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International Internet Magazine. Baltic States news & analytics Sunday, 05.07.2020, 04:07

Housing policy in Latvia

Inara Lisa, PhD candidate at the Baltic International Academy, Riga, 07.02.2020.Print version
According to the Constitution of Latvia, the strategic goal of its housing policy is to fulfill the right to housing for all categories of citizens. The most vulnerable from this point of view is the low-income category of citizens.

The objectives of the housing policy of Latvia include [1]:

- improving the quality and affordability of housing;

- providing a legal base for efficient management of residential buildings;

- assistance in creating a rented housing stock on the territories of local authorities;

- support for energy saving measures in residential buildings.


On the basis of Article 96 of Section VIII of the Constitution of Latvia [2], it is assumed that the strategic goal of its housing policy is to fulfill the right to housing for all categories of citizens. The most vulnerable from this point of view is the low-income category of citizens. This right can be realized by this category of the population by increasing the level of competition in the housing sector, implementing a policy of state support, using state investment and subsidies.


The main principles underlying the housing policy pursued by the state bodies of Latvia are [3]:

- continuity of the administration process;

- selection of optimal management methods;

- preservation and improvement of the residential building environment;

- preventing encroachment into human safety or health, as well as maintaining the quality of a residential building.


To follow these principles and achieve all the tactical and strategic goals, the Law of Latvia "On the Management of Residential Buildings" was adopted in 2009 [4], and later the Law "On Apartment Property" [5]. Further on, in order to improve the process of management of residential buildings, the Department of Housing Policy developed the rules of the Cabinet of Ministers concerning the following issues [6]:

- requirements for sanitary maintenance of a residential building;

- procedure for storing and updating documentation;

- activities to be performed as part of maintenance, current repair, renovation, and reconstruction;

- minimum requirements for energy efficiency of a residential building


Thus, the implementation of the housing strategy can be carried out in the following areas: improving the economic situation, increasing the level of business activity in the construction sector of the economy, as well as the introduction of a number of restrictive measures (such as limiting rent for housing or protecting tenants from eviction). The implementation of the state housing strategy takes place through certain functions, the analysis of which is presented in Table 1.2. The methodological basis for this analysis was developed by the Belorussian scientist M.M. Eremenko [7].


Table 1.2 Housing Policy Functions and Their Implementation in Latvia

Content

State bodies that implement this function

Economic

- promoting the general welfare of the population;

- promoting the stable functioning of the financial and banking systems;

- maintaining the necessary level of competition in the construction sector;

- ensuring the appropriate tariff and price policy;

- implementation of efficient tax policy.

Ministry of Finance of the Republic of Latvia

Ministry of Economics of the Republic of Latvia

Bank of Latvia

Individual Deposit Guarantee Fund

Competition Council of Latvia

Public Services Regulatory Commission (PSRC)

State Revenue Service of the Republic of Latvia

Legal

- promoting the development of the private property institution;

- ensuring the protection of rights and implementation of obligations of all participants in the construction sector;

- promoting free circulation of residential real estate;

- legal assistance in financing housing projects;

- formation of the legislative basis for existence of the efficient lease system.

Ministry of Justice of the Republic of Latvia

Social

- implementing and monitoring the population social support system;

- formation and development of social infrastructure;

- prevention of housing shortages in emergency situations.

Public Services Regulatory Commission (PSRC)

State Labor Inspectorate

State Social Insurance Agency

Ministry of Health of the Republic of Latvia

Ministry of Education and Science of the Republic of Latvia

Latvian National Commission for the United Nations Educational, Scientific and Cultural Organization

City Councils and Committees

Ministry of Welfare

Management and Financial

- development of the state budget taking into account areas of housing policy;

- promoting the harmonious development of territories;

- managing the current housing stock.

Ministry of Finance of the Republic of Latvia

Ministry of Economics of the Republic of Latvia

Public Services Regulatory Commission (PSRC)

Ministry of Local Government and Regional Development

City Councils and Committees

Environmental

- monitoring the environmental safety of housing;

- ensuring compliance with housing policy and environmental standards.

Ministry of Agriculture

Ministry of Environmental Protection and Regional Development

Technical

- development of regulations and standards of quality, safety, energy efficiency, etc. in construction and monitoring their compliance.

Cabinet of Ministers of the Republic of Latvia

State Construction Control Bureau

Center for Conformity Assessment of Building Materials and Construction Products

Certification Center of the Latvian Academy of Sciences

State Construction Inspectorate

Security

- protection of historical and cultural heritage;

- promoting the efficient functioning of the housing insurance system.

Ministry of Culture

National Heritage Council

Ministry of Economics

Cabinet of Ministers

Ministry of Internal Affairs

City Councils and Committees

Public Services Regulatory Commission (PSRC)

Informational

- collection and systematization of information on the existing housing stock;

- monitoring the development of housing areas;

- promoting the availability of reliable information on housing development;

- legal assistance to the population on housing issues.

Public Services Regulatory Commission (PSRC)

City Councils and Committees

 

Thus, the implementation of the state's functions in housing policy, as well as control over their implementation in Latvia, is carried out by both legislative and executive authorities. Based on the study, it can be concluded that public housing policy issues in Latvia are given close attention with priority to all related issues and trends. The analysis of the socially oriented state housing policy shows that two directions can be distinguished in modern conditions: objective and subjective accessibility of housing for the population [8].


To determine the objective affordability of housing, various financial and economic indicators have been studied, such as the cost of housing, the mortgage lending rate, the real income of the population, etc. To conduct the macroeconomic assessment and comparison of housing affordability, international practice uses such coefficients as the housing affordability coefficient (price-to-income ratio) [9], the share of mortgage payment in the family income (mortgage as percentage of income) [10], the mortgage affordability index (loan affordability index/housing affordability index) [11], gross rental multiplier (price-to-rent ratio) [12] and capitalization rate (gross rental yield) [13].


However, when examining the term "housing affordability", one should study not only the economic possibilities of its free acquisition and maintenance but also subjective categories, namely the level of population activity on the market, expectations of the population, the quality of housing that meets modern standards, as well as the degree of trust in state, municipal and non-state institutions in the field of construction.


Thus, it should be noted that housing affordability is a certain indicator of the economic and social development of society, acting as a catalyst and inhibitor of social tension in society. Therefore, the development of an efficient economic strategy for the development of individual housing construction can be a solution to many modern issues in social and economic development in Latvia.


[1] Em.gov.lv. (2019). Housing. [online] Available at: https://www.em.gov.lv/en/sectoral_policy/housing/ [Accessed 10 Sep. 2019].

[2] Website of the President of Latvia. (1992). Constitution of Latvia. [online] Available at: https://www.president.lv/ru/latviiskaya-respublika/konstituciya-latvii [Accessed 10 Sep. 2019].

[3] Em.gov.lv. (2019). Housing. [online] Available at: https://www.em.gov.lv/en/sectoral_policy/housing/ [Accessed 10 Sep. 2019].

[4] LIKUMI.LV. (2019). Dzīvojamo māju pārvaldīšanas likums. [online] Available at: https://likumi.id/193573-law-on-administration-of-residential-houses [Accessed 10 Sep. 2019].

[5] LIKUMI.LV. (2019). Dzīvokļa īpašuma likums. [online] Available at: https://likumi.id/221382-law- on-residential-properties [Accessed 10 Sep. 2019].

[6] Rīgas namu pārvaldnieks. (2019). Regulatory Basis for the Efficient Management of Residential Buildings. [online] Available at: https://www.rnparvaldnieks.lv/ru/dlja_klientov/normativnie_akti/ [Accessed 10 Sep. 2019].

[7] M. Eremenko (2018). Functions of the State Housing Policy in the Republic of Belarus. Housing Strategies, 5(2), pp.191-210.

[8] L. Leonova and V. Zasukhina (2016). Housing Affordability Criteria. Economic Analysis: Theory and Practice, 12, pp.111-124.

[9] Hermann, A. (2018). Price-to-Income Ratios are Nearing Historic Highs. [online] Joint Center for Housing Studies of Harvard University. Available at: https://www.jchs.harvard.edu/blog/price-to- income-ratios-are-nearing-historic-highs/ [Accessed 11 Sep. 2019].

[10] Goodman, L., Lei, W. and Zhu, J. (2018). Housing Affordability. Local and National Perspectives. [ebook] Urban Institute, p.www.urban.org. Available at: https://www.urban.org/sites/default/files/publication/97496/2018_04_10_housing_affordability_finalizedv2.pdf [Accessed 11 Sep. 2019].

[11] www.nar.realtor. (2019). Housing Affordability Index. [online] Available at: https://www.nar.realtor/research-and-statistics/housing-statistics/housing-affordability- index/methodology [Accessed 11 Sep. 2019].

[12] Chen, J. and Ni, S. (2011). Estimating Estate-Specific Price-to-Rent Ratios in Shanghai and Shenzhen: A Bayesian Approach. [ebook] University of Macau, pp.208 – 239. Available at: https://www.um.edu.mo/fba/irer/papers/past/vol14n2_pdf/04.pdf [Accessed 11 Sep. 2019].

[13] Erpolat Tasabat, S., Aydin, O. and Hepsen, A. (2018). Prediction of residential gross yields by using a deep learning method on large scale data processing framework. Pressacademia, 7(1), pp.125-130.


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