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When it comes to climate-proof and affordable homes, many roads lead to Rome

Why the EU should focus on empowering more tried and tested paths to success?

Brussels, 9 December 2021 | Published in Energy, Future of the EU & Housing

The delivery of climate proof, resilient, affordable homes to all does not need to be a utopia. It is a necessity that has been happening in social and affordable neighbourhoods across different corners of Europe in their own unique way. Concrete steps on the ground have been drawing how 2030 and 2050 could look like, proving that one can take multiple paths that are just and ‘fit’ for 55%.


Fair, ambitious and realistic 

The city of Amsterdam and the local federation of social housing associations [Amsterdamse Federatie van Woningcorporaties, AFWC], together with the major heating companies, Vattenfall and Westpoort Warmte have taken a big leap announcing that by expanding the heat network and switching to district heating, over 110,000 social, affordable homes in the Dutch capital will be gas-free while the costs for living in a warm house with hot water will remain the same. In reality, that means that in the coming years, the homes of thousands of citizens who rely on low to middle incomes will emit up to 60% less CO2 and most importantly, their voice in how this will be done will be heard. In three of the four Amsterdam quarters, discussions on how the energy transformation can happen have already started and the houses can only be connected to the heat network if there is a sufficient backing from the residents. The municipality will play its role, subsidizing the faster connection of 10,000 homes with €50 million. Keeping in mind the bold ambition of the city to be natural gas-free by 2040 and to use only clean energy, this initiative is not a one-off but one of the multiple examples of Dutch social housing investment that ensures all layers of society will be resilient to the changing climate. At the same time, the affordability of housing and living in social housing (with a share of 30% of all homes in the Netherlands) must be preserved as investment costs cannot be easily passed on to already vulnerable tenants or residents.

Adapting to different contexts and starting points

Neighbouring Germany had started its own Renovation Wave years ago, bringing thousands of buildings back into shape through renovation, a wise decision which now gives Germany the possibility to take another path to decarbonisation. Berlin’s municipal housing company, HOWOGE has kept up with the beat of time introducing new standards in sustainable construction. Controlled ventilation and water systems, a photo voltaic system with a battery and solar panels on the roof that generate 325 megawatt hours a year manage to supply the neighbourhood with up to 70% of the energy and hardly emit any CO2 emissions. Each apartment has a decentralised drinking water station ensuring that the water is only heated when it is needed. Putting housing affordability first, HOWOGE has a financially sustainable business plan – half of the homes are subsidized at 50% benefitting young students, seniors or families while the other half is privately owned. Apart from affordability, the German public housing company has been securing a good social mix in a city that has been experiencing skyrocketing housing prices in the past years.

In addition to state-of-art innovation, the 100% owned by the Swedish state energy company, Vatenfall with markets in Sweden, Germany, the Netherlands, Denmark and the United Kingdom has also forecasted that only a district approach can bring a fair transition. Looking at Berlin’s CO2 targets, building emissions need to be slashed with 40%, from 4.4 million tons in 2019 to 2.6 tons in 2030.The energy provider sees maintaining home retrofits at a rate of 1.1% rate per year and boosting district heating to up about 53% will require an investment of only €10 billion by 2030, €2 billion of which dedicated to district heating. Vatenfall describes this approach as ‘ambitious but feasible’, calculating that it would also be eight times cheaper than the scenario in which Berlin continues only with renovation works.

Does one size fit all?

Does, however, one size really fit all? In a just-published analysis by the leading Copenhagen Economics about the impact of minimum energy performance standards (MEPS) in the revision of the Energy Performance Building Directive (EPBD), the economists stress that the success of energy renovations varies across the EU due to varying climate conditions and varying access to renewable energy. ‘Not all parts of the EU have, at the moment, equal access to heating based on renewable energy. This also implies that the most cost-effective away to achieve decarbonisation of the housing stock is very much affected by local energy systems and their development in the coming years,’ the analysis says.

To really have an impact, MEPS need to be designed in the right way. A lot of public, cooperative and social housing providers for instance own large volumes of buildings. They own large multi-apartment buildings, but also entire districts made up of largely comparable single-family buildings. When they renovate, they do not simply renovate one building, but rather take on the entire block, an efficient move that creates scale and efficiencies. MEPS should also facilitate this way of working. Obligations at trigger points, such as moment of sale or renting out a building, can work very well in some occasions. But for owners of large building portfolios they can also be counterproductive as they focus on the individual building while it is much more efficient to focus on the district level. European legislators should facilitate a district based approach, allowing the EPBD to leave room for EU countries to follow an alternative approach if this leads to considerable efficiency and scale benefits, while achieving an equivalent or better result.

The Copenhagen Economics study shows that energy renovations have sharply declining returns to the point where they are no longer earned back by future savings on the energy bill.  If we were to pass on the full costs of such renovations to tenants, their housing costs would increase significantly. With this reasoning in mind, many social and affordable housing providers have chosen to only increase rents with the amount that is actually saved on the energy bill and finance the unviable part themselves. However, this reduces their ability to build new homes. Unrealistic standard setting in legislation has forced them to choose between their core tasks: affordability, availability and sustainability while their raison d’être has always been to achieve all three goals. The question today is whether a workable legislation would allow them to complete their mission.

3% nearly zero-energy buildings can mean a few thousands but also a few millions

The same study also reports that the distribution of Energy Performance Certificates (EPCs) across the EU is highly uneven. More than half of all houses in the Netherlands, Ireland or Slovakia are with a label C or above while three-fourths (73%) of the homes in Spain, Bulgaria or Lithuania are marked with D or below. In Spain, the strong necessity to cool and heat less efficient homes throughout the year has also been bringing a large share of the households to the brink of energy poverty even before the high peaks in prices. Limited incomes of tenants have made passive house strategies essential as for example with the EU-funded New4Old Project that refurbished social housing for rent in the centre of Zaragoza. In contrast with Austria for example, where every fourth home is social housing, the share in Spain (1.1%) or the majority of countries in Eastern Europe has been brought to the minimum. Bigger social housing stock does mean a higher chance for housing affordability in the country, but also means bigger responsibilities for which tight deadlines and high ambitions would prove unrealistic to meet. The revised Energy Efficiency Directive that suggests 3% of the public buildings, including social housing, to be exemplary nearly zero-energy buildings (NZEB) and retrofitting all EU buildings until the same date could lead to sub-optimal paths with technical and financial obstacles on the way.

What does the Green Deal mean to me?

In Estonia, where a significant amount the building stock dates back to the Soviet era, ‘70% of the population lives in poorly renovated homes and almost 97% of the residential buildings were privatised leading to high levels of home-ownership’. Residents of the Estonian Union of Co-operative Housing Associations (EKYL) have been part of the decision-making process of renovation for years and over the past 10 years, more than 1000 apartment buildings have been brought back into shape, leaving another 14000 on the waiting list to be finances and renovated by 2050. In a context like the Estonian, where renovation relies on the owner’s will to make the investment, bringing the homeowner into the centre of the renovation scheme is key. A big part of EKYL’s work has been to raise home-owners awareness about the energy transition and empower them to renovate their homes. Legal boundaries, education and training programmes as the EU-funded Horizon 2020 project POWERPOOR, financial incentives as well as ready-made solutions are just some of the measures that are being used in Estonia to encourage home-owners to renovate.

Many paths – one destination

Affordable district heating, fair renovation works, introducing renewables, latest innovation, and communication would come with a significant cost. Housing Europe estimates that to bring the current number of yearly renovated social, cooperative and public housing stock to EPC class A or B, an extra €13 billion every year compared to what the sector is already capable to invest is needed.

Revenues generated from the auctioning of the allowances as part of the Emission Trading Scheme (ETS) for buildings and transport should be used for measures related to buildings and transport. The Social Climate Fund will be financed by 25% of the revenues generated from the auctioning of allowances linked to buildings and transport, however, will not be sufficient to compensate for the increase of cost of the introduction to this expansion to new sectors.

Time is ticking

Time is now to chart the way forward together with the European Commission to ensure that the regulatory and financial environment in which the sector will operate in the next decades will be able to empower all parts of society. While we are focusing on the nitty-gritty of the EU Green Deal and the fine-tunning of its arsenal of powerful legislative tools, let’s also keep in sight what does this mean to the youth, the elderly, the citizens who are socially excluded, to those struggling with a disability. What should matter most is that by 2030 or 2050 they all are able to live in homes good for the climate and their pockets, in homes that might have been through different paths but within the boundaries of our planet.