Getting behind the value of energy efficiency The EC has set ambitious goals around reducing carbon emissions and retrofitting Europe’s housing stock to improve energy efficiency. We spoke to Maarja Meitern of Bax & Company about the Revalue project’s work in investigating the relationship between the energy efficiency of a property and its value A range of
factors are typically taken into account in valuing a property, including location, size and access to local amenities, yet energy efficiency has not historically been a major consideration. This is a topic at the heart of the Revalue project, an initiative which brings together six partners from across Europe. “We are looking at the relationship between the energy efficiency of a property and its value,” explains Maarja Meitern, the manager of the project. This work is focused on affordable housing and housing associations, with researchers gathering and analysing data from five European countries; the UK, Netherlands, Germany, Sweden and Spain. “We found that in most markets, energy efficiency has a very marginal effect on value. For example, in Amsterdam we found some evidence that there was a premium attached to more energy-efficient
introduced in early 2018 which requires all privately rented new lets to have a minimum EPC label of E. That will lead to change in the market,” says Meitern. The regulatory environment is evolving, as governments seek to meet CO2 reduction goals, something of which housing associations need to be aware. As energyefficiency standards improve, those housing providers that do not invest in retrofitting properties risk being left behind. “If building owners do not act now, they risk losing money in the long run through having stranded assets, a property that they cannot let because there is no demand in the market for that quality of building,” points out Meitern. Lenders across Europe have started factoring in energy efficiency in their long-term risk models, and are even adjusting interest rates for more sustainable portfolios.
Building owners need to invest in energy efficiency today or risk being left with stranded assets in the future. properties. But this was still very marginal in most cases,” outlines Meitern. This means housing associations don’t have a strong immediate financial incentive to retrofit properties and improve energy efficiency, despite recognition of its importance to the wider goal of reducing carbon emissions. On the other hand., Meitern says the project did find evidence that investing in energy efficiency can lead to financial benefits in some markets. “For example, in the UK market we found that houses with double-glazed windows had a higher final valuation than similar houses in the same neighbourhood with single-glazed windows,” she says. Nevertheless, the regulatory environment and the availability of subsidies are even more important considerations in this respect, as governments across Europe look to accelerate the transition towards a low-carbon economy. “Policy-makers are looking at changing the current minimum energy efficiency standards – a clear example would be the UK’s Minimum Energy Efficiency Standards (MEES)
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Many housing providers and organisations nevertheless tend to have quite a shortterm outlook on retrofitting properties, often working on a house-by-house basis. By gathering and analysing relevant data, the project aims to help these organisations identify how they could scale this up and retrofit houses more efficiently. “We need to get better quality business cases, which will allow housing associations to negotiate better financial terms with banks,” explains Meitern. This is a key part of the project’s overall message. “We would encourage property owners and housing associations to collect data on their assets, as banks are starting to look in greater detail at retrofit projects. So data collection is very important,” stresses Meitern. “Many banks already ask their valuers to collect data on the energyefficiency performance of buildings. For housing associations, it is about long-term investment planning and smarter decisionmaking.” This could encourage more housing associations to invest in retrofitting houses,
which is very much in line with goals set by the European Commission around limiting carbon emissions. The residential sector is an important part of this, so energy efficiency could become a more prominent consideration in property valuations in future. “One of the project partners, the Royal Institute of Chartered Surveyors (RICS) in the UK is developing an insight paper on how property valuers can take energy efficiency into account. In the updated edition of their Red Book, they also urge valuers to collect and record sustainability data,” says Meitern. “We want to help inform valuers about the importance of energy efficiency, and to get the message across to building owners that they really need to look today at how they retrofit properties. They need to think about the investments they need to make in order to avoid being left with stranded assets in future.”
REVALUE Scaling Energy Renovation REVALUE aims to help valuers to reflect the value of energy efficiency in their valuations of both social and private housing stock. Introducing the right guidance and identifying additional income streams would hopefully encourage buyers and owners to consider EE retrofit decisions. Maarja Meitern, Consultant C/ Casp 118-120, 5o-2a, 08013 Barcelona, Spain T: +34 93 176 31 10 E: m.meitern@baxcompany.com W: http://revalue-project.eu Maarja Meitern is a consultant at Bax & Company, working on smart energy systems, future energy markets and institutional sustainability strategies.
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