Maria Melnikova, a city planner and researcher at the Berlin Competence Center for Large Residential Areas, “Not Just Panels: German Experiences in Mass Housing Areas” is available for download on her official website masshousing.ru.
The online presentation and discussion of the book, organized by the Higher School of Economics, will take place on December 16, 2020 at 19:00. Details are here.
In East Germany, the share of privatized housing (3.5%) is very low, because only individual tenants wanted to buy their apartments after refurbishment at a price of 1000 € per 1m² or more. (BENN, 2007, p. 29).
Houses of the era of mass construction were built at about the same time. Therefore, it is necessary to simultaneously restore the technical condition of many buildings. This is one of the most ambitious and difficult tasks in organizing the further development of areas of mass residential development.
The peculiarity of Germany is that the bulk of the fund in panel areas belongs to large owners (housing companies, cooperatives). This simplifies the organization of the fund renewal process. Instead of a community of owners, one entity acts, as a rule, financially stable. But in Germany there is another practice of modernization of buildings - the reconstruction of the housing stock in historic quarters, where in many houses apartments are owned by private individuals. To work with such territories, at the legislative level, a scheme for working with reconstruction processes has been created - the territory of sanitation (German Sanierungsgebiet) and the agency of sanitation (German Sanierungsträger). This experience may be interesting for Russia.
The preservation and modernization of the national housing stock is one of the main tasks of the development of the German national economy. The housing stock is not only the responsibility of the owners, the state plays an important role. It creates conditions in which owners can take effective action to improve the technical condition of their buildings.
The preservation and modernization of the housing stock is one of the main topics in the development of urban development concepts. For city authorities, this task is often more significant than new construction, because the indicators of housing stock commissioning, as a rule, never exceed 1% of apartments existing in the city.
KfW, the Federal Development Bank of Germany, plays an important role in the energy modernization of buildings. Since 1990, the bank has invested about 68 billion euros in the housing stock of East Germany. This allowed owners (housing companies, housing cooperatives, residents' associations) to renovate more than 65% of the housing stock, which mainly consisted of panel houses.
We are not rich enough to live in low-quality housing stock
In the united Germany, the socialist panel housing stock was considered "unfinished". First of all, because it lacked a layer of insulation on the facade. Due to the constant impact of precipitation on the outer walls, the technical condition of the supporting structures deteriorated. This became the rationale for a quick and large-scale reorganization.
According to the BEEN project, panel buildings can reduce primary heat energy by 40–50% (BEEN, 2007). During the reconstruction of the panel fund in Berlin, it was possible to achieve 60 kWh of primary energy per sq. m of living space per year, which is more than two times lower than the average for Berlin (148 kWh per sq. m per year).
Germany became the leader in the scale of housing renovation among the countries of Eastern Europe, because it had the best ratio of the cost of housing and utilities to income of the population. According to the IWO Housing Initiative for Eastern Europe, the renovation rate of residential buildings in serial development reaches 85% today (IWO, 2018).
Renovation of buildings in Berlin
The districts on the outskirts of Berlin were the first territories in East Germany to undergo large-scale refurbishment. The initiative came from the city authorities: in 1992, by order of the Berlin Senate, the "Encyclopedia of Panel Buildings" was developed. It contained a list of possible measures for the modernization of all series of industrial housing construction in the GDR with a calculation of their cost. The theoretical recommendations have been tested in practice through the implementation of several pilot projects in Berlin. Based on this work, building owners and bank representatives could easily estimate the costs of the modernization.
In 1993, the Berlin Senate launched a program to support the renovation and modernization of buildings. According to this program, the owners were supposed to have 15% of their own funds required for the reorganization. Then they could apply for a loan from KfW Bank. The Berlin Senate also provided additional support. The modernization of all panel buildings in East Berlin (270,000 apartments) was planned to be completed within 10 years (Divigneau, 2010). The average investment for one apartment was 20,000 € (BENN, 2007, p. 85).
Ownership was not important in obtaining financial support. Of course, from an organizational point of view, it would be easier for large housing companies and cooperatives to carry out modernization. But also buildings in which apartments belonged to private owners could participate in these programs on equal terms.
The mass refurbishment measures in Germany were not carried out for individual buildings, but within the quarter as a whole. Large owners calculated the need for investments for each quarter and developed timetable plans for the reorganization. The state of the housing stock in the Hellersdorf district, Berlin in 1989 and after the first wave of modernization in the mid-1990s. This allowed the Berlin government to plan regional budget expenditures for the support program (Divigneau, 2010).
The cost-effectiveness of modernization measures and the judicious application of energy efficiency measures were the main criteria in the development of the mass remediation program.
In many areas, the refurbishment was carried out without resettling the residents. Because of this, special requirements arose for the organization of construction. The key requirement is to carry out works with the least number of complaints from residents. For this, a special consultant worked at the construction site, who could answer all questions about construction work in real time. Housing companies attracted several firms at once to carry out the work. All contracts had a condition: if one of the firms fails to fulfill its obligations, the other will fulfill them, taking on an additional amount of work. So they guaranteed the tenants that all the work would be done on time. In addition, the priority was to control the quality of the work - the representatives of the owner documented all the hidden work on a daily basis.
The modernization of heating, drainage and ventilation systems meant additional work inside the apartments, followed by the repair of bathrooms and kitchens. These works were also carried out without resettlement. Work inside one apartment lasted only 5 days thanks to the use of prefabricated structures. Work on different floors was synchronized by risers, which allowed residents to use the bathroom and kitchen of their neighbors on the staircase.
Large-scale reorganization measures made it possible to bring the housing stock to modern technical requirements and to reduce the cost of utilities by more than half. Currently, the renovation of buildings is not carried out in such a volume. The owners work on the basis of long-term 30-year modernization programs, and the economic effect of each event is carefully calculated.
What types of buildings are most effective in retrofitting?
The German rehabilitation experience shows that from a financial point of view, it is most effective to reconstruct five-story buildings, provided that there is no need to build elevators. Since elevators are necessary for people with limited mobility, financial support for their construction can be obtained additionally through the funds of special programs. It is much more difficult to renovate buildings above 10 stories because it is expensive and technically difficult. However, Germany has experience in the energy modernization of high-rise buildings. Often in such projects, only certain types of work are performed that are beneficial to residents and cost effective.
Most of the buildings have been modernized while maintaining the existing apartment layouts and number of storeys. Individual projects with changes in apartment plans, dismantling of the upper floors were carried out at the expense of the owners or at the expense of the program "City Reconstruction East". But these were isolated cases. Pilot projects have shown that it is easier to demolish a building completely and build a new one, smaller and in line with modern standards.
Projects with superstructure floors are more difficult than simple modernization, because it is necessary to strengthen structures and update the engineering infrastructure in the building. They are implemented in areas where there is a high demand for housing, and areas on the outskirts of cities are often not such. However, solutions with a superstructure and annexed sections can be interesting when it is necessary to provide the upper floors of a building with elevator access at the lowest cost. First, the elevator shaft is laid in the attached part of the building. Then the building itself is built on and access to the apartments on the upper floors is provided through corridors between the old and new parts of the buildings.
What is happening in the field of modernization of housing today
At the beginning of the 21st century, Germany began to actively develop a "green" economy. Energy efficiency in the residential sector is of great importance. Since 2002, the “Regulation on Energy Saving - EnEV” has been in effect at the legislative level. According to § 9 of this provision, the owners have an obligation to implement measures for the modernization of heating systems during the reconstruction of the building (reduction of energy consumption to at least 100 kWh of primary energy per sq. M of apartment area per year) (BENN, 2007).
In addition to the parameter "primary energy consumption", an important role in the "Regulation on energy saving" is played by the "transmission coefficient of heat loss". It reflects the average heat loss across the entire building envelope. The law sets the maximum allowable values for these parameters. However, KfW has developed several support options to stimulate higher energy efficiency rates (for buildings with consumption rates of less than 100, 85, 70, 55 kWh of primary energy per sq. M of apartment area per year). The better the energy efficiency indicator, the greater the amount of a possible subsidy for loan repayment (IWO, 2018).
What happens in other countries?
The goal of improving energy efficiency in housing plays an important role in European Union policy. 2005 to 2007 the interregional project “Baltic Energy Saving Network in the Housing Stock” (BENN) was implemented. Its goal was to develop strategies and tools for energy efficient building retrofits in the Baltic region countries (Lithuania, Latvia, Estonia and Poland). Thus, in Estonia and Lithuania the share of private owners is very high (96% and 97%). The privatization of housing after the collapse of the Soviet Union was practically free (the price could be paid with privatization certificates / vouchers). All of this is very similar to the situation in Russia (BEEN, 2007).
The project was looking for an answer to the question whether it is possible in these countries to repeat the experience of mass refurbishment of buildings, as was the case in East Germany. The experts analyzed the legislation, compared the situation in the economy and in the housing and communal services in the Baltic countries, Poland and Germany. They also estimated the costs of the reorganization and calculated the financial capabilities of the owners to pay for it. Due to the high cost of loans and low incomes of the population in the Baltic countries as of 2007 (the year of the start of the BEEN project), it has not yet been possible to implement large-scale rehabilitation programs. Only wealthy owners could upgrade their home. But after the free privatization, the composition of the residents of the house was usually mixed.
As a result of the project, a recommendation was made that the massive reorganization can be financed with long-term cheap loans, which are provided at the expense of low interest rates in state-owned banks. The percentage can be further reduced through budget subsidies. The apartment guarantees repayment of the loan - otherwise the bank will take it. However, it is imperative to develop tools to support low-income families. An important condition is the need to carry out a comprehensive reorganization. Phased activities or spontaneous combinations of these should not be supported.
An alternative financing mechanism is “contracting”. In this case, the investor (for example, a construction company) offers homeowners to implement the entire package of envisaged energy saving measures at their own expense. In this case, the community of owners does not need to worry about finding financing, providing a guarantee of loan repayment. The investor only requires the signing of an agreement in which the apartment owners undertake to pay a certain amount every month for the work performed (for example, 15 euros per apartment per month for 20 years).
According to Thomas Janicki, member of the Board of Trustees of the Housing in Eastern Europe Initiative in Berlin: “Governments in Eastern Europe, which are experiencing a stagnation in housing reconstruction, are gradually realizing that responsibility for the housing stock cannot simply be transferred into the hands of owners without creating the necessary mechanisms for its subsequent management”. The main problem now is that homeowners who have the ability to pay for energy-efficient upgrades to their homes are dependent on the consent of unsecured homeowners who are unable to pay for the renovation costs even if they wanted to (Yanitski, 2011).
Estonia
In Estonia, 96% of buildings are privately owned. About 60% of residents live in apartment buildings built between 1961 and 1990.
The process of modernizing buildings in Estonia began in the 2000s. Financial institutions were interested in issuing loans, and the most active and solvent associations of home owners could get them. The financial agency KredEx, established in 2001, provided guarantees to owner associations for obtaining loans from private banks (Leetmaa, 2018).
In 2009, The KredEx Revolving Fund was established in cooperation with the European Regional Development Fund, a fund to promote energy efficient building retrofits. Thanks to the creation of this fund, a more adequate support system has appeared in Estonia, based on a combination of loans, loan guarantees and grants. Any house where, after reconstruction, energy consumption is reduced by 20-30% can apply for financing. KredEx provides 20 year loans with an average interest rate of 4%. The owners must provide 15% of the funds (this can be their own funds or loans from other banks).
The owner association can also apply for a grant from KredEx in the amount of 15 to 35% of the cost of the modernization work, depending on the achievement of certain energy efficiency standards and the use of special technological solutions (for example, a heat recovery system). In the period from 2010 to 2014, 663 buildings (1.9 million sq. M) were modernized with the support of KredEx (Kurnitski, 2018). Since 2015, the requirements for ventilation of buildings have been adjusted to receive grants. Renovation projects of another 400 buildings were financed from 2015 to 2019.
In the houses of the later series, high-quality three-layer panels were used, which did not require additional insulation. Therefore, the comprehensive renovation measures did not include a visual transformation of the facade, so as not to waste money on a purely aesthetic solution.
Lithuania
In Lithuania, 97% of buildings are privately owned.
The program for the modernization of apartment buildings in Lithuania has existed since 2005. It involves financing the energy rehabilitation of the building through a low-interest loan (loan for 20 years, fixed 3% for the first 5 years). Loan repayment payments are almost equal to the reduction in utility bills after modernization (primarily for heating). Thus, the program seeks to ensure that residents do not have an additional financial burden.
The program also provides for a number of budget subsidies to cover the costs of project management, development of project documentation, and quality control of construction work. Since 2012, there has been a system of grant support for investments in building construction (30% of the cost for everyone, 100% for low-income families). It can be used by associations of owners planning to carry out a major renovation of the building.
Since 2013, a second model has appeared in the program, involving the active participation of municipalities. The City appoints a project administrator and also prepares an investment project for homeowners. After agreeing on the plan for the modernization of the building by the owners, the administrator takes borrowed funds, organizes tender procedures, is responsible for the implementation of all measures and financial management. 80% of projects in the program are managed by administrators appointed by the municipality (Smaidžiūnas, 2018). If owners with low incomes do not agree to modernization, they are deprived of subsidies to pay for utility resources.
The changes made increased the attractiveness of the program - as of the end of 2019, 2,176 facilities were reconstructed; another 421 houses are in the process of modernization.
The program is administered by the Residential Energy Efficiency Agency (BETA). Their responsibilities include approving projects for the modernization of buildings participating in the program, as well as monitoring the implementation process at all stages. Since 2015, BETA, with the support of the Eastern European Housing Initiative (IWO), has been implementing the project “Energy Efficient Renovation of Urban Areas in Lithuania” aimed at finding a model for the comprehensive renovation of residential areas and neighborhoods. They are also implementing a training program for municipal employees in the area of integrated energy efficient modernization of residential areas.
Latvia
In Latvia, the share of private owners is 85%. About 95% of buildings built between 1941 and 1992 require extensive renovation due to low energy efficiency and lack of necessary maintenance measures in previous periods (Jörling, 2018, p. 1).
In 2009, the Latvian government, together with the European Regional Development Fund, launched the Improvement of Heat Insulation of Multi-Apartment Residential Buildings program.
Since 2015, ALTUM has been operating in Latvia - a state financial development institution, created with the support of the Ministry of Economy and the Ministry of Finance. ALTUM is implementing a program to improve the energy efficiency of apartment buildings. The owners provide ALTUM with technical documentation for the modernization, and ALTUM gives guarantees to banks for the issuance of a long-term (up to 20 years) loan to an association of owners. In 2016, The Latvian Baltic Energy Efficiency Facility (LABEEF) was established to assist companies implementing energy efficient refurbishment based on energy service contracts (Jörling, 2018).
As of 2018, about 740 building modernization projects have been completed (total in Latvia - 53 thousand apartment buildings) (Blumberga, 2018).
Key takeaways from the experience of the Baltic countries
The results of the Baltic countries showed that the modernization of the fund, where all apartments are privately owned, is possible. However, this requires conditions under which the owners can act most effectively. A working system to support the modernization of buildings cannot be formed in a short time. How owner associations are responding to the program needs to be monitored and funding mechanisms improved. This is precisely the process that has been taking place in the Baltic countries over the past two decades.
The experience of these countries shows that the energy modernization program is beneficial to the state in economic terms, as new companies appear, jobs and tax payments to the budget increase.
One of the problems noted in research reports on the prospects for rehabilitation in the Baltic countries is the small number of residential buildings and a smaller population than in East Germany. This impedes the possibility of forming stable and independent financial institutions and achieving high rates of modernization. In Germany, initially, a significant amount of funds could be invested in the modernization program, because there were many who wanted to implement projects. Subsequent projects were financed with funds that were received as loan repayments (Jörling, 2018). In this regard, Russia is more promising for mass reorganization.
For the EU countries, the incentive to modernize buildings is to improve the energy efficiency of the economy, reduce dependence on energy exports and environmental effects. In Russia, these issues are not on the agenda. But the quality of residential buildings of the Soviet period is deteriorating all the time. According to surveys of the housing stock in the city of Ufa, the period of trouble-free operation for 60-70% of panel buildings is only 15 years (Samofeev, 2018). Thereafter, there may be a risk of collapse of part of the wall panels, which are the supporting structures of buildings. To preserve them, it is necessary to carry out comprehensive reorganization measures. Thermal insulation of facades will stop the process of annual freezing and thawing of wall structures, due to which their condition worsens. In Russia today, a large-scale program of refurbishment of multi-apartment buildings with working instruments of financial support is needed.
The need for a professional manager to organize the reorganization
IWO experts point out that private ownership communities in post-socialist countries are often incapacitated when it comes to energy retrofitting of buildings. Reorganization is a complex process with many risks for owners. The first stages already require financial costs. But at the same time, it is not yet clear whether it will be possible to achieve a result. A mistake at any of the stages (concept, design, construction work) can lead to the fact that the objectives of the rehabilitation will not be achieved.
That is why the issue of building renovation is not only a matter of financing. The owner community needs organizational support.
The organization of the renovation of the building includes the following stages (Smaidžiūnas, 2018):
• preparation of the concept of building renovation;
• organizing a general meeting of owners and making a decision on reorganization;
• holding a tender for the development of project documentation;
• support of the process of preparation of project documentation;
• holding a tender for construction work;
• financing of work (obtaining a loan, applying for grants);
• control and acceptance of construction works.
For example, as described above, the number of participating houses in the program increased in Lithuania after they began to appoint an outside manager (Smaidžiūnas, 2018). Another important mechanism was the ability to cover the costs of project administration through grants.
Renovation agencies for residential areas in Germany
The refurbishment process becomes more complicated when it comes not only to a single building, but to several blocks or the territory of a residential area as a whole. In this case, it is necessary to synchronize the interests of a large number of participants, as well as set up many parallel processes.
In Germany, there is a “reorganization territory” tool for solving these problems. Its rules are enshrined in the building code. The decision on assigning this status to the territory is made by the city administration. The city then hires an independent company - the "reorganization agency". Its tasks include coordinating plans for the modernization of buildings and grounds. It is easier for owners who participate in the modernization process on the basis of the developed plan to agree on the project and receive preferential loans and subsidies.
Refurbishment agencies should not be associated with construction companies operating on the site. This is an important condition enshrined in legislation. It guarantees that during the implementation of the project the interests of the residents will prevail over the interests of the builders.
The "Sanitation Agency" (German: Sanierungsträger) performs the following functions:
• develops a general transformation plan for the “sanitation area” (German: Sanierungsgebiete);
• organizes public discussions and agrees on the plan with all stakeholders;
• coordinates private and public investment;
• is responsible for the implementation of activities that are financed from the budget;
• involves the owners in the implementation of the project;
• Assists communities of owners to arrange for building retrofits as needed (at an additional cost).
The introduction of new types of property with the technical renewal of the fund
The prevalence of private ownership in multi-apartment buildings is a challenge to maintain the technical condition of the housing stock in the long term. Ownership communities that have been successful at a certain stage, 10 years from now, when the next steps are required, may not be as effective. Social heterogeneity is becoming another obstacle to joint action. The problem is that “owners who are willing and able to pay for the modernization of their homes are legally dependent on the consent of low-income owners” (BENN, 2007). This negatively affects the economic development of the country as a whole.
Therefore, it is necessary to think about how to introduce alternative forms of ownership in areas of mass housing development: cooperatives and housing companies, which can operate more efficiently in the long term.
In Germany in the 90s. the incentive for the creation of new housing cooperatives in areas of mass housing development was that they could count on additional funding to modernize the fund. A similar scenario can be realized in Russia.
The transfer of part of the housing stock into the ownership of housing companies can occur at a time when the technical condition of buildings on the territory reaches the minimum permissible value, and the owners are not ready to do anything to preserve it. Then, in the process of renewing the fund, the type of property may change - some of the owners may become tenants, and the restoration of the technical condition will take place at the expense of the housing company.
Of course, these are only hypothetical scenarios. But they must be taken into account. The application of these mechanisms requires careful analysis, adaptation of legal conditions. In addition, it will be necessary to adjust the housing policy of the country as a whole. If we talk about Russia, then first of all, free privatization should be stopped and more attention should be paid to preserving the existing housing stock.
