SGEI Decision: New Funding Opportunities for Affordable Housing

Exemption from notification requirement, new exemption category 

The SGEI Decision allows the financing of SGEIs without prior notification to and approval by the European Commission. The revised version now creates new opportunities for public authorities to promote affordable housing without time-consuming and costly notification procedures. This is also intended to support households with middle incomes that cannot afford adequate housing, particularly in urban areas. 

Previously, compensation for “social housing” was already permitted. Other forms of housing support were only possible on the basis of the general exemption provision (with a cap of EUR 15 million per year). 

Under the revised framework, there are now two separate exemption categories for (1) social housing and (2) affordable housing. Details on the distinction and specification of these two categories are set out in an annex to the new SGEI Decision. 

Requirements for compensation payments 

On the basis of the SGEI Decision and a proper entrustment, public authorities may in the future grant compensation for affordable housing. The requirements for this include, inter alia, that: 

• affordable housing is made available to households that do not have access to affordable housing due to market conditions and that are genuinely in need of such housing – the relevant criteria are income and household composition,  
• the public authority ensures that the housing is in fact used as affordable housing on a long-term basis,  
• affordability is measured using reliable indicators,  
• the need for affordable housing is assessed by the public authority, including the use of indicators and benchmarks, and is provided to the Commission upon request,  
• affordable housing is offered at affordable purchase or rental prices below market rates and based on transparent criteria, provided that the prices are not lower than necessary to ensure affordability for eligible households, 
• as a general rule, the affordable housing is made available as such for a period of 20 years from the commencement of the SGEI. A shorter period is possible for undertakings whose activities are essentially limited to the SGEI, whose commercial revenues account for no more than 5% of their total annual revenues, and which are legally obliged to reinvest their profits in the provision of SGEIs. This is likely to be relevant, for example, for municipal housing companies.  

Eligible costs 

The amount of compensation is limited to what is necessary to cover the net costs of providing the SGEI, including a reasonable profit (prohibition of overcompensation). The SGEI Decision does not provide for an annual maximum amount for permissible compensation for affordable housing. 

Eligible costs include: 

• Construction of new buildings and acquisition of land,  
• Acquisition of existing buildings and housing units with regard to their conversion or renovation,  
• Conversion and renovation of existing buildings or housing units or individual building components,  
• Measures to ensure accessibility for elderly persons or persons with disabilities,  
• Compliance with environmental standards and adaptations to climate resilience, as well as  
• Operating costs, to the extent they are necessary for the provision of the service. 

Opportunities for public authorities and companies 

The SGEI Decision creates new funding opportunities and policy options for public authorities to address the housing crisis. In addition to supporting social housing, compensation can now also be granted for affordable housing. Existing strategies and funding programs aimed at mitigating the housing crisis should therefore be reviewed and, where appropriate, adjusted. 

For companies, particularly municipal housing companies, the new regulations open up additional business opportunities.