Estonia’s construction and industrial sectors have been languishing for a year and a half, and it is unacceptable from the country’s economic recovery perspective to withhold the funding allocated by the European Union, Woodhouse Estonia CEO Annika Kadaja writes.
While the Estonian Business and Innovation Agency (EISA) opened applications for renovation grants for small residences on Tuesday, EU structural funds earmarked for apartment building renovation grants still aren’t being utilized. Long-planned measures that could have been launched at the end of 2023 still have yet to be opened, and at this point, the next foreseeable so-called target isn’t until early fall 2024. That means, however, that these funds won’t reach the market before 2025.
Estonia’s construction and industrial sectors have been languishing for a year and a half, and that being the case, it is unacceptable from the perspective of the country’s economic recovery to withhold the funding allocated by the European Union. The countercyclical investment and state flexibility that has been proudly advertised hasn’t materialized, at least not from the construction and industrial sectors’ perspective.
Estonia has to utilize these support funds by 2027 (€330 million in EU structural funds were allocated by the state for apartment building renovation grants for the 2022-2027 period). If this doesn’t happen, the EU grants will have to be paid back.
Meanwhile, renovations (depending on the technology used) take 2-2.5 years, from winning tender to being issued a [building] use permit. In the case of renovation with factory-produced elements, i.e. the use of factory-produced insulated panels, the process takes 1.5-1.7 years. Add to that preliminary work and organizing a procurement, which can tack on another half a year or even more.
If all of this is done starting from the moment the measure hits the market, it will take two to three years to renovate a single apartment building and utilize that grant money. And when you start counting backward, this requires that the state should be fully launching the measure right now already. The plan and the message to disburse funds evenly over the years is failing, and businesses have once again been left with empty promises.
Leaving aside the risks arising from measure and EU funding rules and considering the situation and sensibilities of the construction and industrial sectors, it is exceptionally damaging in the long term if, figuratively speaking, 18 apartment buildings are renovated, not 20.
The state must understand and take advantage of the current market downturn, which is offering cheaper prices for materials and labor. If the measure is delayed and the economy recovers as forecast, prices will go up again. As a result, the measure being delayed will also mean all the projects not yet implemented getting more expensive over time. We remember well the drastic hike in wood and construction materials prices in 2022.
On a more personal level, businesses have been operating based on the promises made by the state. The expectation was for this measure to be launched no later than at the beginning of 2024, including, in the case of the wooden house sector, for factory-produced renovation support. Businesses felt supported by the state, and acted based on previous signals regarding the importance of the renovation of apartment buildings and the time criticality of achieving these objectives. A successful factory-produced element renovation pilot project involving 20 apartment buildings, likewise implemented in mutual cooperation, boosted confidence and provided encouragement as well.
It was apparently naive to expect everything to go smoothly. Businesses, in the meantime, have made investments in technology development and innovation, adjusted strategies and products, hired new people and been ready to go for months. We’re taking off any minute now! But what hasn’t come is takeoff.
Such delays are causing companies direct financial losses and for quite a few businesses may prove fatal. What’s incomprehensible, given all of this, is what is it that has paralyzed the support measure process or package of support measures? Communication is lacking here, and it’s nearly impossible for companies to draw up reasonable business plans based on this.
Do we really not have a “protocol” developed to escape the red tape of bureaucracy? Is this really our Estonian state’s flexibility and strategy for countercyclical investments? Raul Kirjanen’s comment, “Wants versus what is actually done have diverged quite a bit,” very accurately sums up the current state of our state.
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