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80% households in Latvia cannot afford to buy homes

BC, Riga, 18.06.2018.Print version
As many as 80% of households in Latvia cannot afford to buy a home, Economics Minister Arvils Aseradens (Unity) said on June 15th during a meeting with municipal leaders from Riga Planning Region, informs LETA.

The minister informed that rapidly growing demand for housing and also residents’ weak purchasing power represent the greatest challenges limiting housing affordability in Latvia’s regions. As a result, 80% of the population cannot afford to buy a proper home.

“A survey of the biggest cities’ mayors shows that at least 1,000 more apartments are needed in Valmiera, for instance, at least 200 apartments in Cesis and Smiltene and 400 apartments in Sigulda, but the in March, there were only six rental ads in Valmiera and four in Sigulda,” Aserdadens, adding that the shortage of housing restricts the inflow of new labor force.

Despite the high demand, only around 20% of households are actually able to buy a home provided that their total housing expenses do not exceed 30% of their monthly income.

The minister admitted that over the past 25 years authorities in Latvia have failed to pay the necessary attention to construction of new housing and that the apartment houses built after 1993 make up only 2% of the total number of apartment houses in Latvia. “The rest of the buildings have been constructed 40 or 50 years ago, apartment buildings are home to most of Latvia’s population, or 68%,” the minister said.

To tackle the issue, the Economics Ministry has started work on a financial support mechanism that would enable local governments to take 30-year loans for building new multi-apartment houses, Aseradens said, adding that the government should adopt the regulation for the financial support mechanism in the next couple of months so that local governments can start applying for the financing already in the fall. The most important requirement for these projects is that the prices of the new apartments have to be affordable, the minister said.

This will be the first pilot project enabling construction of around 800 new apartments, but the government would work also in a more extensive support program, Aseradens said.

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