Making Houses Energy Efficient and Legal

The Pavićević family lives more peacefully knowing they can heat their home and have a path to legal ownership. Photo: Vlatko Otašević / UN Montenegro;

Energy efficiency and illegal housing settlements are not often linked. But since Montenegro has significant challenges from both, an innovative solution has been to do just that.

The idea is simple. People in approximately 100,000 illegally constructed homes and buildings could draw on low-cost loans to invest in energy efficiency measures such as new insulation, doors and windows. These measures cut their energy bills. The savings are enough to pay back the loans in a reasonable time, and legalize the properties, with titles that guarantee property rights. Broader benefits accrue through increased tax collection and better public services.

UNDP developed the approach, and to test it, enlisted four households in an illegal settlement on the outskirts of the town of Bijelo Polje.

The Pavićević family was one. A construction worker, Siniša Pavićević, 52, lives with his wife and two sons. He started building his house himself back in 2004, but after three years, he could not afford to finish it or pay the fees for a legal title to it.


  • A unique programme links greater energy effciency to solving the growing problem of illegal settlements.
  • Energy effciency improvements made four pilot homes more comfortable, and yielded cost savings to pay for refurbishments and legalization.
  • Retrofitting and legalizing all 100,000 of the country’s illegal buildings over the next decade could bring huge benefits, such as a 2.5 percent increase in tax revenues.
  • After four years, Montenegro would no longer need to import energy for electricity, bolstering its energy security.
  • By 2013, a Law on Legalization was in the final stages of approval, with specific provisions for energy efficiency investments as one path to legalizing private homes.
  • Towards national implementation, current plans call for extending support for energy effciency measures and legalization to an additional 500 households.

Even though the house had no finished façade, the concrete walls and floors were uncovered and cold, and the poor quality doors and windows fit badly, his family was happy to move into a home of their own. But soon they faced a constant struggle to stay comfort-able. Harsh winters last up to eight months in Bijelo Polje, and the family could afford to heat only one room by a wood-burning stove. High electricity bills ate into the household budget, making coverage of basic expenditures a constant struggle.

Four years ago, their situation worsened when a serious illness left Siniša almost paralysed and unable to work. The family was reduced to living on a meagre monthly sum of 146 euros of social welfare.

When UNDP offered to conduct an energy efficiency assessment, provide construction materials and qualified workers to make improvements, and help arrange longer term financing for legalization, the Pavićevićs jumped at the chance. In around a month, they had a completed façade, new doors and windows, finished floors, a central heating system and a new chimney. Today, they heat the whole house, and cold air no longer leaks in from outside. Electricity bills have been cut in half.

“This has changed our life completely,” Siniša says. “The house is much more comfortable to live in, and I am at peace knowing I can legalize my house by paying in affordable instalments over time.”

Small changes could add up

 Energy efficiency retrofitting and legalization on a mass scale could bring benefits to families and the nation—such as a 1.5 percent annual increase in economic growth. Photo: Jelena Rajkovic/ UNDP Montenegro

The Pavićević family has been caught in a national phenomenon in Montenegro, where a decade of rapid growth has been welcome, but has not come without some negative spillovers. Particularly in urban areas, vast tracts of informal, illegal settlements have sprung up, pressuring infrastructure and often resulting in inadequate living standards.

The high price of electricity adds to living costs significantly above the means of many households, resulting in street protests in 2012. At the same time, energy use is high and inefficient.

In 2011, the Ministry of Sustainable Development and  Tourism and UNDP first came together to explore the potential of an integrated approach to energy efficiency and illegal settlements, starting with the collection of data and evidence. In 2012, energy audits of 30 illegal homes in three municipalities, followed by the installation of energy efficiency measures in the four houses in the town of Bijelo Polje confirmed the potential for significant savings in use and cost.

Based on these findings, UNDP has estimated that retrofitting and legalizing all 100,000 illegal buildings over the next decade would bring benefits not just to families like the Pavićevićs, but to the nation as a whole, increasing tax revenues by 2.5 percent, for example, and gross domestic product by 1.5 percent a year. After four years, Montenegro would no longer need to import energy for electricity, increasing its self-reliance and energy security.

A new national plan

 UNDP in Montenegro uses simple and visually appealing graphics to explain the value of energy efficiency measures

Forecasts like these made a convincing case for government action. In 2013, the Government adopted a strategy and action plan for legalization; a Law on Legalization is in the final stages of approval. The statute specifically designates energy efficiency investments as one path to legalizing private homes. A system of financial support for household energy efficiency improvements is under discussion.

“Legalization is one of the most important projects that the Government will be implementing in the near future,” notes Branimir Gvozdenović, Minister of Sustainable Development and Tourism.

He estimates that it could bring some 400 million euros in taxes over the next seven to eight years, money that could be reinvested in improving the living conditions in illegal settlements. Another benefit: the potential creation of up to 20,000 new jobs in construction and other businesses.

Currently, the ministry, in partnership with KfW, the European Bank for Reconstruction and Development and the National Investment Development Fund, plans to extend support for combining energy efficiency measures and legalization to an additional 500 households. The effort will establish a firmer foundation for eventual national implementation of the new law.

Other changes are evident in Bijelo Polje, where the revamped houses and new government incentive programmes have helped stoke interest in energy efficiency. Municipal Energy Manager Blažo Vlaović lists some of the latest initiatives: “Building construction now uses energy efficiency methods for the façade and roofs for better insulation, energy-efficient briquette heaters are made available to residents, and 15 houses are equipped with solar water heaters with help from low-interest loans from the Government.”

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