Speeding up deep renovation of social housing

Deep renovation of social houses is very ambitious. The sector struggles with an outdated housing stock. Financial means are also limited. Even with the use of very advantageous loans from the Flemish Social Housing Association (1% interest rate loans), it can be hard to make repayments via rental income. In addition, the energy savings go completely to the tenant, though this is the correct socially just approach. In other words, energy-saving investments in social housing are not obvious. That is why they were included as a breakthrough project within FALCO.

We wanted to offer a solution when looking for financing solutions. A few possible solutions have been explored:

  • Solutions that create financial resources for the social housing companies. These include those that generate extra income or use a financial instrument such as securitization, which allows future earnings to be made available earlier;
  • Solutions that make use of third party financing. In such case, a third party finances the investments and obtains income from other sources (e.g. through demand side management reimbursement);
  • Solutions where a third party takes on the complete renovation and only receives reimbursement from the added value that this renovation gives to the building when the building is sold.

The different financing options have been tested by different actors. This testing showed that the legal context for financing investments in social housing is so stringent that several of the proposed solutions are not possible. Funding must go through The Flemish Company for Social Housing (VMSW) or through governments if they can offer the same financial conditions. Sale of buildings is only possible if the buildings are in poor condition, and therefore cannot be done for recently renovated buildings. Third party financing with an earnings model via demand side management could offer a solution, but has not yet developed sufficiently. This track will, however, be further followed within FALCO.

Due to the difficult legal context, the FALCO Partner Board decided not to continue this breakthrough project for the time being.

In the meantime, the implementation decree on the financing of solar panels in the social housing sector has been approved. This allows social housing companies to invest in solar panels and to earn back their investment through a contribution from the social tenant. Applying the same thinking to energy renovation could stimulate the renovation of social housing.

FALCO partners leading this breakthrough project: Ghent, Tractebel and Factor4