Introduction

The Annelinn+ project is an ongoing joint living lab between oPEN Lab and BuildEST projects aiming to demonstrate the feasibility of achieving near-zero energy buildings in cooperation with apartment associations. The project focuses on prefabricated façade elements for buildings exceeding five floors and pilots neighbourhood-based renovation and on establishing a co-creation framework that can be scaled to other urban contexts in Estonia.

Estonia has experience of factory-based renovation of five-story buildings, but standardised and proven solutions are also needed for taller than five-story residential buildings to accelerate the energy-efficient retrofitting of this type of building.
The living lab integrates communities to design solutions and establish a co-creation framework applicable to other Estonian contexts. Valuable lessons learned can benefit stakeholders involved in renovating large apartment buildings, especially those supported by EU funding.

The living lab's launch has produced valuable lessons and experiences that could benefit other stakeholders involved in the regional renovation of large apartment buildings, including those supported by EU funding. This presents an opportunity to foster collaboration and knowledge exchange.

Annelinn was chosen as a pilot area because it is the largest district of monofunctional high-rise buildings, population 30 000 inhabitants which is almost one-third of the whole of the Tartu city population. Its area is 5.40 km2 and consists of 5 and 9-story apartment buildings. The neighbourhood was planned between 1969-1973 and was built between 1970-1990. The Nõlvaku area within Annelinn was chosen for this project due to its concentration of six-story or higher buildings.

The majority of apartments in Estonia are privately owned, and apartment building management is entrusted to housing associations. These are usually led by boards elected from among the apartment owners. To initiate a renovation project, a cooperative must secure the consent of more than half of its members. As a result, the scale of opposition to renovation plans tends to be greater in larger apartment buildings. The pilot area of Annelinn is characterised by nine-story apartment buildings, which typically accommodate around 70 – 144 apartments in each building.

Initial findings and learnings from Annelinn+ living lab

The Annelinn+ living lab, launched in 2022 and began by conducting a survey to understand the renovation needs, constraints, and financial capabilities of apartment owners. Through meetings with apartment association boards, the lab assessed the condition of the buildings and the goals of the associations.

Pilot area, Annelinn, Nõlvaku district, and 10 houses that were interested in participating in Annelinn+ living lab. The left-hand side image employs the Estonian Land Board's geospatial portal as its base map, while the right-hand side utilises Google Maps.

In the first phase (2022-2023), various information days, workshops, and seminars were conducted. The project team participated in 22 general meetings of apartment buildings, carried out on-site inspections of 10 residential buildings, and developed building reports including building descriptions, technical condition assessments, renovation proposals, and energy performance calculations.

Information seminar and co-creation workshop in Annelinn (Photo: T. Pitk)

Joint meeting of apartment associations, April 2022 (Photo: K. Alev)

In the winter of 2023, to help apartment associations make well-considered decisions and increase their involvement in the project, a construction cost calculator was introduced to interested associations. When necessary, project representatives participated in general meetings of apartment associations to assist them in understanding the calculations and choices regarding necessary and optional renovation works. The focus was not solely on energy consumption but also on improving living conditions through larger balconies, elevator and entrance upgrades, and enhanced accessibility. The calculations helped clarify investment costs and how different works would impact monthly loan payments.

Consequently, by early 2024, due to a combination of economic factors and resistance from homeowners and apartment associations, all ten targeted building associations withdrew their participation. In autumn 2023, a new pilot project was initiated in the Veeriku district of Tartu, featuring nine-story buildings comparable to those in Annelinn+. This allowed for the application of technical solutions developed in the previous phase.

Despite the challenges encountered, the first two years yielded valuable insights applicable to both the Annelinn+ project and other EU initiatives addressing neighbourhood-based renovation in large apartment building districts. Key lessons learned are outlined below.

Understanding the challenges of Annelinn Renovation Project

Why did the recruitment of buildings for the Annelinn+ living lab fail? Resistance to renovation stemmed from a combination of factors. The most significant were related to the changing economic situation: the supply chain crisis associated with the war in Ukraine, the sharp and simultaneous increase in construction costs, racing inflation followed by sharp Euribor rise in 2023, etc. and the attitudes of apartment owners, and the relatively good condition of the buildings.

The years 2022-2023 witnessed an unforeseen surge in uncertainty, risks, and novel challenges across Europe, leading to substantial price increases, especially in the construction sector, and fuelling inflation in Estonia. This economic climate has resulted in higher borrowing costs, eroded household purchasing power, and dampened residents' propensity to take on long-term loans for building renovations. Estonia was the euro area’s hotspot of inflation throughout 2022, when inflation reached 19.4%, mainly driven by rising energy and food costs [1].

The condition of the buildings in the pilot area were not deemed to be in a state of urgent disrepair; hence the owners did not see the urgency for renovation, and it was easier for them to postpone the renovation decision. Also, the substantial size of the housing cooperatives, with between 77 and 144 apartments, significantly complicated the decision-making process. There was a dearth of experience within Estonia in mobilising the co-ownership of such substantial residential complexes for renovation endeavours.

Furthermore, the capacity and incentive of housing cooperative board members are limited, and collective experience in investment is absent. Elderly residents, occupying 3-4 room apartments as single households, face financial constraints that preclude them from contributing to additional renovation costs. Similarly, young families, burdened by mortgage payments, are unable to shoulder the extra financial burden of renovation.

Is renovating ‘not old enough’ buildings cost-effective?

The value proposition of the Annelinn+ project was more of a luxury for residents, which most did not appreciate, and a large proportion of owners lack the capacity to pay for this luxury. The buildings in the pilot area were completed in the late 1990s, being among the last district which was built in Annelinn. Hence, the houses were relatively ‘new’, and they are in better technical condition and warmer than most apartment buildings in Annelinn. There are no major or frequent (critical) technical problems in the buildings, the buildings are relatively energy efficient (C-E energy class), and the price of district heating in Tartu is affordable.

Given that only around 10% of Estonian buildings possess energy performance labels, the baseline energy efficiency of the building stock was uncertain when the project was initiated. The pilot area was selected based on a visual assessment, considering the urban context and relevant socio-economic factors, with a focus on identifying high-rise (more than 5-stories) apartment complexes and providing an opportunity to explore neighbourhood-scale retrofitting.

These buildings incorporate some insulation within their panels, a feature often absent in older Soviet-era structures. Residents have partially retrofitted their homes with new windows, contributing to improved energy efficiency. Also, underheating remains is an issue to consider. In Estonia the heating season is commonly from October to May. Several housing cooperatives exhibit a tendency to defer the initiation of the heating season and to curtail heating prematurely, thereby compromising the indoor climate and the living comfort of residents. Moreover, old heating systems results in an uneven distribution of heat, with some apartments experiencing excessive warmth while others remain cold, so this further complicates the issue. The use of district heating for domestic hot water is a factor contributing to a higher energy rating, as opposed to the more common alternatives of gas or electric heating, which tend to lower energy efficiency. Energy prices and the resulting housing costs are not excessive enough to motivate renovation. Most residents seem to prefer inexpensive renovations with their own funds over deep renovation.

Table 1. The weighted energy performance of the participating buildings

A valid query may arise concerning the rationale behind the selection of this specific area as a pilot for neighbourhood renovation living lab. There are actually several reasons:

• Annelinn has a tarnished reputation as a residential area, and population projections indicate a downward trend
• the Nõlvaku-Mõisavahe district is home to Tartu's largest apartment blocks
• subjectively, it is perceived as one of Tartu's neighbourhoods most at risk of socio-economic stratification.

At the project's inception, the condition of the buildings was undetermined. This initiative has served as a valuable learning experience for Tartu city in community engagement. 

Households' capacity and expectations of housing

It is very difficult to reach a common agreement in very large buildings (apartment buildings over 5 stories and with more than 60 apartments). Several apartment buildings in the pilot area were home to up to 144 households. Such a number and diversity of owners in one building do not favour dialogue or consensus, while the number of opponents of renovation is louder and there are more people who are indifferent in a large community.

The ability to invest in renovation is more critical for young families and elderly owners. Young families have often purchased an apartment with a loan, making it extremely difficult to service an additional loan payment. The older population has acquired an apartment through privatisation decades ago, i.e., there are no housing acquisition costs, but their incomes are low. The elderly living in Annelinn are often residents who moved to a new building (a large 3-4-room apartment) as a young family decades ago and have now remained in the large apartment alone or with a partner. Thus, the elderly often have too much living space, which also results in a large repayment share of the renovation financing from their monthly income.

Tartu, as a university city, has a significant student population. Consequently, many apartments, particularly in districts such as Annelinn, are rented to students. Given that tenants typically bear the costs of utilities, owner of rental apartment often exhibit a decreased inclination to invest in broader building maintenance.

Is co-renovation the key to success?

The communication with construction companies that took place in the Tartu living lab suggests that starting several housing association renovation projects at once (neighbourhood-based renovation) in an area with good construction market potential does not bring direct financial benefits. The advantage of renovating several buildings at once is in those areas where there is a lack of contractor interest due to small volumes.

Our experience from this living lab demonstrated that construction companies did not see the benefits of renovating multiple large buildings at once. The concept of a 'bigger bite' of the tender was not appealing to them. Tartu is a region with an active building market, where there are enough builders interested in participating in tenders and construction. However, they do not see that combining the renovation of several adjacent and large buildings into a single tender would provide any advantage that would a) motivate builders to participate in such a tender; or b) reduce the budget.

Construction companies saw significantly higher risks. They would have to significantly grow their business to handle the larger volume, i.e., hire more professional workers than usual. And since each building has its own apartment association and specific characteristics, the fact that there are multiple clients instead of one increased the risk for them. Additionally, they face an unmitigated risk of what would happen if one building were to withdraw from the project during the process, which would mean changes to the remaining buildings, the tender, and/or the contract.

The project experience thus showed that in a region with a functioning construction market, combining multiple buildings into one tender, i.e., renovating them together, requires both a change in the companies' business models and assurance that this is not a one-time experiment. EU renovation volumes must increase significantly and we need to think how to make it happen, but at least in Estonia, subsidies for energy efficient renovation are not available on a regular basis, meaning that construction companies price a one-time investment jump higher (where both the volume of the renovated square metres and the speed increase) , because the risks are higher and there is no indication that the greater need to invest in the company can also be compensated for by long-term stable orders.

However, it was found that in regions where there is no functioning construction market, doing multiple buildings at once could be a good idea - if you are already going beyond your usual market, the logistics and accommodation of employees also needs to be considered. In that case, to attract a construction company to the tender, it may be reasonable to increase the volume of the tender and renovate several buildings at once. Provided that regions where there is no active construction market do not have such large apartment buildings as in Annelinn (9-story, up to 144 apartments) as apartment building with such volume are mainly in the areas of active construction market (Tallinn and Tartu).

It is important that when renovating several buildings at once, the area between the buildings should also be updated. In the Annelinn+ project, it became clear that residents value solutions that address parking shortages the most when developing the space between buildings. There were few proposals and ideas for finding other solutions.

Renovating the area between buildings further increases the large budget and complexity of the renovation. Therefore, it is premature to expect that housing association boards will also be interested in developing cooperation, whether with neighbouring houses or with the local government, on the issue of better planning of the courtyard area. With better advice, process management, and positive examples, the current sceptical attitude towards neighbourhood renovation may change.

Conclusions

Making a renovation decision requires years of engagement by the apartment association, even for buildings lower than nine stories and less than 60 apartments in the building. EU-funded projects often have relatively short timeframes, which can be insufficient for tasks such as establishing living lab and allowing the housing cooperatives to make decisions that have been carefully considered and discussed. The pressure to progress rapidly can lead to rushed community engagement processes, potentially causing resistance among residents and cooperative boards.

Key findings:

• To address challenges in large-scale apartment building renovations (more than 5 stories and 60 apartments) it is recommended to involve sociologists, anthropologists, and other behavioural scientists. They can facilitate meetings in a professional manner, minimising polarisation, and when it occurs, defuse it by creating the necessary sense of security to make decisions under time constraints but without haste. This can help to mitigate the potential impact of emerging active resistance groups on decision-making.
• Visualisation tools and different calculators are essential for residents and building associations: it helps residents understand the implications of different renovation options. 
• Simultaneous renovations of neighbouring buildings in areas with active building market may present logistical advantages, but not a lower cost.
• In a situation where renovation volumes need to increase significantly in Europe, to promote innovation, reorganise work processes, and transform business models, it is also necessary to consider how to ensure stable funding for renovations.

References

1. 2023 Country Report - Estonia (europa.eu)