Improving access to housing for internally displaced persons by creating an adequate housing financing offer with subsidised housing loans

Current situation

Since 2014, when the war in Eastern Ukraine and the annexation by Russia, which was not recognised under international law, began, several million people from the east and south of the country have fled to areas of the country under government control. Russia’s attack on the country, which began in February 2022, has massively increased these refugee movements within the country.

People who have to flee to another place require permanent accommodation that facilitates integration into their new environment, offers protection from the weather and cold, and enables a life in safety and dignity. It is therefore the medium to long-term goal of many internally displaced persons to acquire their own home. Private home ownership promotes social integration and, at the same time, represents an important pillar of private provision in old age due to the lack of government-backed social insurance systems.

Internally displaced persons are economically much poorer compared to the rest of the Ukrainian population, as they often had to leave their assets behind and possess few savings. The purchase of a residence is therefore generally only possible with a bank loan. However, there are hardly any need-based loan offers that internally displaced persons can use to purchase their own place to live. Residential lending in Ukraine is severely restricted and financing conditions are often not affordable. In addition, banks require formal proof of fixed income and residence, which many internally displaced persons often cannot provide. Suitable government support programmes are generally in place, but underfinanced. The lack of long-term, affordable and adequate housing in the country’s government-controlled regions is therefore a major problem for the housing and social integration of many internally displaced persons.

Project approach

The aim of the project is to enable home ownership for internally displaced persons and their families by creating an adequate housing financing offer with subsidised housing loans. The target group is internally displaced persons who have already been able to find (often informal) employment and are generally able to raise financing for the acquisition of housing.

To this end, the German project follows an existing state-run promotional programme in Ukraine, which was underfinanced and was unable to meet the sharp rise in demand for low-cost housing loans. This promotional programme is implemented by the State Fund for Support of Youth Housing Construction (SFYH) in cooperation with the Ministry of Reintegration of Temporarily Occupied Territories (MinReintegration). SFYH has experience with the particulars of lending to internally displaced persons (e.g. lack of formal proof of income) and is represented by regional offices in all government-controlled areas of Ukraine, making it easily accessible to all internally displaced persons in the country.

The grant funds provided by the Federal Ministry for Economic Cooperation and Development (BMZ) are thus channelled via MinReintegration to SFYH, which uses these funds to finance subsidised housing loans to internally displaced persons. Housing loans comply with the criteria laid down by the government and can only be used to purchase small, owner-occupied housing units. Only existing properties are eligible for financing. In order to receive financing, internally displaced persons must submit an application. Loan candidates are drawn from the large number of applications in a lottery procedure; the applications are then examined for credit standing according to a fixed and transparent procedure. The average sub-loan amount is around USD 20,000. At an annual interest rate of 3% p.a. and a counterpart contribution of only 6% of the loan amount, the financing conditions are much more favourable in comparison to standard market conditions. The programme is designed to be revolving, with returns from interest and repayments from internally displaced persons being used for further housing loans. This enables the high demand for housing financing to be addressed more sustainably and the Federal Government’s grant funds to be used more efficiently.

The project also includes capacity-building aspects. SFYH processes will be strengthened and professionalised in the long term, thereby improving structures in order to reinforce the needs-based operation of the target group in the long term. In addition, the selection process for obtaining financing has been enhanced and is monitored.

Impact

The programme aims to provide at least 4,000 internally displaced persons with long-term housing through subsidised loans.

As a subsidised housing financing project for low-income groups, this project makes a valuable contribution to the long-term satisfaction of the basic needs of an economically disadvantaged population group (specifically: internally displaced persons). The provision of long-term housing at affordable conditions represents a key pillar of personal protection against poverty and lowers the high economic vulnerability of the target group, which is often significantly worse off than other sections of the population on account of its internal displacement. In addition, indirect effects can arise for the health situation (improved living and hygiene conditions). The aim of the project is also socio-economic integration of the internally displaced persons into the host communities. Subsidised financing of long-term housing supports the integration of internally displaced people and thus makes an important contribution to society

The project proposed here (BMZ no. 2016.6851.6 / 2016.7036.3) is divided into both the Ukrainian strategy for integrating internally displaced persons and the national strategy for implementing the SDGs, which defines the creation of housing (including through adequate housing financing) for vulnerable population groups as a central objective.

The project contributes to the achievement of these following United Nations Sustainable Development Goals:

• SDG 11: Sustainable cities and communities