Podcast with Jan Ruuth, Senior Programme Manager and Advisor at Sida, currently seconded to the Ukraine Service at the European Commission in Brussels.

Jan, you have been working in Ukraine for many years in various positions, from the investment sector to international development organisations and international financial institutions. You certainly know Ukraine well. You are currently working in Brussels as part of the European Commission’s team on Ukraine, among other things in the housing sector. Of course, we will be listening to your expert opinion today, without any official positions. We would be interested to start with what types of social housing exist in Europe. Could you tell us a little bit about that?

Yes, with pleasure. But I should note that I am new to the housing sector, I have only been very deeply involved in it for the last two years of my work in Brussels. However, I used to work with Ukrainian municipalities and on municipal services, such as water supply, sewage and district heating. It’s not the same, of course, but it’s not too far from the housing sector. Over the past two years, I have learnt a lot from experts in the housing sector.

Regarding the types of social housing. Currently, Ukrainians consider the Soviet system, under which all housing was social, as outdated. They prefer the modern system of private housing. However, in Europe and other parts of the world, social housing has a large share of the housing stock. In general, social housing, for example, in Europe, is divided into two types. The first is housing owned by municipalities. This is the case, for example, in Austria, France, Germany and Finland. The other type is non-profit and co-operative housing. It differs from the first type because it is not owned by municipalities. Rather, it is a cooperative owned by both the people who live there and some non-profit organisations. Such housing exists, for example, in Denmark, Switzerland and the Netherlands. 

Affordable social housing necessarily involves a rent that covers the costs of operating and managing the property. If a person is unable to pay the rent, they receive a subsidy. However, free housing is not the main idea. 

In Ukraine, there is a widespread belief that everything social should be free, right? But this is not the case. Let’s look at my home country, Sweden. In many cities there is municipal housing, which accounts for somewhere between 30 and 35% of the housing stock. The rent paid by residents must cover the costs. This is to say that no one provides this housing for free. People from vulnerable groups receive assistance from the state or municipality, but pay rent to a municipal housing utility.

In your experience, which models are the most successful? 

I mean, there are different models in Europe, but the basic principle is common. It is that, if you look at Denmark or Finland, for example, there are government subsidies for construction. In the said countries, after the housing is built, the tenants’ rents pay for loans, depreciation and building management costs. And then there is a surplus of profit that the utility company can use to build new housing. It’s like a revolving fund. 

Besides, we should not allow the privatisation of these housing units. Because if it is municipal housing, it means that the municipality has invested in its construction. If you allow privatisation ten years later, the capital that the municipality has invested will be transferred to private owners of these residential facilities. Therefore, it is very important that this housing belongs to the municipality, which maintains it, manages it and rents it out.

I think that this will be a problem in Ukraine, where after the collapse of the Soviet Union there was privatisation and there is almost no social housing left.

Which of these social housing models would be best for Ukraine? 

In my opinion, Ukraine should create its own model. It is impossible to copy, for example, the Austrian model. However, you can take elements that would be useful for Ukraine. Or take something from Poland’s experience.

Fortunately, there are many experts who are ready to support Ukraine in creating a social housing system. Over the past few years, they have already been working to support Ukraine in developing various schemes and mechanisms. So, I am confident that with the support of the European Union and many other donors and international partners, we will be able to support Ukraine.

Here I would like to add. Perhaps, we will touch on this topic later, but it is worth mentioning. Currently, Ukraine still has the housing code from the 1980s . It is obvious, there is a need for a new one. Over the past 30 years, there have been many attempts to reform it, but for various reasons it was not possible so far. 

Why is this reform of the housing code so necessary? First of all, to prescribe modern standards. Every modern country in Europe has a housing code stipulating that the right to housing is a human right. For example, in the housing sector, the right to rent will be taken into consideration, therefore if you live in an apartment, you cannot be evicted without a valid reason. Currently, this is not very well regulated in Ukraine.

Now there is also the so-called Law on the Basic Principles of Housing Policy drafted by the Ministry of Development and discussed with various partners, including the European Commission, the World Bank, the European Investment Bank and many other partners. This law is necessary for a more modern and advanced housing code. The draft law was submitted to the Rada in January this year, but has not yet been adopted. This is partly due to the fact that it is difficult for the Rada to work in wartime. Another reason is that housing is a politically sensitive area with many vested interests which is also one of the reasons why it has not been possible to adopt a new housing code since more than 30 years.

Are there any other priorities on the list? 

I would like to tell you a little bit about what is being done now and how we are supporting the Ukrainian government in this regard. The European Commission has set up the Ukraine Facility, being a EUR50 billion tool to support reforms in Ukraine. This facility has three different components. The first component includes budgetary support in the amount of EUR 39 billion. The second component includes guarantees and blended financing, approximately EUR 9 billion. While the third component is a technical assistance amounting to EUR 4 billion. For Ukraine to access the first component, up to 39 billion, it has to develop a reform plan for different sectors of Ukraine. The plan should include housing, energy, transport, rural legislation and many other aspects. To access this budget support related to  housing , Ukraine has to fulfil two important tasks. These are two pieces of legislation. The first is the Law “On the Basic Principles of Housing Policy”. It should be adopted no later than the end of 2025. The second is the Law on the Social Housing Fund. It should be adopted by the end of 2026. 

We support Ukraine in implementing these measures by providing expert assistance both in Kyiv and in other regions. In addition to these reforms, which are the top priority of the Ministry of Communities and Territories Development of Ukraine, which is responsible for their implementation, we can also provide investment support. This is the second area, the area of guarantees and blended finance. We currently support two programmes: one with the World Bank and the other with the Council of Europe Development Bank. The programme with the World Bank involves providing a loan to the Ukrainian government, which is then transferred to people whose houses were slightly damaged during the war. People can apply to the ministry via the app Diia to receive funds to buy windows and repair materials. The second programme is with the Council of Europe Development Bank. This is money that goes to people who have lost their homes, people whose homes have been completely destroyed or are in the occupied territories. The programme provides vouchers for the purchase of new housing. On average, each family is allocated about EUR 36,000 to buy a new home. 

We also directly support the construction of housing for IDPs. We do this together with Nefco. As part of this programme, municipalities either convert old buildings into IDP housing or build new houses. In addition, I would like to talk about another very promising programme. This is a programme we are implementing jointly with the EIB, a pilot social housing programme under which the EIB will provide loans to Ukraine. In the first pilot phase, the EIB will provide EUR 50 million in loans, which will be supported by investment grants from the Ukraine Investment Framework programme, which makes up the pillar 2 of the Ukraine Facility.

Loans to municipalities or loans to the state? 

Now everything is structured in such a way that it will be a loan to the state, to the Ministry of Finance, but it will be provided to municipalities. They will select one, two or three pilot municipalities where they will build social housing in accordance with the best European practices and help municipalities. In doing so, a sustainable housing sector will be established with the first stock of rental housing. Furthermore, if all goes well, this municipal housing utility will work just like their successful counterparts in the European Union. Then people will move in, pay rent and pay construction costs, and there will be a small profit for the utility company so that it can build more housing. That’s the action plan at the moment. 

The work and support of the European Union is very impressive. You are testing different aid formats. But do you have a personal favourite model among them that you think will be a truly successful story?

In my opinion, the model proposed by the EIB is the best option. The idea of this pilot project with the European Investment Bank is that people who come to live in these apartments, I mean, internally displaced persons and vulnerable groups, will be not the only ones to live there. This housing will be open to the entire population of the city. After all, if you look at the experience of Europe, if you provide housing only to vulnerable groups, as, for example, in the UK, it creates a ghetto feeling. And we don’t want that.

Now, given the war, it should be available to different groups, such as veterans, internally displaced persons, etc. But the main idea of this housing model which the EIB will work on together with municipalities, is to provide housing for everyone.

So, we’re talking about a year and a half to adopt the necessary legislation, it means we will see the start of activities in this sector in some three-four years, right? And someone has to administer it, someone has to build it. What are your expectations in terms of timing?

Yes, it will take time. However, it is important to do everything right at the very beginning. In addition to these laws, which will be adopted, the Ukraine Facility envisages the need to develop a National Housing Strategy. And this is something we have already started supporting Ukraine with. At the same time it has to be underlined that such a strategy cannot be developed by external partners, but has to developed in a process owned by the Ukrainian side – this to be able to create ownership of the process and also the end product. This strategy will consider what Ukraine needs in the future for a well-functioning housing market. One of the points is the creation of a municipal enterprise or a housing finance agency where municipal companies could receive low-interest loans to be able to replicate the model we are trying to implement together with the European Investment Bank. The idea is to implement a pilot project in one or two municipalities, and, in addition to the EIB, to involve a pilot project with AFD, the French Development Bank having an extensive experience in implementing such programmes in other countries, and with their help create a model that can be replicated in other municipalities. But, of course, this will take time. And it will also require the participation of the private sector that will, basically, be involved in the construction itself. But first, it is important to develop rules and regulations, for example, rules about tenants, how much they should pay and what guarantees they will have. The rules should be in place before the housing market boom begins.

There is also the question of whether you really need to rebuild all cities. Or maybe we should rethink what Ukraine should look like in the future. Many things need to be thought through now, and housing is at the centre of it.

Is there a model of social housing that you would say: “Please don’t do that”? Any example of a bad scenario? Something that Ukraine should definitely not do?

One of my colleagues, a professor of urban planning at an Australian university, a real expert on urban development, gave me the following four points. First, we should avoid over-reliance on market development and public-private partnerships. There are examples from Ireland, where there is a similar system of social housing, which was implemented through public-private partnerships, and it failed. Ukraine and public-private partnerships are not the best of friends either, as you know. Second, we must not allow a deficit in the public housing stock. After the reforms of 1991, it almost disappeared in Ukraine, but public housing is essential for the functioning of the housing market.

Is there an optimal percentage of public housing? Because where will the private sector go if all municipalities start building cheap or affordable housing on cheap loans? The private sector will not be able to survive on luxury real estate alone.

In Europe, the average figure is around 30-35% of housing is publicly owned.

Is there no need for more? 

Yes, we don’t need any more. Getting back to what to avoid. Third, we cannot ignore the participation of residents in decision-making. Let’s look at Ukraine, for example. A beautiful three-storey building may find itself in the shadow of a 20-storey building, which has been granted permission to be built by a private developer. It is unlikely that the residents of the three-storey building will be happy with this neighbourhood. It is very important that they have the opportunity to influence decision-making on what will be built next to their homes. 

And the fourth is gentrification through mandatory reconstruction. If you reconstruct buildings and sell them to attract a richer population, then people who lived in the area before the reconstruction face the fact that the standard of living becomes too high for them. This is also not good for urban planning and for the well-being of city residents.

But where is the place for sustainable development in all of this? The solution to this eternal dilemma is that we must rebuild faster or build better. After all, our mentality often holds the idea that affordable housing should be cheap, which means that materials and technologies should be cheap. And only high-tech or VIP housing can be filled with heat pumps, solar panels, independent energy sources, super insulation etc. Do you think Ukraine can really achieve such a balance? And what does international experience say about this? 

I am sure that Ukraine can do it, because building energy efficient buildings does not mean that they have to be expensive. They can be a little more expensive than the cheapest ones. But if you look at the lifetime, the life-cycle cost, given that such buildings are easier to maintain and have lower energy consumption, then in the long run it is much better to build something more energy efficient.

In the projects that my team is involved in, I often wonder if instead of solar panels, heat pumps and better insulation, it would be worthwhile to build three additional apartments. This balance is very difficult to find. What are your thoughts on this? 

Ukraine has already adopted the NZEB standards, and both the EIB pilot project and the IFT pilot project also include energy efficiency integration. EU regulations on energy efficient buildings will need to be complied with, if not right now, then very soon. From this point of view, it would be better for Ukraine to comply with these norms from the very beginning. Of course, it is possible to build a few more apartments, but in the long run, all parties will benefit from building more energy-efficient and sustainable housing. 

If we imagine, say, in 10- or 20-years’ time, a truly inclusive and sustainable Ukrainian city with properly built social housing, what would it look like? 

Well, first of all, I hope that Ukraine will be able to rebuild when the war is over. Hopefully, this year. And I think the future Ukrainian city will have mixed forms of ownership. That is, there will be private houses, socially affordable housing, good public transport links, green areas, and the opportunity to work close to home. And I also think that utilities will be important for Ukraine, which will be like in many other parts of Europe. Speaking about utilities, it should be mentioned that they were neglected and need to be restored. 

And it will be rent-based housing that will allow people to come and pay the right price. And the people who live there will be involved in the management of this housing. And when new housing is planned nearby, they will have the opportunity to express their opinion to the municipality in the planning process. And the land owned by municipalities will be used wisely. And this is also something that I think is important for the further development of Ukraine. 

And finally, could you name, say, three to five priority measures to speed up the implementation of an effective social housing strategy in Ukraine? What needs to be done as soon as possible? 

First and foremost, Ukraine needs to adopt the Law on Basic Principles of Housing Policy, which will unblock the discussion on the housing code. This should be done as soon as possible. The second is to develop a good National Housing Strategy, which will serve as a guide for Ukraine on where to go. It is also important that not only international consultants take part in its development. This is something that should be developed and owned by Ukrainians themselves. Therefore, an inclusive process is needed, involving not only the government and ministries, but also other Ukrainian partners, such as NGOs, developers or private companies. The next important activity is to work on the issue of utilities in the municipal housing sector. To have such sustainable utilities that will allow us to launch pilot projects of socially affordable housing, ensure their functioning and spread to other regions of the country. 

Disclaimer. The interview reflects the author’s personal opinion and does not represent the official position of any organisation or institution 

Podcast is available for viewing at the following link