After the administrative reform of 2017, many local government leaders faced a difficult optimisation challenge, as on the one hand communities wanted to preserve the existing structures, while on the other hand economic realities and the disappearance of the need forced them to reduce the number of agencies, buildings and positions that became redundant after the merger of several local authorities. Like the reform itself, the choices were often not easy. The process was prolonged in many places by merger agreements in force until the 2021 local elections, which ruled out major changes. Each local authority has to find the balance between community interests, needs and economic practicality but it seems that the majority of local authorities have made some progress towards the optimisation set as the goal by the reform.
Whilst local authorities had 2,070 agencies under their administration immediately after the administrative reform, only 1,457, i.e. a third fewer, were left by the end of May 2025. The change has mainly come from local authorities that have undergone the administrative reform – 96% of them have reduced the number of agencies. Changes have been made mainly to improve the quality and management of services, as well as to reduce duplication.
However, the services are still largely provided in the existing locations, just the number of the agencies organising them is smaller. For example, in settlements where it was possible to visit the library in 2016, it was still possible to do so in 2025 in 91% of the cases. Many sites have been transformed into local service points of a larger agency. There are also new locations, where the activities of several institutions – the library, the community centre, the youth centre – are concentrated. Approximately one-third (31%) of all locations are multifunctional.
As the agencies have been downsized, there are fewer area managers than before and growth in management staff costs has become slower.
The reorganisation of agencies and services has also led to changes in the real estate portfolio. For example, 19 of the disused former municipal or city government buildings had been disposed of by the end of 2025, with plans to dispose of 11 more, and five buildings have been given on rent. However, as the majority of the locations have been preserved, the changes in the real estate portfolios of the local authorities cannot be called revolutionary.
For example, if we take the larger complete buildings of 100 m2 or more, the data collected by the National Audit Office shows that 85% of the buildings of 2016 were still owned by local authorities in 2024. The rest have mainly been sold or demolished. At the same time, the total number of larger buildings in most local authorities (58%) has increased somewhat in recent years. New buildings have been built, old ones have been acquired for refurbishment, ownerless assets have been registered, etc. In part, this is a sign that the need for new, modern premises is being met faster than disused buildings are sold. According to the local authorities, the rental or sale of disused buildings has been hampered primarily by a lack of market demand. The buildings are specific or located in rural areas away from major centres. The attempts to sell the buildings can therefore last for years.
Building management costs have inevitably risen alongside the general cost of living. In 60% of cases, growth has been faster than inflation. This is also due to the fact that energy costs are an important component of building management costs and they have risen faster than consumer prices in general.
In most local authorities, the number of residents is decreasing and population forecasts do not foresee any change, so the search for optimisation opportunities is an ongoing task. The majority of local authorities also continue to see the need to optimise the building fund. The share of disused buildings was generally 4–6%, but in some places it was considerably higher (e.g. in Ida-Viru County).
It is also important to improve situational awareness of real estate and management accounting. For example, only a few of the municipalities analysed in greater detail were able to show energy costs by building. For some of the buildings, the question of how the building is recognised in accounting or how it is used more specifically in the activities of the local authority was also left unanswered.
Background
The National Audit Office analysed how the network of agencies and the portfolio of buildings have been optimised after the administrative reform and how this has affected the accessibility of services and the cost of maintaining real estate. The overview is a follow-up to the earlier work by the National Audit Office, in which it monitored and analysed the impact of the administrative reform. Data were collected from all local authorities. A more detailed analysis was carried out in 10 local authorities: Alutaguse Municipality, Hiiumaa Municipality, Lääne-Harju Municipality, Lääneranna Municipality, Mulgi Municipality, Narva-Jõesuu Town, Põhja-Sakala Municipality, Pärnu City, Tartu City and Tõrva Municipality.
