Prerequisites for post-war rebuilding of Ukraine’s housing and construction sector

Ukraine’s housing is composed primarily of buildings with poor insulation and low energy efficiency. Buildings in Ukraine are responsible for nearly 40% of final energy consumption. In the residential sector, 54% of final energy consumption is devoted to space heating or cooling. The situation is aggravated by the share of natural gas in residential energy supply (48% versus 32% for the EU), making Ukraine dependent on imported fossil fuels. As a result of the ongoing war, Ukraine has endured enormous damage to the economy and public well-being in terms of social infrastructure. After winning the war, Ukraine has a chance to rebuild public and residential buildings according to new principles of green construction.

Damages

Housing is the sector with the most direct economic damages from the war ($48bn) due to intense shelling of Ukrainian cities; the need to relocate 4.5 million internally displaced Ukrainians also creates an urgency to rebuild rapidly and in the right areas; damage to critical infrastructure, including district heating and water supply, is also massive.

According to KSE estimates, some 132,000 residential buildings, dozens of shopping centers, enterprises, offices and other real estate have been destroyed or damaged. The Ministry for Communities and Territories Development of Ukraine reports that 60% of damaged buildings require major repairs and only 25% have suffered minor damage. Therefore, immediate solutions to provide accommodation and strategic initiatives to improve living conditions should be implemented with a view to energy-efficiency standards. Therefore, the prerequisites for post-war rebuilding of Ukraine’s housing and construction sector are as follows:

1.Increase the level of energy efficiency. In the medium- and long-term, the reconstruction plan must enable housing quality, wellbeing and energy and water savings to the best level possible, together with public services and infrastructure that meet the needs of the population. In order to increase the competitiveness of enterprises, it is also necessary to implement innovative technologies and energy efficiency measures. For this, the 2021 revised EU Energy Performance of Buildings Directive provides a reference framework. In the EU, all new buildings are required to be nearly zero-emission buildings (NZEB) from 2021. By 2027 for public buildings and 2030 for private ones, all new buildings will have to be in line with Zero-Emission Building (ZEB) standard. While NZEB tends to pay back over time through energy savings, the upfront costs are considerable. Based on data from adjacent countries, WiseEuropa research indicates that the costs of building NZEBs in Ukraine can amount to a 10% to 40% increase in construction costs that translates to billions of dollars if deployed on the full housing park destroyed by the war. Therefore, massive investments are needed.

2. Support low carbon construction solutions and enable the development of building materials sector, in particular, the low carbon cement sector. It becomes obvious that the post-war reconstruction of Ukraine will significantly increase the demand for building materials, such as insulation, glass, windows, cement. Thus, there will be strong need for the localization of their production. For example, Kingspan Group, the global leader in advanced insulation and energy-efficient building solutions, is to invest €200m in a new Building Technology Campus in Ukraine after exiting Russian market. The new Building Technology Campus will make positive contributions on three fronts, supporting Ukraine as it rebuilds its economy, meeting demand across central and Eastern Europe for energy efficient buildings, and helping Europe to reduce reliance on oil and gas imports. Ukrainian plants produce almost all components for window manufacturing: window profile manufacturers provide 65-70% of market needs, window fitting manufacturers cover 50% of needs. However, double-glazed windows require high-quality float glass, which has not been produced in Ukraine since 2015 and domestic window manufacturers work on imported glass. As far as the demand for glass production in Ukraine will increase, the construction of a modern glass manufacturing plant could cover the domestic needs and reduce the cost of windows due to simpler logistics. The construction of such plant requires 80-100 million dollars of investment. Another competitive advantages of Ukrainian construction industry is high quality cement. Today, the cement industry of Ukraine has been modernized by mainly replacing ‘wet’ technology of cement clinker production to ‘dry’, this contributed to CO2 emissions reduction. The next step could be CO2 emissions reduction by replacing fossil fuels with alternative fuels from waste. Therefore, Ukraine is highly attractive in terms of the production of “green cement” segment and to achieve this in the post-war period, it is again necessary to attract foreign investments.

3.Organize circularity of materials, water and energy upstream and downstream of the construction process and the improvement of waste management. Circularity must be another key element in Ukraine’s reconstruction. Planning ahead to proactively manage raw material, water and energy will generate positive economic and environmental spinoff by reducing resource use and valuing waste. Technical solutions that prioritize the reuse of materials such as cement, aluminum or plastic from damaged infrastructure can further minimize construction costs. Digitalization in construction, such as smart buildings, Building Information Modeling (BIM) or unmanned construction operations, can also lead to significant cost savings. In the nonresidential sector, BCG experts admit that savings can reach up to 21% in the construction phase and 17% in the operations phase . Energy, water and waste management infrastructure that supports the building sector must also be prioritized. Waste recycling, which only covers 8% of household waste today, should be strongly developed.

4. Integrate housing reconstruction into a more comprehensive approach to city planning. The destruction of buildings, including houses and public services, is a humanitarian, social and economic disaster. Providing temporary living infrastructure to meet the needs of displaced populations must be the priority. This should bring changes to existing city planning framework to consider affordability and inclusion, mobility, energy generation (rooftops), reconstruction/ repositioning or industrial sites from cities, etc as well as manage environmental risks management. The principle to “do no significant harm to the environment” should also be applied to short-term recovery solutions.

Conclusion

It is important for Ukraine to implement European approaches to strategic planning and implementation of state policy in the field of housing and construction. Increased energy efficiency, modern materials, new communication systems, bomb shelters – all require significant investment, but are financially viable in the long run, as living standards will rise, utility costs will fall and housing will become safer. In general, after the end of the war, the housing and construction industry together with building materials production, can become one of the drivers of economic growth in Ukraine.