Over the past 15 years, residential construction has been concentrated in Tallinn and, to a lesser extent, Tartu and Pärnu. Meanwhile, not a single new apartment building has been constructed in places such as Valga or Jõgeva. As housing costs are rising as a share of income at one of the fastest rates in the European Union, housing affordability in Estonia is deteriorating.

"One issue concerns lower income deciles, which in Estonia often spend around 40 percent of their household income on housing costs. On the other hand, outside Tallinn and Tartu, we have a market crisis because quality housing is simply not being offered," said Siim Tanel Tõnisson, vice president of the Estonian Association of Architects.

The Ministry of Climate has completed its Housing Sector Development Plan through 2035, which aims to bring more affordable housing units onto the market. While affordability is a problem in major urban centers, availability is the main concern in smaller communities. The state would help simplify planning procedures, reducing investment costs for developers.

"If the roadmap develops supporting mechanisms or measures for how to do this in different regions, I believe developers will get on board if it helps mitigate their risks," said Kalmer Gross, CEO of the Estonian Construction Entrepreneurs Association.

Funding for several support measures is already available.

"For example, housing loan guarantees and co-financing loans are already available in Estonia through either the Estonian Business and Innovation Agency or the Rural Development Foundation. When it comes to renovation, which is a very important housing policy measure, we also already have loans and guarantees available in that area," said Ivo Jaanisoo, deputy secretary general at the Ministry of Climate.

However, the nearly 50-page development plan does not state anywhere how much its implementation will ultimately cost the state. Some of the funding would come from Europe.

"For Estonia, we are developing a separate model to provide long-term, low-cost financing from the European Investment Bank to private-sector developers. This is not state aid; rather, the private sector would build rental apartment buildings," Infrastructure Minister Kuldar Leis (Reform) explained.

According to Andres Jaadla, chairman of the Estonian Union of Cooperative Housing Associations, the state's new plan could result in a significant reduction in renovation support for apartment associations in major population centers.

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