Chaos in Bulgarian building stock renovation: Countless questions, no answers

What will happen to the multi-family residential buildings approved for renovation under the second stage of the program, meant to be financed by the Recovery and Resilience Plan? Will the 1.25 billion euros of budget money set aside by the Bulgarian government with a deadline of 2029 be enough? What will happen to the money paid by the property owners for the inspection of the buildings? Do renovation companies have the resources to take on the rising amount of work? And given the rising cost of materials, will there be a need for more financing?

These are the questions that were raised by property managers, owners and experts during a press conference organized by the Energy Efficiency Center "EnEffect", and to which there are no answers. However, answers will have to be provided by Ivan Ivanov (BSP), Regional Development Minister, since the program was being managed by his institution. The ministry was responsible for applying for funding at the various stages of the plan and evaluating the submitted projects, from which it became clear that renovation was a popular measure, but only if it was managed effectively.

This confusing situation came to be after Ivanov announced 2 weeks ago that part of the renovation with RRP funds would not happen but reassured that the approved residential buildings would still receive money under the National Program, for which 1.25 billion euros is being set aside. However, even these funds will not be enough to promptly renew the building stock in the country.

The amount in question should be used for the rehabilitation of the approved 282 apartment towers from the second stage of the RRP, as well as the remaining 2,100 apartment towers from the first stage on the reserve list. In addition, experts think that there is a risk for the already approved 756 properties from the first stage, which must be rehabilitated with over 550 million euros of European money, since the deadline for their absorption is July 2026.

We are barely approaching half of the 19 million sq m of residential buildings that need to be renovated by 2030," said Dragomir Tsanev, executive director of the EnEffect Energy Efficiency Center, at a press conference at BTA.

The fact is that to date there are municipalities where public procurement for the selection of a contractor is delayed, and construction companies in Bulgaria cannot take on more than 300 buildings for renovation per year.

The property managers ask

Stefka Gavizova, who is a condominium manager from the Oborishte district in Sofia, attended a press conference, seeking answers to her questions. She said that the multi-family property where she resides had applied for renovation under the first phase of the RRP program, which provided a 100% grant. However, the building was not approved for funding, so the owners decided to apply for the second phase, which required a 20% co-payment from the owners. This time they were approved.

The public administration made a mistake that even the Regional Development Ministry can't see, and so our co-financing jumped from 20 to nearly 30%. Since August last year, I've been struggling to figure out if it will remain that high," she said.

Gavizova also commented that the condominium tried to secure the money for the deductible with a loan, but they encountered a problem, as banking institutions do not grant loans for energy renovation to associations.

I know two people who took out loans to cover their 20% down payments. Who will help them with the interest on those loans now?" she asked.

She added that smaller collective properties, such as the one she lives in, had to pay more for the inspection and preparation of the necessary documentation, which, however, expires in 2027. Thus, the owners are put in a situation of not knowing whether they will have to pay for this again and whether they will even receive funding for the renovation.

If we are also dropped from the new program with its 2.5 billion leva (ed. 1.25 bn euros), what shall we do? Construction materials and services are at different prices now. No one is giving out loans, and the renovation companies want the big projects because that's where the money is."

"There are more questions than answers. We are waiting for answers from the authorities," commented Tsveta Nanyova from BACC/BGFMA.

According to Yordan Nikolov from the Bulgarian Association for Insulation in Construction (BAIS), the inspections are completely unnecessary, since everywhere in Bulgaria, regardless of the city, the façade renovation is done using 5-centimeter insulation.

The inspections were supposed to take place over a few months. They are largely inaccurate, as there simply weren't enough inspectors to take on the work," Nikolov commented.

The funding model needs to change

Experts called for a change in the financing model for building renovations in Bulgaria. It should not be done using 100-percent grants, because this way the country will never be able to renovate the entire building stock.

They recalled the results of the previous National Program, which was financed with 1 billion euros, and which is now being revived with another 1.25 billion euros pledged by the government. Under the 2015 program, only about 2 thousand properties were rehabilitated, and subsequently, the auditors found fraudulent practices, cartelization of contractors, low control and poor quality of the activities carried out in some cities.

Only 4% of the building stock was renovated," stated Nanyova.

Experts are of the opinion that the practice of giving money out without control needs to change. In addition, businesses need to be actively involved. There are more sustainable models, and they are being implemented in several countries. Nanyova outlined one such example, in which owners receive 30% grant funding and then provide their part through loans secured by state guarantees. In this case, only the energy-poor families receive additional targeted assistance.

The way the renovation is being done in Bulgaria does not bring predictability to the businesses either. Experts are of the opinion that it is a subject of political campaigning and that 100% grants are provided to ensure electoral wins. They also raised the alarm about unimplemented reforms set out in the RRp, such as the Decarbonization Fund, which was supposed to support the co-financing of building stock renovation.

It is still unclear what the financing method will be under the new National Program with 1.25 billion euros until 2029. For 2025, 25 million euros have been set aside in the state budget bill, and the government has yet to determine the application and evaluation criteria.

The only clear thing is that once again the Bulgarian Development Bank (BDB), similar to the national program 10 years ago, will have a major role, as it will draw a state loan, conclude agreements with the municipal mayors, who will then issue public procurements for the selection of contractors, then the BDB will grant a loan to the municipality, and when a building is completely rehabilitated, the state will pay the money back to the BDB. This financing model was repeatedly criticized under the previous program.

Translated by Tzvetozar Vincent Iolov