Estonia and EIB Launch Partnership to Expand Affordable Housing Beyond Major Cities

Estonia's Ministry of Climate and the European Investment Bank (EIB) have launched a new cooperation aimed at boosting the supply of affordable, high-quality rental housing across the country, particularly in regions outside Estonia's largest urban centres.

The initiative seeks to develop a financing solution that reduces the risks faced by private-sector developers in smaller towns, helping unlock investment and support balanced regional development.

"Estonia is not just Tallinn," said Minister of Infrastructure Kuldar Leis.

"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. For developers, the risks are simply too high."

Tackling Regional Housing Gaps and Labour Mobility Constraints

The Government says the lack of new housing construction outside major cities is limiting labour mobility and weakening long-term regional competitiveness.

"This hampers labour mobility and regional development," Leis said.

Cooperation with the EIB, he added, will help bring modern rental housing to smaller centres while keeping state intervention as limited as possible.

"The aim is to arrive at a solution where state intervention is minimal and housing development can function as market driven as possible," he said.

EIB Advisory Support to Design Sustainable Financing Tools

Under the partnership, the EIB will conduct a detailed housing market assessment and propose a sustainable financing model alongside a long-term strategy for developing Estonia's rental housing market.

The advisory work will take place over a 13-month period.

The longer-term objective is to prepare and launch concrete investment projects with private developers and local authorities, supported by tailored financing instruments that can make regional housing projects more viable.

EIB: Unlocking Investment Potential in Smaller Towns

EIB Vice-President Karl Nehammer said affordable housing is essential for Estonia's regional growth and social cohesion.

"Affordable, high-quality housing is vital for Estonia's regional development," Nehammer said.

"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."

Research Highlights Competitiveness Risks From Housing Disparities

The partnership builds on recent national research into Estonia's housing challenges.

Last year, the University of Tartu and the Estonian Academy of Arts produced an "Analysis of the Opportunities for Estonia's Affordable and Accessible Housing Policy," which found that regional disparities in the housing market:

• Reduce Estonia's long-term competitiveness

• Constrain economic development

• Limit the availability of skilled labour in smaller regions

Drawing on EU-Wide Housing Experience

The EIB has supported affordable and social housing programmes across many EU Member States and will bring tested financing practices that Estonia can adapt to its needs.

The Bank is also scaling up housing support across Europe through its new Action Plan, including initiatives such as the €400 million HousingTechEU programme.

Building a Market-Driven Rental Housing Future

The Estonia–EIB cooperation represents a strategic effort to expand housing supply where it is most lacking, support regional development, and create a more balanced and competitive national economy.

By reducing developer risk and attracting private investment, the initiative aims to ensure that modern rental housing becomes accessible not only in Tallinn and other major centres, but across the country.