The EPBD, moreover, goes back even further. It dates back to 2002 and originated within the Provisions for the implementation of the Kyoto protocols. It has since been revised several times, for example in 2010, when an EPBD no. 2 was issued (transposed in Italy only in 2013), and in June 2018.
Today’s directive
In brief, the key points of the new EU directive are:
- climate neutrality by 2050.
- zero-emission new buildings from 2028
- from 2033, new constructions and renovations in class D
- a series of exemptions for member states
- measures to help fight climate change, reduce bills and support vulnerable households.
Emission reduction targets
All new buildings must be zero-emission from 2028, with the deadline for new buildings occupied, operated or owned by public authorities set at 2026. New buildings must be fitted with solar technologies by 2028, where technically suitable and economically feasible, while residential buildings undergoing renovation have until 2032.
Energy performance
Residential buildings must reach at least energy performance class E by 2030 and D by 2033. The scale used to calculate efficiency runs from A to G, with the latter category corresponding to the 15% of buildings with the worst performance in the national stock of each EU member state.
Non-residential and public buildings must reach the same ratings by 2027 and 2030 respectively.
The energy performance upgrade (which may take the form of insulation work or improvements to the heating system) will take place when a building is sold or undergoes major renovation or, if it is rented, when a new contract is signed.
Member states are free to determine the measures needed to achieve these targets in their national renovation plans.
Support for measures against energy poverty
The national renovation plans will set out support schemes to facilitate access to grants and financing. Financial measures must provide a significant bonus for deep renovations, in particular those of the worst-performing buildings, and grants and subsidies will be made available to vulnerable households.
Exemptions
Exemptions will cover particular buildings, such as monuments or buildings protected for their special architectural or historical value; technical buildings; buildings used temporarily; and churches and places of worship.
Member states will also be able to exempt social and public housing, where renovation work would lead to rent increases that cannot be offset by savings on energy bills.
Member states may also adjust the new targets, for a limited share of buildings, depending on the economic and technical feasibility of the renovation work and the availability of skilled labour.
Next steps
The European Parliament’s vote saw 343 votes in favour, 216 against and 78 abstentions.
MEPs will now begin negotiations with the Council to agree the final form of the bill.
The ‘Green homes’ directive: the view of ING analysts
Let us now see how the economic world surrounding the property sector has received the important news of the new European directive.
In this article we begin with the analysts of the Dutch bank ING, one of the largest banking groups in the world.
In a very recent report, ING’s experts analysed the future scenario of the property market that will emerge from the implementation of the directive.
Although the assessments are cautious, since, as the analysts write, ‘the directive is still under negotiation’, the report identifies six variables to consider in order to estimate the directive’s impact.
- Data availability
The transition to zero-emission buildings (ZEBs) involves many difficulties. In addition to difficulties of implementation, there are national discrepancies in the number of energy performance certificates (EPCs) already available.
- State of the current building stock
According to existing data and estimates, the general distribution of EPCs (Energy Performance Certificates, known in Italy as APE) also varies from country to country.
Since there is currently no harmonised way of assigning EPC scores, data analysis can only follow national scales and methodologies.
The analysts highlight significant differences in EPC labelling: France has better EPC labels than Norway but worse energy savings. The Netherlands shows the highest rate of EPC label A.
- House prices
According to ING, in most European countries the nominal price of homes has risen sharply since 2015.
Since these price increases are mostly linked to general market trends, an EPC premium on homes with a good label can already be seen in some countries. A study by the National Bank of Belgium and KU Leuven, which examined price differences between homes with high and lower energy performance, clearly shows the premium on energy-efficient homes, with a net loss of value for those that are not energy efficient.
ING notes, however, that this effect is evident in countries with fairly widespread enforcement of EPC requirements. In countries such as Spain, by contrast, there is currently no such energy-efficiency premium trend, mainly because EPC labels are non-existent or not disclosed during the sale transaction.
The forecast is that, as the energy label and methodology are harmonised, other markets will show similar developments. Improved transparency will also probably influence the market and the valuation of buildings more and more.
These effects may differ from country to country: climatic differences, in particular, may have an influence (since heating costs are lower in Mediterranean countries).
- Renovation costs
The ING report also already assesses the costs of renovating inefficient buildings.
The overall estimate is between €15,000 and €100,000, figures based on estimates by the German renovation giant VEKA together with other national sources.
The investment required, however, will depend on the country, the condition and the type of building. VEKA’s research shows that in the Belgian market the cost of renovating a detached house can be up to 1.3 times higher than that of a terraced house.
A higher share of owner-occupied flats (a figure that particularly affects Italy) is also an obstacle to renovation, because of ‘decision-making barriers’ (for example in apartment blocks, where major building renovations require a unanimous vote).
All this is on top of existing national variations. For Germany and the Netherlands, ING’s estimate of average renovation costs is between €15,000 and €30,000. They are higher in Belgium, averaging €50,000.
- Ownership profile
Another important point to consider is the ownership profile in each country.
Countries with a high proportion of low-income homeowners can be expected to face greater difficulties in financing the necessary renovation work.
For example, Belgium shows a high rate of low-income ownership, with 44% of the low-income population owning property. This is not the case in other markets such as Germany or the Netherlands, which show, on average, low-income home ownership of 20% and 15% respectively.
These countries also generally show lower home ownership rates, which implies a larger rental market. The rental market could also see changes, since landlords might ask tenants to share the cost of renovation work.
- Access to liquidity
Overall, the forecast is that countries with high renovation costs and a significant share of low-income homeowners will face greater difficulties in starting energy renovation.
This will also have a considerable effect on social justice, given that the worst-performing buildings are owned by the most vulnerable people, since these will have the highest renovation costs and will have to be renovated first. However, there will also be a significant benefit in renovating these buildings: reducing a household’s energy needs will considerably limit spending where family income is low.
The important conclusion is that access to liquidity for renovation will be crucial not only to achieve the zero-emission target for 2050, but also to make the transition fair.
