There are more than 39,500 apartment buildings in Latvia and at least 26,600 dwelling houses need retrofitting but only about 4% of them have been retrofitted so far. Apartment residents pay 360–390 million euros for heating energy every year, and at such prices, the costs will exceed 10 billion euros over the next 20 years. Timely retrofitting of buildings would allow these costs to be reduced significantly while improving the quality of life and the value of housing. However, the audit by the State Audit Office of Latvia reveals that even motivated residents are often forced to postpone the decision on retrofitting due to the rapid increase in retrofitting costs and insufficient funding, as they face unpredictability of costs and insufficient support.
IN BRIEF:
- In Latvia, only around 4% of apartment buildings have been retrofitted although at least 26,600 dwelling houses require retrofitting. Meanwhile, apartment residents pay up to 390 million euros for heating energy every year.
- Rapidly increasing construction costs are one of the main obstacles to building retrofitting, as they reduce the economic return on retrofitting for residents significantly. The average cost of retrofitting projects per square metre has increased by 127% since 2017.
- The survey of population conducted during the audit shows that the biggest concerns before retrofitting relate to high costs (30.2%), the quality of construction work (22.7%) and the complexity of procedures (15.6%).
- In Latvia, not all opportunities are used to ensure more accessible financing for retrofitting because the rate of JSC Development Finance Institution ALTUM is 3.9%, which is higher than in Estonia and Lithuania. By reducing the rate by 0.9 percentage points, the benefit from retrofitting would exceed the credit costs for more than half of the projects.
“In Latvia, more than half of apartment buildings were built 40–50 years ago and one has not invested sufficiently in their retrofitting. As a result, the condition of the buildings is gradually deteriorating while high energy consumption results in disproportionately high bills for heating energy. Retrofitting is not just a more beautiful facade, as it is essential for housing to be of high quality, energy-efficient and economically maintainable. The longer the decision on retrofitting is postponed, the more expensive it becomes. However, today only about 4% of housing has been retrofitted in Latvia, which clearly shows that solutions must be sought to make retrofitting simpler and more accessible. At the same time, we see that the interest of residents in thermal insulation has grown. For example, this year, the ALTUM retrofitting program funding was reserved in less than a month and a half. It means that people are ready to act if support funding is available. In the audit, we conclude that the Ministries of Economics and the Ministry of Climate and Energy have not used all the opportunities to facilitate the availability of retrofitting support funding,” emphasised Mr Mārtiņš Āboliņš, Council Member of the State Audit Office of Latvia.
Insufficient awareness and lack of professional support hinder the retrofitting process
The audit has found that the awareness of apartment owners is still insufficient and often becomes a significant obstacle to start retrofitting. The results of a survey of apartment owners conducted by the State Audit Office of Latvia show that only 39.5% [1] are informed about the possibility of carrying out retrofitting measures or a complete retrofitting of their building while 29.8% are partially informed. However, only 8% of the respondents know the approximate costs of retrofitting. It means that basic data is often lacking for decision-making. This is also visible in the dynamics of the processes when general meetings of apartment owners at which a decision on retrofitting must be made must be convened three or more times in 44.4% of cases, and projects often get stuck before technical work even begins. In addition, a large part of the population is not informed purposefully about retrofitting options at all because 57.8% of respondents indicated that they had never been approached about the possibilities of retrofitting their building. Therefore, the most significant obstacles to making a decision to retrofitting are concerns about costs (30.2%), the quality of construction work (22.7%), and the complexity of procedures (15.6%).
In its turn, professional project management support is currently available only after receiving a loan although the most complicated tasks such as preparing documents, collecting technical information and convincing residents should be carried out before that. At this stage, apartment owners are often left without support, and this is one of the main reasons why projects are delayed or become more expensive. The audit found that the amount of obligations imposed on apartment owners’ associations, which often operated only on a voluntary basis and without professional knowledge, was disproportionate and exceeded their capacity. In the survey, apartment owners and one of the associations also indicated that the project had to be re-developed due to poorly prepared documents which caused significant delays and increased costs.
Rising construction costs reduce the economic return on retrofitting
The audit clearly confirms that the rapidly increasing construction costs in recent years are one of the main obstacles to the retrofitting of apartment buildings, as they reduce the economic return on retrofitting for residents significantly. Since 2017, the eligible costs per square meter of residential energy efficiency projects have increased by 127% while overall construction costs have increased by 52% during this period. It means that the cost of retrofitting projects is increasing twice as fast as the overall inflation rate in the industry. The audit has discovered that as a result of such costs, the average annual savings in heating costs in 54% of the implemented projects do not cover the monthly loan payment, which can exceed even 2 euros/m².
The return on investment in energy efficiency improvements has become insufficient for residents to be confident in financial benefits, especially in a situation where the average project costs currently reach 880,000 euros per apartment building. The survey shows that the increase in property value after retrofitting is not a decisive factor for the majority of apartment owners, as only about a third consider it to be a significant motivation. In its turn, a significant proportion either does not experience an increase in value or has not been interested in it; however, almost 29% do not consider it to be significant at all, as they do not plan to sell or rent out their property. As a result, the rapid increase in costs reduces the motivation to start retrofitting even in buildings where the technical condition clearly requires action.
Not all opportunities for attracting more accessible financing for residents for increasing energy efficiency are being used
The State Audit Office of Latvia has found that Latvia is not using all the opportunities to provide more affordable financing for building retrofitting. The Ministry of Economics has not yet used instruments that would allow attracting more advantageous loans or reducing the interest rate, although this would increase the economic return on projects significantly. The current fixed rate offered by the ALTUM, that is, 3.9% is higher than in Estonia and Lithuania. Reducing it would increase the number of projects in which the benefit from saving on heating costs would exceed the monthly loan payment for retrofitting.
At the same time, Latvia lacks targeted support mechanisms for lower-income households, as 18.7% of residents already find housing costs “very burdensome”, 6.7% are unable to provide sufficient heat, and 42% are not willing to pay more than 0.5 euros/m² for retrofitting. In such circumstances, socially vulnerable groups are unable to participate in retrofitting projects, which increases both social tension and the burden of municipal benefits. Without more favourable financing conditions and clearly defined support for these groups, the pace of retrofitting housing in Latvia will continue to be insufficient and uneven.
“In order for residents to make informed decisions about retrofitting their dwelling houses, there must be clear and easily accessible information about the costs and results of projects that have already been implemented. Currently, there is no such information; the data is fragmented and cannot be used without in-depth analysis. This limits both the quality of planning and the ability to compare prices, assess risks and understand what the real costs of retrofitting are,” stated Mr Āboliņš.
The State Audit Office is holding a discussion
To facilitate dialogue among responsible state institutions, the industry and the public on the obstacles that hinder retrofitting of housing in Latvia and possible solutions, the State Audit Office of Latvia is holding an online discussion “Challenges and solutions in housing retrofitting: how to move forward?” at 10:00 on 9 December 2025. The discussion will be available on the Facebook page of the State Audit Office and on Leta.lv with sign language translation.
Recommendations of the State Audit Office of Latvia #PēcRevīzijas
The audit has provided the Ministry of Economics with four recommendations, the implementation of which will allow for significant improvement of the housing retrofitting process in Latvia by making retrofitting more accessible, financially beneficial, and understandable to residents.
The implementation of recommendations will result in:
- Increase of available funding for retrofitting and decrease of residents’ loan payments by making building retrofitting more financially accessible to different groups of society;
- More effective use of public funding by allowing more buildings to be retrofitted with existing funds;
- Professional support available to apartment owners from the beginning of a project by facilitating decision-making and reducing the risk that projects will become more expensive or take longer;
- Targeted support reaching vulnerable households by reducing social barriers to retrofitting and also the burden of municipal benefits;
- Provision of transparent information on retrofitting costs and benefits that will improve the quality of planning and help residents assess the need for retrofitting more impartially;
- Strengthened involvement of local and regional governments and house managers by ensuring clear, action-oriented communication with apartment owners and accelerating decision-making.
Additional reading:
- Audit report summary, infographics.
- The results of the population survey conducted by the State Audit Office of Latvia have been summarized in “Power BI” format.
- Information on the results of projects implemented under the 2014-2020 EU Fund Support Programme for Energy Efficiency of Multi-apartment Buildings in “Power BI” format.
About the State Audit Office of Latvia
The State Audit Office of the Republic of Latvia is an independent, collegial supreme audit institution. The purpose of its activity is to find out whether the actions with the financial means and property of a public entity are legal, correct, useful and in line with public interests, as well as to provide recommendations for the elimination of discovered irregularities. The State Audit Office conducts audits in accordance with International Standards of Supreme Audit Institutions of the International Organization of Supreme Audit Institutions INTOSAI (ISSAI), whose recognition in Latvia is determined by the Auditor General. Upon discovering deficiencies, the State Audit Office of Latvia provides recommendations for their elimination, but it informs law enforcement authorities about potential infringements of the law.
[1] Survey of apartment owners conducted by the State Audit Office of Latvia