At the Cabinet of Ministers' meeting, amendments were approved to the Recovery Fund support program for the establishment of the Financing Fund to promote the construction of low-rent housing in Latvia. Due to the increased construction costs, the applicable cost has been increased from 59,447 euros excluding VAT to 89,107 euros excluding VAT per apartment on average (the respective increase in costs per square meter is from 1,200 euros/m2 to 1,800 euros/m2). Several technical clarifications have been made to the program's implementation regulations in line with the amendments.
"During the program's implementation, we faced challenges in the construction industry and, consequently, the rise in construction costs. Therefore, to ensure the successful continuation of the program, we have promptly made changes, increasing the construction costs applicable in the program," says Minister of Economics Ilze Indriksone.
The total funding of the support program is 42.9 million EUR, and with this funding, according to the approved amendments, it is planned to build 467 low-rent apartments in the regions.
As known, the aim of the support program is the construction of rental homes to ensure the availability of low-rent apartments that meet construction standards and energy efficiency requirements for households that cannot afford housing on market terms. Within the program, support for rental housing construction is provided to real estate developers by the Development Financial Institution ALTUM in the form of long-term loans (up to 30 years) and capital discounts (up to 30% of the total applicable costs). The support program does not limit the circle of real estate developers, and support is available to commercial companies, cooperative societies, publicly controlled capital companies, or public-private capital companies.
The support program was launched in November 2022. However, unfortunately, due to rapidly increasing construction costs with the current program conditions, the activity in developing and submitting project applications was low. Therefore, to ensure the interest of real estate developers in participating in the program and a reasonable return on investment, the Ministry of Economics developed amendments to the Recovery Fund plan, which sets the conditions of the support program, including support intensity and applicable cost cuts. Since a positive opinion from the European Commission on increasing applicable costs and subsequently reducing indicators within the program was received at the end of May this year, the ministry submitted and the Cabinet of Ministers approved the amendments to the support program.
Details on the amendments to the Cabinet of Ministers' Regulation No. 459 of July 14, 2022, “Regulations on Support for the Construction of Rental Homes within the European Union's Recovery and Resilience Mechanism Plan 3.1. reform and investment direction "Regional Policy" 3.1.1.4.i. investment "Establishment of the Financing Fund for Low Rent Housing Construction" can be found on the Legal Acts Portal.