessary costs related to housing maintenance, including physical maintenance and renovation. Amendments to other related legal acts will be introduced respectively. The reform of the housing assistance system is directly related to the demand of increased allocations from the state budget of the Republic of Lithuania.

54.2. To provide conditions to apply different forms of rent (lifelong rent, permanent rent, etc.). This measure enables low-income households and those who cannot afford to maintain their housing to convert his assets into cash. It would be expedient to analyse an option to provide local governments with the right to pay rent so they could apply different forms of rent to housing less attractive commercially.

54.3. To encourage local initiatives to rehabilitate housing and living environment. Local governments have to encourage NGOs, multi-apartment home owners and their associations, committees and boards of communities, and individuals to actively participate in the preparation and implementation of plans of renovation and cleaning-up of residential areas,and also social development plans, It is necessary to support cooperation of funds for the implementation of these objectives. It is foreseen to implement this objective when preparing programs of residential areas (territories) by local governments.

Sustainable Management System of the Housing Sector

55. This priority goal, i.e. improvement of maintenance administration of multi-apartment buildings aiming at the optimisation of their value, includes the following objectives:

55.1. To strengthen capacities of public institutions to formulate socially effective housing policy, to accumulate and analyse information, to administer the existing housing programs and monitor them, to raise public awareness, to expand training and education of subjects in the housing sector, thus increasing capacities of the Ministries responsible for the housing sector, to distribute functions among the public institutions more efficiently, and to use other structures operating in the housing sector.

55.2. To expand functions of local governments related to the housing policy implementation, to increase their financial capacity, i.e. to provide more authorisation to them to use state-owned land, to establish an urbanised infrastructure, and to form and use the social housing stock. The formation and use of the social housing stock should be delegated to local governments.

55.3. To establish non-governmental housing management institutions and to increase the efficiency of their activities. It is necessary to establish capable institutions of developers, housing owners and users (associations, confederations) to ensure duly management of the ownership, maintenance, protection of interests of housing owners and users. It is of particular importance to strengthen the legal basis of construction associations (cooperatives) of residential buildings and to establish an association of these associations to facilitate organisation of the activities of construction associations and protection of their interests. It is necessary to establish territorial and national associations of multi-apartment home owners, and to support the establishment and activities of other NGOs. It would be expedient to provide financial support of the state and local governments to establish these organisations and develop their activities.

  • Public Communication and Education

56. This priority goal, i.e. public communication and education, includes the following objectives:

56.1. To establish a permanently operating system of public awareness raising for the housing policy. A public awareness raising program covering various mass-media, the search for and promotion of success stories, and important housing policy objectives (promotion of the establishment of multi-apartment associations, energy saving in residential buildings, etc.) should be prepared. This program would be prepared and implemented using various funding sources.

56.2. To establish a permanent training and education system for the housing sector actors aiming at ownership awareness raising of the home owners and housing users and their capacity to appropriately manage and use their property, to increase its value, and also capacities of the providers of maintenance housing services aiming at adequate quality services. This system should be established by joint efforts of the public institutions, local governments, schools of further and higher education, and training centres and counselling firms. Support from the EU structural funds will be sought.

  • FINAL PROVISIONS

  • Strategy Implementation and Supervision

57. The Ministry of the Environment will be responsible for the supervision of the Strategy implementation and, taking into consideration varying economic conditions and new challenges, will provide proposals to the Government of the Republic of Lithuania regarding the adjustment of the Strategy goals and priorities, its implementation programs, and preparation and implementation of other measures.

58. The Strategy implementation supervision will be carried out by the Ministry of the Environment, by including the Lithuanian Housing Strategy Implementation Program in the Strategy Plan of this Ministry, including measures aiming at the implementation of the Strategy supervision, accumulation and analysis of relevant information, preparation and monitoring of the state support housing programs, public awareness raising, and development of training and education for the housing parties. For the implementation of this Program, funds from the state budget of the Republic of Lithuania will be allocated, and NGOs operating in the housing area will be involved, contributing to the management of NGOs in compliance with laws.

59. The goals envisaged in this Strategy will be fully attained in 2020. Quantitive and qualitative goal attainment indicators are designed for this period (see Annex). Aiming at objective efficiency evaluation of the measures the selected indicators will be analysed based on official statistics, the population census, analytical material collected in the State Enterprise Register Centre and the data basis of the Ministry of Environment. Targeted feasibility studies and surveys will be carried out, as necessary.

  • Strategy Implementation Funding

60. The objectives established in this Strategy will be implemented using funds of the population, economic entities, and the state and local governments.

61. The annual total investments into the housing sector development, housing rehabilitation and modernisation will increase four times before the year 2020.

62. Planning of the state budget allocations of the Republic of Lithuania for the implementation of the prioritised goals and objectives will be program-based and allocated in compliance with the procedures established in laws.

63. Assistance of international institutions and funds will be used as necessary.

Annex

to the Lithuanian Housing Strategy

PROPOSED GOAL ATTAINMENT INDICATORS OF LITHUANIAN HOUSING

Goal

Indicators 2020

1. To expand housing choices to all social groups of the population

1.1. rental housing will account for 18% of the national housing stock (currently 10%), including social housing 4-5%(currently 2,4%)

 

1.2. the scope of residential construction will increase from 4000 dwellings annually to 12.000-15.000 dwellings annually

 

1.3. the indicators of dwellings per capita will become close to the existing EU level: the residential useful floor space per capita will grow from 22,4 m2 to 28-29 m2 (the existing EU average - 30 m2)

 

1.4. with increased mobility of the population, the annual housing market turnover (currently ca. 2,6%) will grow to 3,4-3,5% (the existing EU level)

2. To ensure efficient use, maintenance, renovation and modernization of the existing housing, efficient energy use

2.1. for the majority of multi-apartment buildings, heating systems will be renovated and/or modernised, roof structures will be renovated and insulated, windows and doors will be renovated or replaced

 

2.2. wall joint defects of panel residential buildings will be removed and thermal resistance of walls of these buildings will be improved

 

2.3. the costs in relation to heat energy and fuel ratio per unit of useful residential floor space will be reduced by at least 30%

 

2.4. household costs (investments) for housing needs will increase and account for 20% - 30% of the total costs

3. To strengthen the capacity of the housing sector parties to participate in the housing market

3.1. a sustainable state management/regulation system for the housing sector will be established

 

3.2. local government functions related to the implementation of the housing policy will be expanded and their financial capacity will be increased respectively

 

3.3. the number of multi-apartment buildings managed by multi-apartment owners' associations will increase from 20% (currently) to 80%

 

3.4. capable non-governmental housing management institutions (associations or confederations of home owners and lessees) will be established

 

3.5. a reliable housing sector information system, harmonised with the EU housing statistics, will be established

 

3.6. public awareness raising and education systems operating on a regular basis will be established

 

					

Minister of Environment of Lithuania Kęstutis Navickas
Minister of Environment of Lithuania Kęstutis Navickas