In Montenegro, making houses energy efficient and legal

A mother and son in front of their house in Montenegro.
The Pavićević family now has a path to legal ownership.
Photo: Vlatko Otašević/UNDP in Montenegro.

Siniša Pavićević, 52, is a construction worker who lives with his wife and two sons in the town of Bijelo Polje, Montenegro. In 2004, he started building a house, but three years later he still could not afford to finish it or pay the fees for its legal title. Though the family was happy to move into a home of their own, they faced a constant struggle to stay comfortable. Harsh winters last up to eight months in Bijelo Polje, and they could afford to heat only one room.


  • A UNDP-developed programme in Montenegro to make illegal houses energy efficient could legalize 100,000 homes while increasing tax revenues by 400 million euros in 7 to 8 years.
  • The programme allows people in illegally constructed homes and buildings to draw on low-cost loans to invest in energy efficiency measures such as new insulation, doors and windows.
  • This legalization could create up to 20,000 new jobs in construction and other businesses.

As part of a pilot programme to make such houses legal and more energy-efficient, UNDP conducted an energy-efficiency assessment, provided construction materials and qualified workers to make improvements, and helped arrange longer-term financing for legalization. In around a month, they had a completed façade, new doors and windows, finished floors, a central heating system and a new chimney.

“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.”

The UNDP-developed approach could allow people in approximately 100,000 illegally constructed homes and buildings to draw on low-cost loans to invest in energy efficiency measures such as new insulation, doors and windows. The savings on energy bills are enough to pay back the loans in a reasonable time and legalize the properties. Broader benefits accrue through increased tax collection and better public services.

In Montenegro, a decade of rapid growth has resulted in many informal, illegal settlements, which pressure infrastructure and often have inadequate living standards. The high price of electricity adds to living costs significantly above the means of many households.

In 2011, the Ministry of Sustainable Development and Tourism and UNDP explored the potential of an integrated approach to energy efficiency and illegal settlements. 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.

Based on these findings, UNDP 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 and gross domestic product by 1.5 percent a year. After four years, Montenegro would no longer need to import energy for electricity.

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.

Branimir Gvozdenović, Minister of Sustainable Development and Tourism, estimates that legalization could bring 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.

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