History of housing cooperatives in Estonia

Co-operatives in Estonia are relatively new, initially appearing during the first period of independence in 1918–1940. With the arrival of the “perestroika” and the accession of independence in 1991, co-operatives began to flourish. and were the first form of private enterprise. The Estonian Co-operatives Act was adopted in 1992 and was subsequently changed for the Commercial Associations Act in 2001.

Housing co-operatives grew rapidly due to the vast privatisation program put in place by the State. The privatisation program, started at the beginning of the 1990s, impacted on all aspects of the economy. The state owned properties and enterprises were all privatised in a very short period of time. Moving from socialism, state property and planned economy to liberalism, individual property and market economy, the necessary financial and legal tools had to be put in place such as a land registry and a mortgage financing system. The housing privatisation was done in three steps: the privatisation of apartments, the establishment of housing co-operatives or apartment associations, and the registration of housing property. The privatisation of apartments was done through a system of vouchers given to the in-situ tenants. The value of the voucher was dependent upon the number of working years during the soviet period. In less than three years, by mid 1993, more than 3,000 co-operatives housing associations or apartment associations had been formed.

Housing retrofitting was the first task to be undertaken at the time of privatisation. The apartments were located in 20 to 50 year old buildings. They were in poor condition due to inadequate construction and lack of maintenance. The major part of the building portfolio needed complete renovation. However, the economic situation of both the country and the citizens along with high interest rates ranging between 16 to 18% made it impossible to address the situation. The housing co-operative movement lobbied hard to gain better borrowing conditions. Thanks to this effort, a major instrument of housing policy in Estonia was introduced in 2003, namely the state subsidy for reconstruction and technical expertise of apartment buildings. The subsidy covered 10% of the costs of reconstruction works and 50% of the costs of technical expertise. In addition to this, the City Governments of Tallinn, Paide, and Rakvere had special credit support systems for apartment associations and co-operatives, which enable them to receive very low interest (1% to 3,5%) loan from banks.

In Estonia, unlike other central and eastern European countries that went through privatisation programs, the setting of up of housing co-operatives or associations was made mandatory for the management of the buildings and common space. This obligation created several challenges. People with no democratic tradition and different backgrounds had to work together and to learn building, people and organisational management. The Estonian Union of Co-operative Housing Associations was founded in 1996 expresslyto support the new housing co-operatives and to help the newly elected board of directors and managers.

The privatisation program included another aspect that added to the challenges of setting up and managing housing co-operatives. The State recognised the previous apartment owners when appropriate and allowed for the restitution of those units to the people who owned them before the communist period. To ease the transition of the living residing tenants, the State ensured low rent and security of tenure until 2002 at which time the previous owners were able to have their units back.

On January 1st 2008 a new law came into force allowing housing co-operatives to change their status to apartment associations. According to the Estonian National Housing Development Plan for 2008–2013, an apartment association is a non-profit association established by apartment owners for the purpose of shared management of the legal shares of the building and plot of land and, representation of the shared interests of the members of the apartment association.

Today only 300 original housing co-operatives remain. All others have been transformed into apartment associations. Housing co-operatives and apartment associations have some legal differences but both terms are used in English language to describe the portfolio.

Legal Framework

The legal instruments for the co-op housing sector are:
• The Commercial Code.
• The Co-operatives Act 1992–2001, Commercial Associations Act since 2001.
• The Non-profit Associations Act.
• The Apartment Associations Act.
• The Apartment Ownership Act.
The most important pieces of legislation for apartment associations or housing co-operatives are: The Apartment Associations Act, The Apartment Ownership Act and The Non-profit Associations Act.
The others are pertinent as supportive legal acts.

Context and situation today

Today, 96% of apartments have been privatised. These privatised apartments are organized through apartment associations and housing co-operatives.

Special efforts are being made to improve energy efficiency and the co-operative housing movement is working with several private and public partners. Any renovation and refurbishment plans are nevertheless limited by the financial capacity of individual members; housing co-operative membership includes people with diverse socio-economic backgrounds.

The official statistics indicate that Estonia is not lacking housing units. However the fact that, in many instances, several family generations live in the same unit may distort the official statistics.
Moreover, there has been only marginal new development over recent years. This has contributed to create a lack of available units; more specifically of affordable units for people with special needs and seniors. This lack of affordable units is more predominant in some regions facing migration due to employment.

The State has adopted a housing strategy, the Strategy of Estonian Housing Policy 2007–2013. The implementation of the policy is under the responsibility of the Ministry of Economic Affairs and Communications. Three priorities have been identified:
• Provide affordable housing to the tenants from restituted units.
• Support the building of new apartments.
• Improve and strengthen urban planning for better quality living,
roads and property lands.

Description of housing cooperatives in Estonia

Key characteristics of the Estonian housing co-operatives or apartment associations are:

• Formed to manage the common areas.
• Non-profit organisations managed by a board of directors.
• The board can hire real-estate manager if needed.
• Units belong to the individual members.
• Sale of units is regulated at market.
• Owners pay according to the actual costs.
• At the beginning of privatisation, one housing co-operative had to be established for each building. The rule was changed and apartment associations / housing co-operatives can have many buildings.
• Units built during the soviet era (1960s to 1980s) are of poor quality and have high energy costs (30% more than compared to other European countries). The portfolio is in need of major renovation.

Financing

Housing co-operatives or apartment associations have access to several financial programs. There are renovation loans and loan guarantees for apartment buildings and the green investment scheme “Support for renovation of apartment buildings” offered by KredEx. The objective of the green scheme is to support the reconstruction and renovation of apartment buildings for achieving indoor climate and energy efficiency, improving the energy-performance as well as using renewable energy in the existing apartment buildings. The financial assistance is available to apartment associations, building associations and communities of apartment owners.

The green investment scheme comes in a form of a grant from KredEx in the amount of 15%, 25% and 35% of the total project cost depending on the level of complexity of the reconstruction of apartment buildings. The grant is primarily meant to supplement the renovation loans of KredEx but the grant can also be combined with owners’ funds. Information from KredEx shows that the average energy saving of apartment buildings having undertaken renovation with the help of reconstruction grant offered since September 2010 is 37%. A total of 270 reconstruction grant applications have beensubmitted to KredEx until today, of which 229 apartment buildings have received a positive decision in the amount of 6,2 million Euros.
More information visit: www.kredex.ee.