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Is the delivery of a Social Green Deal right on track?

EU’s ‘Fit for 55’ policies through the eyes of social and affordable housing

Brussels, 14 July 2021 | Published in Energy, Social, Future of the EU & Housing

To set Europe on a path to climate neutrality by 2050, the European Commission presented a policy roadmap that would aim at reducing net greenhouse gas emissions by at least 55% by 2030, compared to 1990 levels. As Executive Vice President, Frans Timmermans said, ‘the goal is undisputed’ and our sector is a true believer that we need to live within planetary boundaries. At the same time, he also rightly pointed out that ‘people will be most worried whether it is going to be fair’. Today, Housing Europe is making a reality check whether social safeguards in ‘Fit for 55’ are clear and strong enough to ensure a fair energy transition.

Among the various EU legislative proposals made today that are meant to transform the economy, some of them are particularly relevant for social, cooperative and public housing.

In her immediate reaction to the new package, the Secretary General of Housing Europe, Sorcha Edwards said:

‘At the end of 2020, Housing Europe announced its 4 million renovated homes by 2030 which will decrease the energy consumption of the refurbished housing units on average by 50% by 2030, cut emissions with at least 50% and save up to €700 per year on average to each resident. The ‘Fit for 55’ package has been drafted with the good intention to support such ambitious missions and we, at Housing Europe will work with the EU institutions to ensure that what now seem to be details does not go against our common goal to live in a climate-neutral continent and deliver decent, healthy, adequate housing to next generations.”

‘Putting a price on carbon and premium on decarbonisation’

After the idea of creating a European Trading System for CO2 emissions has been in the air for a while, the European Commission has officially announced that it will now put a quantity limit and a price on emissions from the heating and cooling for buildings and from the fuel consumption released by the transport sector. In practice, there will be a maximum amount of emission units issued by the European Commission and national government. Each unit will work as a voucher that allows the holder to emit one tonne of greenhouse gases. Holders will be providers of fuel for heating and transport operating in the EU. The holders of the units will be allocated a certain number of emissions units and will have to buy more if they want to exceed the maximum limits, whereas those who improve their processes and emit less can sell or bank their excess units.

Not individual homeowners, tenants or drivers but fuel suppliers will have to pay allowances to put fuel on the market, Executive Vice President Frans Timmermans said, further clarifying that the cleaner the fuels will be, less suppliers will pay. One fourth or 25% of the revenues of this system will then go to a Social Climate Fund that could potentially compensate vulnerable groups for higher costs of heating and transport fuels and help invest in cleaner solutions. The Commission is expecting 72 billion euros to be made available to all 27 EU countries, providing direct income support, helping citizens finance their heating or cooling systems or to purchase a cleaner car. ‘It is a commitment to a just transition,’ the Commissioner also said.

As a result, emitting CO2 to produce fuel for heating and transport will become more expensive as the European Trading Scheme will have the same effect as a carbon tax, unless market prices go down in such a way that the increased due to the carbon tax is offset by the decrease of wholesale price of fossil fuels.

Although making carbon more expensive is a way to incentivise the shift towards clean energy, the evidence shows that low-income households and therefore residents of social housing will end up paying more for their energy without having the possibility to switch to a cleaner source of heating or transport fuel. Housing Europe shared the concerns of many users’ organisations about the creation of an Emission Trading System for buildings and transport and the resulting increased of cost for Europeans.

Decarbonising public, cooperative and social housing by the numbers

‘EU’s immediate thinking of the most vulnerable and creating a specific fund is very encouraging. At the same time, we had to do the math and quickly saw that setting up the Climate Action Social Facility will not be sufficient to address the financial challenge of the fair energy transition in the building sector. We need to make sure that national governments step up their game to avoid placing the financial burden of climate change adaptation and mitigation on those who can least afford it,”

Housing Europe’s Secretary General, Sorcha Edwards stressed.

To bring the stock of social, cooperative and public housing in to Energy Performance Certificate Label B and A by 2050, on top of the yearly €23 billion dedicated to renovation and maintenance in a business-as-usual scenario, the sector would need an extra €13 billion every year until 2050. The Climate Action Social Facility size will determine by the expected revenues from the auctioning of emissions units. We also know that currently, the amount of revenues generated by the Scheme is around €15 billion per year.

Energy Efficiency Directive rules applying to public housing

While the previous Energy Efficiency Directive enshrined the obligation to renovate 3% of the floor of buildings owned and occupied by governments, the European Commission now proposes to extend this obligation to buildings owned by public bodies. This means also public housing. Forecasts of renovation activity from the sector are determined by local contexts, on having the right local policy framework, financial support for housing providers and capacity in the construction sector. There is no evidence that an obligation from EU level will create those success factors on the ground.

Setting a uniform rate of renovation across the EU, however, overlooks the diversity of the national situations. The Renovation Wave of public, cooperative and social housing in some countries had already started decades ago, leading to a currently rather low renovation rate. Sweden for instance has been a pioneer in renovation and is proud to have already almost fully decarbonised their building stock.

The sector’s experience has also proved that the contribution of energy efficiency to decarbonisation can sometimes be limited as users’ behaviour and the carbon content of heating and cooling also plays a major role. An optimal situation would require a balance between energy efficiency, decarbonisation of heating and cooling and accompanying measures for residents.

Housing Europe also regularly calls for coherence between difference pieces of legislation and the ‘Fit for 55’ package makes no exception. An obligation to renovate at precise and uniform rate runs the risk of being in contradiction with Energy Performance of Buildings Directive, and especially the Minimum Energy Performance Standards (MEPS) by forcing renovation without taking into account the life cycle of the buildings. This approach could undermine the already fragile business case for energy efficiency investments.

An obligation without the right incentives may reduce the capacity to deliver new homes and exacerbate the already high tensions around housing. The OECD predicts higher demand for social and affordable housing resulting from unbearable housing costs coupled with growing unemployment rates due to COVID-19. Keep in mind that average house prices in the EU's private sector have increased by over 30% in the past decade and rents have gone up by almost 15%, outstripping increase in the incomes.

Once again, housing systems in Europe are very diverse, meaning that in some EU countries public housing companies are established as private non-for-profit entities which rely partly on their own resources to carry out energy efficiency investments but are classed as public due to EU definitions linked to regulation. For this reason, we would call on the European Commission to carefully reassess the obligations to renovate the public housing stock to ensure that this does not lead to a rent increase in the affordable housing sector in some countries.

Beyond this change, the revised Directive proposes a new article about protection vulnerable consumers including social housing residents. Article 22 rightly states that “Member States shall take appropriate measures to empower and protect people affected by energy poverty, vulnerable customers and, where applicable, people living in social housing” In particular, Member States shall “set up methods and measures to ensure affordability, the promotion of housing cost neutrality, or ways to ensure that public funding invested in energy efficiency improvement measures benefit both, owners and tenants, of buildings and building units, in particular regarding vulnerable customers, people affected by energy poverty, and, where applicable, people living in social housing”.

District by district towards 55% less CO2 emissions

Today, Commissioner for Energy, Kadri Simson, said: “Reaching the Green Deal goals will not be possible without reshaping our energy system – this is where most of our emissions are generated. To achieve climate-neutrality by 2050, we need to turn the renewables evolution into a revolution and make sure no energy is wasted along the way.”

The revised Energy Renewable Directive proposes to consider the obligation to provide a minimum amount of renewable energy not at the building level but at a district level. This was one of Housing Europe’s points during the discussion about the revision of the Directive.

‘Member States shall introduce measures in their building regulations and codes and, where applicable, in their support schemes, to increase the share of energy from renewable sources in the building sector, including national measures relating to substantial increases in renewables self-consumption, in local energy storage and in energy efficiency, and relating to cogeneration, to renewable energy communities, and to passive, nearly zero-energy and zero-energy buildings,’ the new Directive states.

4 million homes by 2030

Europeans rightly considers climate change a very serious challenge, probably the most serious of our times. As European Commission President, Ursula von der Leyen said, fighting climate change is our generation task and we take it seriously. Social, cooperative and public housing’s historic mission of providing affordable and quality homes has for many years now taken the climate change challenge on board and are now frontrunners for the fair energy transition. The sector continues to complete its mission to renovate 4 million homes by 2030.

Housing Europe will continue to defend a balanced approach where ambition is essentially about fairness. As the legislative process for this first package starts, Housing Europe will promote towards the European Parliament and the European Council our vision of climate proofed and fair transition.