Opinion column by real estate market analyst Viktoriia Smyk

Recently, I came across an interesting discussion claiming that Ukraine’s state-backed mortgage program eOselya may have been far less efficient than it could have been. The authors argued that because of the program’s current structure, Ukraine potentially missed the opportunity to provide affordable housing to more than 100,000 additional families.

The claim caught my attention, so I decided to take a closer look at the economics behind it. Using available data and several financial scenarios, I analyzed whether an alternative model could have delivered better results for both the government and homebuyers.

How eOselya Works Today

Under the current model, the state provides funding through the state-owned company Ukrfinzhytlo, which finances preferential mortgage loans via partner banks.

In simple terms:

1. The government allocates funds.

2. Ukrfinzhytlo channels those funds through banks.

3. Borrowers receive mortgages at preferential rates.

4. The state effectively finances the loan portfolio.

This means that if the government allocates UAH 1 billion, the economy receives roughly UAH 1 billion in mortgage lending.

Critics argue that this approach does not create a significant multiplier effect.

The Alternative: Interest Rate Subsidies

An alternative model would involve banks issuing mortgages using their own capital while the government subsidizes part of the interest rate.

For example:

• Market mortgage rate: 20%

• Borrower's rate: 7%

• Government subsidy: 13%

Under this approach, the state would not finance the principal amount of the loan. Instead, it would only compensate the difference in interest payments.

This is the model used in many countries to stimulate housing finance while attracting private capital.

The Numbers

Since the start of the full-scale war, approximately UAH 40 billion in mortgages have been issued through eOselya, helping around 22,000 families.

This means the average mortgage size is approximately:

UAH 40 billion ÷ 22,000 = UAH 1.82 million per loan

Assuming a market interest rate of 20% and a preferential rate of 7%, the government would need to compensate roughly:

UAH 1.8 million × 13% = UAH 234,000 per year

per borrower.

From a purely financial perspective, this could allow the government to support a much larger mortgage portfolio using the same budget resources.

Why Reality Is More Complicated

While the theory is attractive, several practical challenges limit the potential impact.

1. Banks Would Carry More Risk

Under a subsidy model, banks would use their own money and assume:

• credit default risk;

• employment and income risks;

• property value fluctuations;

• wartime risks;

• collateral damage risks.

The key question is whether banks would be willing to expand mortgage lending from UAH 40 billion to UAH 150–250 billion under current wartime conditions.

That is far from certain.

2. Limited Borrower Demand

The problem is not only interest rates.

Many Ukrainians still do not qualify for mortgages because of:

• insufficient documented income;

• unstable employment;

• weak credit histories;

• high debt burdens.

Even if more funding became available, the number of eligible borrowers would not automatically increase sixfold.

3. Housing Supply Constraints

A sudden increase in mortgage availability would likely push housing prices higher.

If tens of thousands of additional buyers entered the market simultaneously, part of the government support would simply be absorbed by rising property prices rather than creating truly affordable housing.

This effect has been observed in many international housing support programs.

4. Long-Term Fiscal Commitments

Another overlooked factor is the government's long-term responsibility.

With direct financing, the state spends money today.

With interest-rate subsidies, the government commits itself to making payments for 15–20 years or longer.

Given Ukraine’s wartime budget pressures and dependence on international assistance, such commitments would also carry significant risks.

Would It Be Better for the Government?

In my view, yes.

An interest subsidy model could:

• attract private banking capital;

• expand mortgage lending;

• increase competition among lenders;

• reduce the need for direct state financing.

From a budget-efficiency perspective, it is a compelling idea.

Would It Be Better for Homebuyers?

Not necessarily.

More mortgages might be available, but banks would likely apply stricter underwriting standards.

Borrowers could face:

• tougher income requirements;

• larger down payments;

• more rigorous credit checks.

As a result, some households currently eligible under eOselya might struggle to qualify.

So Did Ukraine Really Lose 100,000 Homes?

This is where I disagree with the strongest claims.

A more accurate conclusion would be:

Ukraine may have been able to support a significantly larger mortgage market under an alternative financing model.

However, there is no evidence that:

• banks would have issued all those additional loans;

• enough qualified borrowers existed;

• housing supply could meet demand;

• the government could guarantee subsidies for decades.

Therefore, claims that Ukraine definitively “lost” 100,000 homes should be viewed as a theoretical scenario rather than a proven outcome.

My Conclusion

After reviewing the numbers, I believe the criticism of eOselya raises a valid and important discussion.

The current model is not the most efficient in terms of leveraging public funds. An interest-rate subsidy approach could potentially generate a larger mortgage market and attract more private capital.

However, the often-cited estimate of 6–8 times more mortgages and over 100,000 additional homes appears highly optimistic.

A more realistic outcome might have been a mortgage market 2–4 times larger, which would still represent a substantial improvement.

As Ukraine continues rebuilding its housing sector, discussions about how to make state housing programs more efficient will become increasingly important.

Viktoriia Smyk
Real Estate Market Analyst