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We need to move to a life-cycle approach to assessing the cost of building and renovation

The highlights from Housing Europe's Renovation Summit

20 May 2021 | Urban, Energy, The future of the EU & Housing

The small (but increasing) number of state-of-the-art circular public and social housing projects now prove that the is significant potential for cost savings for housing providers by moving from a ‘linear’ to a ‘circular’ model. Renovations are an opportunity to go the extra mile and upgrade resource use and management. Undoubtedly, besides shifting its perspective, the housing world needs to think about the cost behind the green transformation, especially when the raison d’être of public, cooperative and social housing providers is to offer homes that are good for the pocket and for the environment

On the 11th of May, as part of Housing Europe’s two-day Renovation Summit, and in partnership with the EU-funded Houseful project, social and affordable housing providers, policymakers, innovators and funding institutions dived into a session dedicated to ‘Financing greater circularity in housing’. “In the last couple of years, actors in the construction industry have shown an increasing willingness to move towards circular businesses. However, many consider circular construction to be a more expensive option, which makes actors reluctant to invest in circularity,” the recent review, ‘Exploring the relationship between the level of circularity and the life cycle costs of a one-family house’ notes. This poses the question of ‘Why is there an apparent disconnect between the expected costs of being circular, and the demonstrated reality?’.

The simple answer is “life-cycle”. As human beings, we all have certain cognitive biases, which cause us to, amongst other things, make poor decisions; often as a result of discounting the available information. One such bias is that we give more priority to our immediate circumstances, discounting the longer-term impact of our actions. Climate change is a good example of this, as we tend to focus more on maintaining or even improving our current production and consumption capacity, without adequately considering the very real negative impact that this will have on us and future generations down the line.

In much the same way, when it comes to investing in a new housing development or renovation, the capital cost that we must pay today can obscure our vision of the future costs that we might incur.[i] The simple fact is, being circular, at least given current market conditions and incentives, does cost more in terms of the initial capital investment required. This may pose a psychological barrier to housing providers working with tight budgets. However, and this is the key point, over the entire lifetime, or “life-cycle”, of the building (likely at least 80-100 years), it pays to be circular. This applies to both the ‘operational phase’, the active use of the building, and the ‘end-of-life phase’, known as ‘obsolescence’.

Vätterhem YEAH in Sweden – unlimited sustainability in the way we use our homes

This innovative municipal housing development is a collaboration of the Vätterhem municipal housing association, located in Jönköping (Sweden), and Yellon. Pär Löfstedt, Brand Strategist at Yellon, the development of 44 fully self-sufficient in energy, water and also in taking care of their own wastewater, 100% off-grid public rental housing units. To be able to compare the performance and costs of the two buildings over time, the homes will be built next to 44 similar, but ‘on-grid’ homes.

Amongst its many innovations, the Väterhem YEAH development will use PV panels and hydrogen generation for electricity, rainwater harvesting and greywater processing for water consumption, and state of the art insulating and design for efficiency and sustainability.

In terms of the costs of the development, the 44 ‘standard’ apartments will cost approximately €12 million to develop (€295k per unit). The 44 innovative ‘off-grid’ apartments will cost around €17 million (€386k per unit). This means that the self-sufficient units are roughly €90,000 more expensive to develop.

The Vätterhem YEAH business plan shows that the ‘standard’ apartments will retain their cost advantage during the first 10 years of the occupancy. However, by year 20, the costs have effectively equalised, and from then until the expected obsolescence of the building in year 100, we see that the YEAH building will begin to accumulate cost savings.

One of the keys to the life-cycle success of the Vätterhem development is the fact that the electricity consumed is not coming from the local grid, but rather from the building’s own electricity capacity. This means when utility bills are paid by tenants, the money will not go to an external provider, but rather to Vätterhem itself to help finance the extra development cost. The same principle applies to waste and water. Thus, once the additional costs have been paid off, Vätterhem receives surpluses that it can then use for building improvements, or even to help finance other projects. 

Om Circle House in Denmark – recycling without losing value

This sustainable circle housing development is a collaboration of Lejerbo, a Danish social housing provider, and GXN/3XN Architects. Aleksander Kongshaug, Architect MAA at GXN/3XN provided a detailed overview of the development, which will see the development of 60 public housing units in Lisbjerg, outside Aarhus. The Om Circle House project is being developed in such a way that it can be ‘disassembled’, and the used elements can be recycled almost without losing value. Thus, it has a strong focus on the ‘end-of-life’ phase of the building.

Concrete is a key part of the building model used in Denmark today, and indeed in most other countries. This is used quite effectively, with pre-moulded slabs quickly fitting into place in new buildings. However, these are not reused and when buildings are demolished, everything, including the slabs, goes to waste. This is not sustainable.

However, there was a conscious decision made to work with Denmark’s concrete industry in the development of the Om Circle House project, rather than using more carbon-friendly materials such as wood. This was done to make sure that the project was not just a one-off, but that it has broader impacts on the construction sector by working to improve on the practices of the concrete sector. This has included using RFID chips in slabs to generate digital material passports. Aleksander did make the very valid point though, that if the lifetime of the building is 100 years, the digital chip will likely not be readable in the future, meaning that information might be lost.

In terms of the other materials used in the project, upcycled materials, such as old plastic bottles are being repurposed. The housing is also being fit together in such a way that ‘parts’ can easily be removed and replaced, if needed. This means the upkeep of the building and future renovations will be less costly for the Lejerbo, versus a traditional social housing development.

Taking the knowledge forward

A key part of what Housing Europe is trying to achieve through its involvement in the HOUSEFUL project is to demystify circular building and renovation practices, and showcase that circularity has its place in the public, cooperative and social housing sector.

The case studies  echoed what will also be shown with the four HOUSEFUL ‘Demo Buildings’, including social housing buildings in Barcelona and Vienna, that by looking past the initial cost, social providers stand to benefit from lower costs in the future, providing the scope to either generate surpluses for further investment, or else to offer more affordable rents to their tenants.

The significant environmental angle also cannot be overlooked, with housing providers needing to do their bit to escape from the current ‘make-take-waste’ model of linear consumption that means that the construction and demolition of buildings account for around one-third of global materials consumption and waste generation. Demolition waste is currently the largest waste stream in the EU.[ii] With most resources used for construction finite, this is clearly not sustainable.

At the same time, national governments and the EU have shown increased willingness to take greater action to elimination such waste[iii], which will likely evolve over time to include greater sanctions or financial penalties for those who do not, or cannot comply. Thus, adopting circular use of building materials today will help to futureproof social hosing providers; further justifying the higher initial capital costs involved.


[i] You can find a really interest review of how cognitive biases negatively impact our capacity to accept the circular economy from: Singh, P., & Giacosa, E. (2019). Cognitive biases of consumers as barriers in transition towards circular economy. Management decision. Management Decision, 57(4).

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