SMARTER4EU interview with project manager, Volodymyr Smolii

Photo by: CHUTTERSNAP

What is the SMARTER4EU project about?

SMARTER4EU dates back to 2018-2019, when the first project called SMARTER for Families was implemented, designed to develop green mortgage and certification tools for residential construction in several European Union countries. 

The successful implementation of SMARTER for Families, which ended in 2021, brought together seven countries and gave rise to a new project. Three new countries, including Ukraine, have become SMARTER4EU target countries.

EECU did not take part in the first project, but joins the current SMARTER4EU as one of the partners from Ukraine.

The objectives of SMARTER4EU are similar to those of its predecessor, namely

• testing and development of an appropriate regulatory framework for green building certification in the housing sector in Ukraine;
• creation of green building financing instruments;
• financing green mortgages for residents.

Does the SMARTER4EU acronym have a meaning? 

The name contains a play on words: SMARTER stands for smarter, the number 4 is for, and EU is consonant with the word you, i.e. for the European Union or for you. The philosophy of the project is embedded in its name, it is designed to give people and communities a smarter and more profitable housing option.

Who are the countries participating in SMARTER4EU?

The three target countries that joined the project this year are Spain, Portugal and Ukraine. 

Each has its own specifics: in Spain and Portugal, more work is planned with the private sector and the private banking system. In our case, the implementation philosophy will be slightly different due to the war and post-war challenges and a different banking system than in the European Union.

The project is being implemented by 9 organisations, two of which are Ukrainian: EECU and EUEA, the main partner is the Romanian Green Building Council (RoGBC), as well as organisations from Slovakia, Luxembourg, Portugal, and Spain. All of them are non-governmental organisations.

Who are the project partners in Ukraine?

This is currently our task. In the previous SMARTER for Families project, Ukraine was just an observer who studied the experience of others, but now Ukraine is a target country. Since the project is aimed at helping to address national issues, the Ministry of Recovery and the state-owned banking sector are likely to be the main stakeholders. A large share of Ukraine's systemically important banks are state-owned, so communication with the state-owned banking sector can ensure the successful implementation of the project's objectives.

In other countries, the project is focused on cooperation with private partners. Due to the fact that in Ukraine, firstly, the mortgage market is not well established, and secondly, the income level of the population, which is now in dire need of housing and housing, is not commensurate with European incomes, this is a niche that should be filled by the state banking system. Obviously, there will be government programmes to purchase housing and compensate part of the cost of housing, so the Ministry of Recovery and interested state-owned banks will be our key partners.

What role does EECU play in the project?

There is a common task for the Association of Energy Efficient Cities of Ukraine (EECU) and the European-Ukrainian Energy Agency (EUEA). The two organisations from the target country, each with a specific experience and set of competencies, are important for the project. 

In particular, EECU is an association of local governments that has good communication with government authorities and can draw on the support and expertise of Ukraine's leading cities working in the field of energy efficiency. Its task will be to work with ministries and agencies to lobby for regulations and create an appropriate documentary and regulatory framework. EUEA's work will be more focused on cooperation with the financial sector. 

In other words, this project envisages synergy of efforts between the association and the agency in order to achieve a common goal and reach out to the necessary partners and public authorities. 

Who are the main beneficiaries of the project?

The country itself is directly identified as the project beneficiary. But within the country, we understand that there are three types of beneficiaries: 

• The interests of the state, which are that it needs help in developing new mechanisms that will help solve the issue of housing for internally displaced persons, people who have lost their homes, or those who want to move; the second component of interest is the transformation of the housing stock, which is currently not energy efficient and, if new housing is built, it should be in a way that affects the overall energy efficiency of the state;
• Development companies, which will be responsible for a large share of financing commercial and business projects. Businesses need to make money, but they also need to have the necessary financing tools and motivation to design and build energy-efficient housing;
• The population, which is directly interested in getting housing, either through state aid or at their own expense, that will be as energy efficient as possible and will not create a burden on their energy bills. And if they want to buy this housing, they should have the tools of affordable, understandable, transparent bank loans to help them do so.

We emphasised this at the kick-off meeting with Sviatoslav Pavliuk in Brussels. Since the project's goals were set out in a joint statement in a rather general way, our task was to explain the needs of Ukraine as one of the target countries in this project, particularly in the context of military and post-war challenges. After all, the full-scale war has further exacerbated the energy efficiency problems we had before.

We model that the cost of an energy-efficient building project will be somewhat higher than usual, so developers should have some financial instruments to finance such projects not from their own savings, but as is done in the world and Europe through affordable loans.

What are the benefits of green construction under the SMARTER4EU project for the population?

Today we have a primary and secondary housing market. On the secondary market, people understand the importance of energy-efficient housing when they pay their heat or electricity bills. In other words, no matter how much you modernise an old house built in Soviet times, it is unrealistic to achieve high energy efficiency. At the same time, the price per square metre of such housing is almost comparable to the cost per square metre of new buildings, which are now the "mass market" in the housing market.

For comparison, a square metre in new buildings can cost $600, but we understand that they are built to standards that are barely in line with state energy efficiency standards. And then along comes a developer who has built an energy-efficient building, received resources for this, for example, from a bank with the support of the European Union, and now offers energy-efficient housing that costs, for example, $700 per square metre. 

A person who wants to buy a home understands that he or she does not have an extra $100. If he or she has affordable mortgage instruments, he or she can buy this apartment on credit at a reasonable interest rate without having to pay the entire amount at once. However, the energy savings will help to compensate for this small overpayment she will make for the purchase of that square metre in an energy efficient building in the long run.

The government is required to bring all building codes in line with EU requirements. If this is done, it is clear that the cost of housing will rise, and the lack of clear credit resources for citizens may lead to a drop in demand in the construction market. This will not be good for the construction industry, which also plays an important role for the country's economy. Not to mention that construction also means money and jobs, so scaling it up is also in the state's interest. 

Does the SMARTER4EU project have any disadvantages?

Everything looks very positive, but the war factor is a very unpredictable moment. We are all talking about post-war reconstruction, solving problems, and the fact that people already need to live somewhere.

The war itself, its course, ending and victory, whether sooner or later, can have a significant impact on the project schedule. But we are only optimistic about this.