A more energy efficient housing stock is an important element for achieving climate goals. But carrying out the necessary renovations is not without problems – it often leads to higher rents, which means that the measures can clash with other goals, such as social sustainability.
The goal is for 35 million buildings to be renovated in the EU by 2030 to reduce energy demand and phase out fossil fuels and outmoded technology. This is a key aspect of transition efforts to achieve the established climate goals.
In order to speed up renovation work, a Swedish government budget bill has proposed allocating a total of SEK 4.3 billion up to 2023 to fund energy efficiency measures in apartment buildings. The new rules will come into force in August this year.
Risk of rent increase
However, although the funding will result in an upgraded apartment building stock and a better standard of living for tenants, these types of measures often lead to higher rents. This effect is particularly palpable when it comes to apartment buildings in economically disadvantaged areas, which frequently have a great need for renovation.
“When rents increase in the areas where disadvantaged groups live, it leads to greater economic disparities and greater economic segregation in Sweden as a whole. Those who are already the worst off become even worse off,” says Mikael Mangold, researcher in RISE’s Urban Development Unit.
For precisely this reason it is imperative that similar funding is balanced by other subsidies that reach the groups affected by potential rent increases.
“There are several ways to deal with the issue, one way is through ‘green rental discounts’,” says Mangold. “For instance, if the building you live in has undergone an energy-efficiency renovation that has resulted in higher rent, you can have that rent discounted through a form of subsidy.”
We help authorities to understand developments in order to design policies and laws for energy efficiency
Funding opportunity requested
Another option requested by municipal property companies involves setting up a fund for use in future renovations.
“However, in Sweden we have laws on how public housing companies may operate, along with regulations governing the amount of financial resources permitted to be carried over from year to year,” explains Mangold. “So there are laws obstructing what many of the municipal property companies would prefer to see.
One option, of course, is separate conventional subsidies geared towards energy efficiency and increased housing benefits or social benefits or increased health insurance or similar.”
Zero options allow the tenant to choose
Another option to prevent tenants from being forced to move is what is usually referred to as the ‘no action option’, which means the tenant gets to choose the scope of an upcoming renovation. By opting solely for maintenance measures instead, the rent can remain unchanged.
"A no action option ensures that everyone can stay,” says Mangold.
RISE assists with analysis and expertise
RISE has broad expertise and extensive experience in these questions. For example, RISE provides government agencies with a basis for investigation prior to future proposals along with analyses of the effects of introduced regulations.
“We help authorities to understand developments in order to design policies and laws for energy efficiency,” says Mangold.
The work is carried out by analysing data on Sweden’s building stock from several different national building stock registers.
“We collect data on the building stock with a primary focus on the apartment building stock,” says Mangold. “We then measure development according to different parameters by means of socio-economic data on those who live in the buildings, economic data on property owners and data on energy use over time.”
Large investments are needed
According to Mangold, making the housing stock more energy efficient requires major investments, and it is important to take into account how this may affect residents in the properties:
“We have a major segregation problem in Sweden – economic segregation, geographical segregation, and differences in living standards and opportunities. Of course there are different spheres, but there are definitely common denominators, one of which is buildings and the opportunities that exist to renovate the buildings.”
