Estonia and EIB Launch Partnership to Expand Affordable Housing Beyond Tallinn

The Ministry of Climate of Estonia and the European Investment Bank (EIB) have launched a new cooperation aimed at increasing the availability of affordable, high-quality housing across Estonia — particularly in smaller towns and regions outside the country's major urban centres.

The initiative seeks to develop a financing solution that reduces the risks faced by private-sector developers in regional areas, where new housing supply has remained critically low.

Tackling Regional Housing Inequality

Estonia's Infrastructure Minister Kuldar Leis said the country's housing challenge is not confined to the capital.

"Estonia is not just Tallinn," Minister Leis said.

Around one-third of Estonia's population lives outside Harju, Tartu and Pärnu counties, yet only up to two percent of new dwellings are being built in those areas.

For developers, the financial risks of building outside major cities are often too high, limiting investment and slowing regional development.

"This hampers labour mobility and regional development," Leis said. "Cooperation with the EIB helps bring modern rental housing to smaller centres."

The long-term aim is to create a model where housing development remains as market-driven as possible, with minimal state intervention.

EIB to Develop Sustainable Financing Model

Under the new cooperation, the EIB will provide advisory support over a 13-month period, including:

• A detailed market assessment

• A sustainable financing solution for rental housing development

• A long-term strategy to strengthen Estonia's rental housing market

The goal is to unlock private investment and encourage construction of modern rental homes in areas where demand exists but financial uncertainty has stalled development.

Supporting Smaller Towns and Labour Mobility

EIB Vice-President Karl Nehammer said affordable housing is essential for Estonia's long-term competitiveness.

"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."

Improving housing availability in regional centres is expected to support labour mobility, economic growth, and access to skilled workers.

Research Highlights Economic Impact of Housing Gaps

The cooperation builds on recent national research into housing challenges.

Last year, the University of Tartu and the Estonian Academy of Arts produced an analysis of opportunities for affordable and accessible housing policy, highlighting that regional housing disparities:

• Reduce Estonia's long-term competitiveness

• Constrain economic development

• Limit the availability of skilled labour

The findings underscored the need for targeted solutions beyond the capital region.

Part of Wider European Housing Push

The EIB has supported affordable and social housing programmes across many EU Member States and is bringing tested practices that Estonia can adapt.

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

The Estonia–EIB partnership represents a significant step toward ensuring that access to affordable, modern rental housing extends beyond Tallinn — strengthening regional communities and supporting more balanced national growth.