This will, proponents say, address ongoing regional disparities which are harming Estonia's overall economy and will provide support to the private sector in developing properties in areas that would otherwise be commercially unappealing.

The EIB says it has supported affordable and social housing programs across many EU Member States already, and is scaling up housing support across Europe through its new Action Plan, including a €400 million HousingTechEU program.

"Estonia is not just Tallinn. About a third of Estonia's population lives outside Harju, Tartu and Pärnu counties, yet only up to two percent of new dwellings are built there," Minister of Infrastructure Kuldar Leis (Reform) noted.

"For developers, the risks are simply too high. This hampers labor mobility and regional development. Cooperation with the EIB helps bring modern rental housing to smaller centers. The aim is to arrive at a solution where state intervention is minimal and housing development can function as market-driven as possible," Leis went on via a press release.

The project's longer-term objective is to prepare and launch concrete investment projects in cooperation with private sector partners and local authorities, providing tailor-made financing tools, the Ministry of Climate said.

We're teaming up with Estonia to close the rental housing gap beyond major cities.

The 13-month advisory programme will help unlock investment, reduce risks for private developers and support regional development across the country.

➡️https://t.co/uTS9iZBqg2 pic.twitter.com/OTui0QABBj

— European Investment Bank (@EIB) February 17, 2026

"Affordable, high-quality housing is vital for Estonia's regional development," said Karl Nehammer, EIB Vice-President. "Smaller cities and towns have strong potential, but developers often face risks that stall investment. With this advisory support, we aim to help Estonia build a sustainable, market-driven model that attracts private partners and delivers modern rental homes where people need them most."

Ivo Jaanisoo, deputy secretary general of the Ministry of Climate, told "Aktuaalne kaamera": "Our initial goal is to use external experts to break down the problem and determine why these market failures exist, why real estate developers are not operating outside the Tallinn, Tartu and Pärnu areas, and then to propose concrete solutions. These solutions could include financing schemes, cash flow guarantee mechanisms, simplification of procedures, land policy interventions and so on."

Veikko Luhalaid, former mayor of Vaivara municipality and head of the Association of Estonian Cities and Municipalities ( Linnade ja Valdade liit), meanwhile said that adding housing could attract businesses to rural areas, given employees could that way find suitable and standardized accommodation.

"Since this project is in its early stages and has a long-term perspective, then it is positive that an entrepreneur can plan ahead if it is clear that housing is planned for that area and employees can move there. That is an argument in planning," Luhalaid said.

However, real estate developer Ingmar Saksing said he is more skeptical about the plan. "Nowadays, rental buildings are not being built in rural areas as no market value is created in doing so. If a property can be built at half or one third of market price or current levels, then no matter how this money gets distributed, it does not matter what specific metric is used in that context," Saksing told "Aktuaalne kaamera".

Estonia has previous and less happy experience with state-supported rental housing construction. This hit the state coffers, however, and was not largely based on EU money.

"The state supported local governments at a rate of 50 percent for the construction of new buildings or the reconstruction of existing ones. More than 500 apartments got completed, around 20 buildings across Estonia," Jaanisoo explained

As direct a distribution of funds is intended to be avoided this time around, he added.

The next stage is for the EIB to carry out a detailed market assessment, propose a sustainable financing model and a long-term strategy for developing the rental housing market. This will take a little over a year.

Additionally, in order to map the bottlenecks in the Estonian housing market, the University of Tartu and the Estonian Academy of Arts (EKA) have prepared an "Analysis of the Opportunities for Estonia's Affordable and Accessible Housing Policy." Among other findings, the study highlighted that ongoing regional disparities in the housing market reduce the country's long-term competitiveness and constrain economic development and the availability of skilled labor.

The EIB Group is the long-term financing institution of the EU owned by the Member States. In 2025, the EIB Group signed €100 billion of new financing for over 870 high-impact projects in eight core priorities that support EU policy objectives, including €336 million in Estonia.

--

Follow ERR News on Facebook and X and never miss an update!