The Renovate to Rent Program Will Add 700 Houses to Subsidised Rentals

1 November 2017

The average cost of renovations in private buildings was about 50,000 euros per unit. In the last eight years, IHRU has spent €45 million renovating its assets.

In almost two years of existence, the Renovate to Rent (Reabilitar para Arrendar) program – through which the Institute of Housing and Urban Rehabilitation (IHRU) intends to promote urban rehabilitation, to provide affordable rental housing to facilitate the return of the middle class to urban centres – opened only 126 cases. The program provides real estate owners with financing conditions at competitive prices, with fixed rates and favourable maturity periods compared to commercial banking conditions.

The Renovate to Rent program was launched in 2015 and has been promoted by the current government, as embodied in the decrees with which it intends to implement its “New Generation of Housing Policies.”

In response to the questions by Público, to evaluate the implementation of the program, the Institute’s management considers that they are “excellent levels of adherence” since they mean intervention in 382 homes which, after being renovated, will almost their subsidised rentals to 695. These projects involved an investment of 38.3 million euros, and the value of the financing provided by the IHRU reached 32.9 million euros.

The instrument currently uses an EIB financing line with a total allocation of €50 million, and it is expected that, in the context of the renegotiation of the credit line, the amount will be increased.

At the start of the program, the Institute recognised that it was losing some potentially interested parties in the use of the advantageous financing lines available from the IHRU because of the contractual obligation to put the properties on the affordable rental market. Some owners preferred to finance themselves at a higher price, but to obtain a higher and faster monetisation, by placing the homes in the local tourist accommodation market.

Renovate to Rent (Reabilitar para Arrendar) therefore began to be more widely used by companies and private institutions of social solidarity, such as Misericórdias. However, two years later, of the 126 cases that the IHRU made through this program, 88 refer to private developers. The program’s geographical distribution is dominated by the northern region, with 55 cases, and after the metropolitan area of Lisbon which secured 34 projects. In the central region, 25 cases were considered feasible, in the Algarve, only six, in the Alentejo, four, and in the Autonomous Region of Madeira, just two.

According to the IHRU, the average age of the rehabilitated is 76 years, and the gross area of each building is around 420 square meters. The investment value per square meter was 724 euros, per fraction 49,600 euros and per building almost 305,000 euros.

One of the projects that the IHRU points to as an example of participants in the program was an investment of 725,000 euros to provide nine residential units to the affordable rental market (20% to 30% below market values), in Porto, more precisely on the Rua Chã (5) and the Rua Tomás Gonzaga (4).

The IHRU’s strategy has been to sign agreements with municipalities to disseminate the program to potential beneficiaries. At present 59 cooperation protocols have been approved, but, according to the IHRU, “this number will tend to increase since we have received several expressions of interest from other municipalities.” The Institute has also entered into agreements with other entities which contribute to the same objective, such as the Misericórdias, which have extensive holdings, and several construction and real estate associations and confederations.

In addition to funding rehabilitation works by private owners and institutions, the IHRU also set as a priority the rehabilitation of its own, deeply degraded housing stock. In the last eight years, the IHRU has already invested €45 million in its assets. Currently, through projects and applications submitted under Portugal 2020, in particular in the Integrated Action Plans for Disadvantaged Communities (PAICD) and the Energy Efficiency Plans, the IHRU intends to rehabilitate 16 social housing districts through an investment of more than 16 million euros to intervene in a total of 1,632 homes.

For the time being, only two projects have been approved: the rehabilitation of the Arcozelo social housing district in Barcelos, where work began in March and will involve an investment of almost 471 million euros, and the rehabilitation of 14 buildings in the neighbourhood of Amarelo, in Almada, which will involve an investment of 1.8 million euros.

Original Story: Público – Luísa Pinto

Translation: Richard Turner