Boosting the economy through large-scale renovation for better and healthier buildings

European and Flemish recovery plans find each other

While we are just starting to assess the far-reaching economic, social and psychological consequences of the COVID-19 crisis, the discussion on how to address the recovery effort has kicked off.

The proposal of the Flemish Parliament for a Flemish socio-economic recovery plan after the corona crisis focuses on sustainable investments with a quick return. [i] The resolution makes explicit reference to capitalize on the opportunities offered by the European Green Deal through the European Recovery Fund.

With the so-called Renovation Wave [ii] as one of the Green Deal flagships, the renovation of the building stock is brought up as a key action for the recovery strategy due to its positive impact on economic activity. [iii] The EU makes urgent renovation of our buildings and infrastructure a priority, not only to combat climate change, but also to alleviate energy poverty for millions of Europeans and ensure that buildings provide a comfortable, healthy and affordable living and working environment. [iv]

What would, under the current debate, a no-regret rescue package imply for the built environment? Could we accelerate this process, creating a win-win scenario with the recovery effort? Or are there conflicting positions?

Are sustainable renovations a Flemish lifesaver?

Across Europe, member states such as Denmark [v], Austria [vi], Spain [vii] and Italy [viii] incentivise energy renovations as part of their recovery programme. For example, Denmark invests 4 billion euro in sustainable renovations between now and 2026. With this housing agreement - the largest ever in Denmark - 72.000 homes will be renovated on the short term. The Danish government alludes to the unique opportunity of combining the recovery of the economy through job creation with achieving the sustainability targets.

Could a similar approach – targeting renovation – also be of capital importance for the Flemish recovery plan? The poor quality of the Flemish building stock, from which an estimated 95% share needs to be renovated between now and 2050 [ix], would suggest so.

The consequences of the corona crisis are massive, with additional 190,000 people to be unemployed [x]. The Flemish construction sector - with an estimated employment of 200,000 people - is a rock in the surf, characterised by a large number of SMEs and strongly locally connected. To achieve the long-term Flemish renovation objectives, 90,000 homes must be renovated annually, tripling the renovation rate, and requiring 250,000 additional workers [xi].

Finding the qualified people for this increased capacity need in the construction sector is an immense challenge, but is as well a window of opportunity to boost the economy. The construction sector must innovate further for renovation processes to run more efficiently, faster and cheaper, but also become more attractive as employer to a wider target group.

Calculations by VITO / EnergyVille show that an ambitious and sustainable renovation plan for residential buildings in Flanders in line with the international and European climate objectives requires an annual investment between 2.4 and 8.4 billion euros (see Figure 1). This for a CO2 reduction in 2050 of respectively 50% and 80% compared to today. The calculation is based on detailed information of nine neighbourhoods representative of Flemish homes, and identifies the most advantageous combination of renovation measures (e.g. insulation, solar panels, heat pump) at system level.

The economic asset is clear, but what is the right approach for a Flemish renovation recovery plan? How do we avoid lock-in effects or stranded assets, target the correct buildings and assure that installed measures are future-proof? And how can we maximise both individual and societal co-benefits?

The renovation recovery plan must focus on the appropriate no-regret measures

In an early stage of the recovery plan, the implementation should focus on rapid initiation of no-regret measures. These are quick wins with a high return for the building owner and/or the society, but as well in line with the long-term climate and energy targets. A tailored and diversified renovation package is therefore preferred over a uniform – one-size-fits-all – approach where all buildings need to achieve the same energy performance levels. This because the optimal balance between reduction of the energy demand (e.g. insulation of the building envelope), sustainable energy supply (e.g. heat pumps or sustainable district energy systems) and smart energy management (e.g. demand response or building energy management systems) differs between buildings and districts. Such a tailored approach implies a modelling exercise to point out which measures are most appropriate according to the building types, and this in relation to their (urban) environment (e.g. where excess heat from nearby industry is available).

Based on a high-level modelling exercise by VITO / EnergyVille, the cost per ton of CO2 saved is one third cheaper when the most advantageous combinations of renovation measures are selected at system level instead of an approach in which all homes have to achieve the same energy performance level.

Both the burden and the extensive investment of renovations are key barriers to be tackled by the renovation recovery plan. This by aggregation and facilitation of the renovation process and smarter financing. New process designs and financing mechanisms such as one-stop shops make it possible to actually get the upscaled building retrofit efforts launched [xii].  Public investments should also guarantee a ‘just transition’. In the Danish renovation recovery fund, a specific package is foreseen for public housing, alleviating energy poverty and making houses more comfortable and healthy for vulnerable families. Additional Flemish public investment could therefore be allocated to retrofitting social housing at an increased pace and to (co-)funding sustainable district heating and cooling projects. District energy systems are together with heat pumps the preferred option to decarbonise the heating and cooling supply, but have a tough business case due to the current cheap gas prices. From a societal perspective, public (co-)investments in centralised and decarbonised heating supply makes sense.

Not all existing buildings are worth retrofitting. Buildings may be of critically poor quality, in a bad state of repair or energy-inefficient beyond feasible remediation. They may also stand at a location not sustainable from an urban planning perspective.

In the first case, demolition and rebuild may be the better option both from the financial and technical, social or architectural point of view. In the second case, it may be worth demolishing the building, reclassifying the location to nature or to another sustainable land use type, and providing a substitute solution for the building’s functions at a more sustainable location. VITO/EnergyVille has explored such approach in a recent study for the Flemish spatial planning and energy administrations [xiii]. This however requires spatial and urban planning policies on the mid-long term that remediate structural problems of the (lack of) spatial planning in Flanders during the last 50 years. Hereby a part of the building stock will be earmarked for an ‘extinction scenario’. Nevertheless, a fast post-COVID renovation wave can already tackle those buildings for which the retrofit choice can stand the test without any doubt.

Urban housing quality as a social dilemma?

COVID-19 poses a societal dilemma, with climate change and health problems as game changers. If the current crisis leads to the conclusion that a detached suburban home and private car use are the best options for living virus-free, figures might go south too fast. If we take Flanders as an example, this will lead to even more buildings and soil sealing, further increasing hydrological problems, less nature, more traffic congestion, higher energy consumption, higher emissions and a greater impact of the use of raw materials and infrastructure.

Measures that intelligently make densely built environments more sustainable and climate-friendly can increase both the quality of life and the resilience of the city, both from a climate and health perspective. If these qualities are sufficiently guaranteed, the pressure to make the reverse movement will decrease. It is therefore hoped that a first reflex will not jeopardize the much-needed efforts in the field of sustainable urban (re)development, climate action, conservation of nature and biodiversity, healthier water and soil cycles, and cleaner air. Because, COVID or not, these problems will have to be solved anyway.

Smart urban density may take away the spontaneous reserves that arise when thinking of cities and pandemics as a potentially deadly cocktail. There exists a wealth of viable and sustainable urban typologies in between the caricatures of the over-packed city and the cool countryside. For Flanders, many relevant exercises have already been made and should inspire us for future, pandemic-proof interventions in our built environment [xiv].

From a building-by-building approach to urban regeneration and futureproofing

Additional benefits can be reaped from adopting a district- or city-scale approach, rather than working on a building-by-building basis. Embedded in strategies of sustainable urban and spatial development, the wider co-benefits for society as a whole include reduced energy dependence, savings on social and health expenditures, less pollution, a safer and healthier living environment, more local employment and less traffic congestion with the associated economic losses.

In its advice to the Flemish recovery strategy the Social Economic Council of Flanders (SERV) highlights the importance of investment programmes and partnerships between regional and local governments, social partners, local coalitions and experts. Positive Energy Districts are pointed out as strategic key projects on local level, enabling both prosperity and jobs, stimulating a sustainable energy system as well as improvement of the quality of the (living) environment.  [xv]

Renovation can also entail more greenery, increased water buffering and climate resilience. An example, which may be relevant in the light of the current crisis, is the renovation of the 16-storey Tour Bois-le-Prêtre in Paris [xvi]. A new shell of terraces and winter gardens was draped around the building, making a lockdown a lot more bearable. 

Now is the time to invest in a future-proof built environment. Provided these investments are well thought, they serve a triple purpose: recovery in the short term, increased robustness and sustainability in the long term.