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Assistant Buildings’ addition to Retrofit, Adopt, Cure And Develop the Actual Buildings up to zeRo energy, Activating a market for deep renovation ABRACADABRA

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The communication reflects only the author’s view and the Research Executive Agency for SMEs is not responsible for any use that may be made of the information it contains

This project has received funding from the European Union’s Horizon 2020 Research and innovation programme under grant agreement No 696126 The EU Framework Programme for Research and Innovation

DELIVERABLE 2.5

FINAL USERS CONSTRAINTS – PRELIMINARY REPORT

(Coordinator) University of Bologna (UNIBO)

Rina Consulting S.p.A. (RINA-C)

National and Kapodistrian University of Athens (UOA)

Foundation for Development, Innovation and Technology (KIM)

Cecodhas Housing Europe (CECODHAS)

Architects’ Council of Europe (ACE)

ICLEI European Secretariat (ICLEI)

Ecuba S.r.l. (ECUBA)

International Union of Property Owners (UIPI)

RENESCO (RENESCO)

Banca Monte Paschi Belgio (MPB)

EnergyPro Ltd (ENERGYPRO)

Municipality of Brasov (BRASOV)

TU Delft Onderzoek voor de gebouwde omgeving (OTB)

Norwegian Institute of Wood Technology (TRETEKNISK)

Partenaires Europeens puor l'enviroment (EPE)

Sociedad Aragonesa de Gestión Medioambiental (SARGA)

Black Sea Regional Agency for Energy Management (BRAESM)

FEBRUARY 2018

Assistant Building’s addition to Retrofit, Adopt, Cure And Develop the Actual Buildings up to zeRo energy, Activating a market for deep renovation


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FINAL USERS CONSTRAINTS – PRELIMINARY REPORT

Deliverable No. D2.5 Final Users Constraints – Preliminary report

Work Package nZEB TOOLKIT and POLICY Recommendation

Task Task 2.4 TFR Toolkits, Policy recommendation elaboration, review and finalisation

Dissemination Level Public

Lead Beneficiary WP 2 – RENESCO

Author(s) Emmanuelle Causse, Agatha Rogala, Spyridon Pantelis (UIPI)

Co-Author(s)

Date 01.03.2018

Status Ongoing

Document history V1 01.03.2018

This document has been prepared in the framework of the European project ABRACADABRA – Assistant Buildings’ addition to Retrofit, Adopt, Cure And Develop the Actual Buildings up to zeRo energy, Activating a market for deep renovation. This project has received funding from the European Union’s Horizon 2020 Research and Innovation Programme under Grant Agreement No. 696126.

CONTACT: Project Coordinators’ email: [email protected]

Website: www.ABRACADABRA-project.eu

mailto:[email protected]

http://www.abracadabra-project.eu/


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TABLE OF CONTENTS

I. Introduction ............................................................................................................................ 5

II. Delimitating the scope of this report – Subject of focus ..................................................... 7

III. Methodological approach ...................................................................................................... 8

IV. Obstacles and barriers to implementing AdoREs from property owners’ perspective .... 9

1) Technical challenges and solutions ...................................................................................... 9

i. Lack of trust in construction professionals ....................................................................... 10

ii. Consumer acceptance towards new technologies and innovative renovation solutions .. 10

iii. Lack of knowledge of available solutions and customisability .......................................... 11

iv. Disruption factor .......................................................................................................... 11

2) Regulatory barriers and solutions ....................................................................................... 12

i. General lack of knowledge, diversified regulatory frameworks and legal uncertainty....... 13

ii. Urban planning legislation and bureaucratic procedures ................................................. 14

iii. Decision-making in condominiums .................................................................................. 15

iv. Cultural heritage buildings ........................................................................................... 17

v. Rental law restrictions ..................................................................................................... 17

3) Financial challenges and solutions ..................................................................................... 18

i. Payback expectations and investment horizons .............................................................. 19

ii. Upfront financing ............................................................................................................. 19

iii. Lack of funding opportunities .......................................................................................... 20

iv. Tax advantages, reductions, deductions and other fiscal incentives ............................ 21

v. Split-incentive and financial investment........................................................................... 22

vi. Imperfect mortgage market for energy efficiency and retrofitting project ......................... 23

vii. Loan eligibility of condominium owner associations ..................................................... 23

viii. Cautiousness when it comes to property value ............................................................ 24

ix. Maintenance costs ...................................................................................................... 24

x. Relocation and vacancy costs ......................................................................................... 25

xi. The aesthetical value of AdoREs? ............................................................................... 25

V. Guidelines for Property Owners Associations (Annex I) .................................................. 26

.............................................................................................................................................. 26

i. Purpose of the Guidelines ............................................................................................... 26

ii. Addressees of the Guidelines ......................................................................................... 26

iii. Development methodology ............................................................................................. 27

iv. Division and drafting manner ....................................................................................... 28

ANNEX I ....................................................................................................................................... 29


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ANNEX II ...................................................................................................................................... 33

Presentation of the Guidelines used during the International Workshop for voting ..................... 33


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I. Introduction ABRACADABRA is a three-year long European funded project designed to implement cost-effective energy efficient retrofitting solutions. Its purpose is to build confidence and demonstrate to both key stakeholders and financial investors the attractiveness of a new renovation strategy based on volumetric Add-Ons and Renewable Energy sources (AdoREs).

The core concept of ABRACADABRA1 is the assumption that non-energy related benefits play a crucial role in the deep renovation of existing buildings, and its actions will focus mainly in increasing real estate values of buildings through energy and architectural transformation, which will allow going beyond the minimum energy performance. Its ambition is to reduce the pay-back time of large-scale renovation, strengthen key investors’ confidence, increase the attractiveness and quality of existing buildings and generate market acceleration towards energy efficient and nearly Zero Energy Buildings (nZEB) to reach EU Climate and Energy goals.

The implementation of the AdoREs concept in practice is highly challenging: A renovation project that would foresee a side or façade addition, rooftop extension or even an entirely new assistant building construction, together with the installation of renewable energy sources, and on top of that a deep energy retrofit, is due to face a considerable amount of constraints and obstacles. These barriers are of regulatory, financial, technical and social nature. In some cases, AdoREs can even complicate further the energy efficiency renovation. For instance, they could make the whole project technically more difficult, more expensive, increasing red tape or increasing social unacceptance.

Aware of those possible challenges and with the firm intention to identify ways to overcome them, ABRACADABRA partners have conceptualised the project in a way that those challenges and barriers are acknowledged and addressed throughout the entire course of the project and from different perspectives.

1 ABRACADABRA stands for Assistant Buildings’ addition to Retrofit, Adopt, Cure And Develop the Actual Buildings up to zeRo energy, Activating a market for deep renovation


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An accurate evaluation of those challenges is primordial to the success of the project. Even though the ABRACADABRA consortium is aware that there is no “one-size-fits-all” solution, the identification of problems is an indispensable preliminary step to suggest appropriately tailored solutions to address them.

Addressing and evaluating those challenges and obstacles from different angles equips stakeholders with a more holistic view of its potential for widespread market adoption. Finally, evaluating those challenges at different national and local levels is a guarantee that the national and local peculiarities, are well documented and assessed.

The significant added-value of the project lies in the fact that:

- the national specific coverage is relatively wide,

- the technical, financial and regulatory aspects are assessed separately and then addressed with the development of relevant tools and policy recommendations,

- the key stakeholders are directly involved and can, during the entire project duration, constantly reiterate the concerns and interests of the sector they represent and list the barriers and opportunities encountered.

This “reality check” exercise is indispensable to the success of the project.

Considering that such renovations must be primarily supported by the owners themselves (either as individuals, a community of owners or private or social investors/managers), their contributions to identifying possible barriers and concerns towards the implementation of AdoREs strategy play a pivotal role.

Keeping all those factors in mind, the International Union of Property Owners (UIPI) has in the framework of this project taken over the task to identify private property owners’ constraints who are, for the purpose of this project, considered as final users. The objective of the present exercise is to compile them under one single report on “Possible barriers and incentives for the adoption of the AdoREs by final users”.

Yet, the identification of specific private property owners related aspects and their perspective cannot be seen in a silo. Previous project steps included the identification of specific obstacles and solutions to the development of AdoREs. Those were widely discussed during the first four rounds of National Meetings and International Workshops that took place respectively on challenges and opportunities on Add-ons in the deep renovation of existing buildings2 as well as on the development of the technical,3 regulatory4 and financing toolkit.5 They were extensively reported in:

- Deliverable 2.1 Past and running projects on Add-Ons. Challenges and opportunities – preliminary report;

- Deliverable 2.2 Technical toolkit – preliminary report

- Deliverable 2.3 Regulatory toolkit – preliminary report

- Deliverable 2.4 Financial toolkit – preliminary report

Therefore, the purpose of this report is not to reinvent the wheel. Capitalising on the work that has already been done in this project, this document aims at contextualising, clarifying and completing

2 23-24 June 2016.Bologna, Italy. 3 24 October 2016:in form of a webinar. 4 16 March 2017. Brussels, Belgium. 5 4-5 October 2017. Barcelona, Spain.


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the challenges, barriers and opportunities from property owners’ perspective. It focuses solely on topics that are relevant for private property owners to choose AdoREs solutions.

This been said, distinguishing AdoREs specific obstacles and incentives from the ones related to deep energy efficiency renovation is sometimes difficult and it would not necessarily make sense as, from an investor’s point of view, the renovation project would be seen as one single project and both have related, or even common, variables and conditions.

With all those elements in mind, the report will:

- Propose a non-exhaustive list of challenges that property owners face or expect to face during the realisation, planning and execution phase of an AdoREs intervention;

- Identify potential solutions;

- Propose guidelines on how property owners’ associations can assist individual property owners to identify and overcome them.

II. Delimitating the scope of this report – Subject of focus As mentioned, this report focuses on private property owners’ perspective while another target audience to be considered later on in the course of the project is social housing providers. For the purpose of this project, “private property owners” are also considered to be the final or end users. Even though obstacles and constraints specific to tenants should not be neglected, focusing on owners is appropriated since:

- 7 out of every 10 (69.4 %) persons in the EU-28 live in owner-occupied dwellings6, - owners are the ones who ultimately take the decision and the risk to invest, therefore such

renovations must be primarily supported by owners themselves.

Yet the term “private property owners” is extremely broad and potentially encompasses a whole range of real estate actors: from large listed or non-listed real estate companies with a portfolio composed solely of large commercial buildings to individual owner-occupiers. A good understanding of the real estate economy and its great diversity can often lead to wrong assumptions. If the project as such is not specific as to the part of the real estate it considers and the type of owners it focuses on, the International Union of Property Owners’ involvement in the project was meant to steer the focus towards the part of the sector it represents and knows best: mainly small private landlords and owners’ occupiers in the residential sector.

Therefore, even if some of the aspects considered in this report might be valuable for several segments of the real estate sector, the focus is mainly on those millions of individuals that live in their own house or rent a certain number of residential dwellings on a non-professional basis or as small businesses.

Focusing on this part of the sector as some significant advantages: this is the most fragmented part of the real estate sector and the most difficult to target when it comes to energy efficiency renovation.7 It is also the most difficult to understand as some of the decision taken might not be fully rational.8

6 EU Housing statistics (2017). 7 United Nations : Global Roadmap - Towards low-ghg and resilient buildings (2016), p.13. 8 See e.g. Elinder, M. and Persson, L.: Property Taxation, Bounded Rationality and House Prices (2014).

http://ec.europa.eu/eurostat/statistics-explained/index.php/Housing_statistics

https://globalabc.org/uploads/media/default/0001/01/0d6a71a346ea7e6841b1b29c77eba6d6ae986103.pdf

http://www.ifn.se/wfiles/wp/wp1029.pdf


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In addition to that, it is important to specify that the tenure and ownership types considered in this report constitute important variables as additional regulatory, financial and sociological aspects might occur. In this report, we will therefore consider the following types of ownership and tenure:

- co-owners that live in a small or large multi-apartment building; - owner-occupiers of detached or semi-detached single-family houses; - landlords of residential dwellings that can own a property on their own (either with one

single tenant or several) or co-owners of an apartment in a multi-apartment building.

III. Methodological approach To collect and compile the information contained in this report, the following sources have been used:

1. Grassroot and field experience as well as knowledge coming from UIPI and its member associations (notably on housing-related issues such as national housing legislation, condominium law, social aspects, etc.);

2. Desk research (including information from other EU projects);

3. Information collected during ABRACADABRA (notably Deliverables 2.1, 2.2, 2.3, 2.4)

4. Expertise, input and comments collected during:

- the 5th round of National Meetings in each participating country (i.e. The Netherlands, Norway, Greece, Italy, Latvia, Romania, Bulgaria and Spain)

- the 5th Project Meeting in Brussels, Belgium (7 February 2018)

- the 5th International Workshop organised by UIPI in Brussels, Belgium (8 February 2018)

- the 5th Capacity Building event organised by UIPI in Brussels, Belgium (9 February 2018)

The 5th round of National Meetings and the 5th International Workshop and Capacity Building event were specifically dedicated to addressing property owners’ concerns, identifying barriers at local, regional, national and EU level, come up with solutions and gather best practices and real case examples. This exercise aimed at checking the ABRA idea and solutions against the actual end-user perception to be able to reflect real concerns and barriers to implementing the AdoREs strategy and to even take the initial decision for energy efficiency retrofitting. The inputs gathered are precious for the further development of the ABRA solutions and ensure that the project outputs will have a real potential to foster a higher uptake of energy efficiency retrofitting of existing buildings, increase awareness of available solutions and have an impact beyond the lifetime of the project.


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IV. Obstacles and barriers to implementing AdoREs from property owners’ perspective

This chapter aggregates challenges and possible solutions to implementing AdoREs from a property owners’ perspective. It considers the comments, remarks and discussion topics regarding the obstacles and best practice solutions as they have been identified and compiled during the fifth series of the National Meetings and International Workshop as well as other relevant sources (see Methodological approach).

To sort those challenges and possible solutions, we have kept the project structural division between technical, legal/regulatory and financial related aspects. Yet, it is important to keep in mind that some of those aspects might be highly interlinked: A technical or legal difficulty might have financial implications, etc. In addition, societal and sociological parameters are a central and cross-cutting element of this analytical approach: A low social awareness might lead to the adoption of behavioural patterns incompatible with the financial and legal interests of an individual. So, the fact that behavioural aspects, social norms or reference biased are not addressed in a specific paragraph does not mean that they have been disregarded. On the contrary, they are a transversal feature of this analysis.

Also, many characteristics might be country, and even regional or local, specific. This implies that neither the obstacles nor the solutions fall into a “one-size-fits-all” model. Yet, if the conditions are different, there are common patterns in the way property owners take the decisions to invest in renovation or extension projects. Our intention is, therefore, to enrich the discussion with AdoREs specific problems and highlight their potential solutions.

1) Technical challenges and solutions

The assessment of AdoREs and deep renovation technical related aspects has been one of the main objectives of ABRACADABRA and was undertaken early in the project. The technical feasibility of the implementation of AdoREs was assessed through case studies together with energy simulation program. It led to the adoption of a technical toolkit, which provides a guide and outline process to understand, evaluate and implement the technical assessment required for the deployment of successful building renovation projects choosing between different scenarios. This was extensively explained in Deliverable 2.2.

The technical feasibility is of course of great importance for property owners. Yet, the purpose of this chapter is not to assess what is feasible or technical suitable in specific cases. Rather it is to better grasp what is relevant when it comes to technological aspects for property owners, how property owners perceive technological changes and how they assess their benefit and potential disadvantages. Identifying the key factors that influence public attitudes is the first step towards the design of appropriate strategies that would enhance public support. As for the solutions, some can be derived from those assessments.


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i. Lack of trust in construction professionals

Latent mistrust toward professionals, the lack of AdoREs and energy efficiency professionals – in particular in local areas - or, on the contrary, the overwhelming number of offers can weigh heavily in the balance when it comes to the final decision to renovate or not renovate. As mentioned during the 5th round of National Meetings, individual homeowners and landlords do not know where and how to find reliable experts and professionals and ask for advice and assistance. Taking such an important decision as a deep renovation together with a building addition or extension (AdoREs) is for many, the second most important investment – after buying their home – they will undertake in their life. Therefore, they demand some guarantees that the work will be done appropriately, that the given advice is neutral and does not favour particular technologies or services. They are looking for long-lasting solutions that will be both economically and practically viable.

Suggestions

Lists of trusted professionals could be provided by neutral parties such as public authorities, property owners’ or consumers associations or “one-stop-shop” structures. The lists should have a non-exhaustive character, but with sufficient choices and a rather wide price range for the services offered would be advised. This would constitute a relatively low-cost measure to cope with the lack of transparency in the market.

Independent and trusted guidance could be provided by local authorities and national property owners’ associations. They should be directly involved in providing a comprehensive service package with information on the most efficient technologies, available funding instruments, fiscal measures, lists of certified building professionals, etc. to property owners at the local level.9

ii. Consumer acceptance towards new technologies and innovative renovation solutions

Property owners’ associations often report a certain level of mistrust towards new technologies among their individual members. This aspect has also been mentioned during the ABRACADABRA project. This phenomenon that can also be referred as ‘consumer acceptance’ has been widely documented.10 It corresponds to behavioural aspects towards available technological solutions and the possibility of purchase and use of such products. It is mainly due to a lack of knowledge about issue and technologies, the perception and feelings and interpretation of the information and finally, the fear, i.e. worry, risk and inconvenience that people may feel regarding new energy technologies.11 This is also valid for risks perception towards AdoREs, an aspect that was mentioned several times during the National Workshops.

9 TRAINREBUILD: Lesson learned from EU-Funded project under Intelligent Energy Europe (2012), IEE/09/741SI2.576295. 10 Tsokaa, S. et. al: Rethinking user based innovation: Assessing public and professional perceptions of energy efficient building facades in Greece, Italy and Spain. Energy Research & Social Science, Vol. 38 (2018), p. 167. 11 Assefa,G. and B. Frostell: Social sustainability and social acceptance in technology assessment: a case study of energy technologies, Technol. Soc., Vol. 29(1) (2007), p. 63-78.

http://www.trainrebuild.eu/

https://www.sciencedirect.com/science/article/pii/S2214629618301658


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Suggestions

Training and awareness-raising activities are key elements for the acceptance of innovation. Continuous awareness-raising campaigns, across the entire demographic spectrum, is the first crucial step to provide knowledge on the importance of improving buildings’ energy efficiency through the application of the respective innovative technologies. Focused informational campaigns counter misleading perceptions and knowledge gaps regarding the characteristics, benefits or even acquisition cost of certain technologies.

iii. Lack of knowledge of available solutions and customisability

The lack of knowledge about available solutions is a major obstacle. This is particularly relevant for AdoREs solutions and energy efficiency related improvements. Add-ons solutions are far from being often considered. If they are, this is hardly done in combination with the installation of the renewable energy sources and as a way to finance energy efficiency renovation. This was mentioned in the Dutch, Spanish and Italian National Meetings.

Therefore, if architects and construction professionals do not propose solutions to include add-ons when a renovation is planned, it is unlikely that the owner or co-owners will consider such option. Except if they have been made aware of such solutions. That is why it is crucial to disseminate information among owners and owners’ communities of the advantages, benefits and technical implications of AdoREs.

Suggestions

Awareness raising and training on AdoREs solutions is indispensable to make sure that the existence of such options reaches the owners through trusted and independent sources. Local authorities and national property owners’ associations should be directly involved in training and informing owners of AdoREs solutions.

Easy to understand and transparent information on AdoREs should be provided to and should be easily accessible to individual households. It should also be exhaustive enough to include all relevant information on customisability, possible barriers and hidden costs to be considered valuable by the consumer.

Promotion of the ABRACADABRA technical toolkit to provide customised and tailored solutions for each building is highly relevant to ensure that the owner can visualise and assess the advantages of the solutions proposed and can take a documented decision.

iv. Disruption factor

The disruption factor is also fundamental and needs to be assessed especially in the case of deep renovations.12 It refers to all the troubles linked to refurbishment work for the occupant, which might impact on the decision to renovate. This aspect was mentioned at several occasions during the

12 NET_Lerning: Module Handbook (2017) p. 54.

http://www.newenergytorebuild.eu/images/pdf/Net-Learning_Handbook_Final.pdf


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course of the project, notably during the National Meetings as well as the 5th International Workshop, and is confirmed by extensive literature and research that pointed out that one of the main barriers to retrofitting is the disruption caused to users. Disruption can be of different nature:

- Disruption of utilities: occurs when retrofit works affect the continuity of utility supplies and the provision of gas, water or electricity is interrupted;

- Disruption of traffic: when retrofit works constrain the flow of occupant is disturbed (e.g. access to the building is blocked or limited);

- Disruption of physical space: occurs when retrofit works restrict space for working or living because spaces are being shared between workers and occupants and physical comfort is affected;

- Disruption of internal environment: occurs when retrofit works affect the internal environment by generating different levels of pollution.13

Suggestions

Favouring ‘Plug-and-play type of solutions’ that limit the intervention on site should help to overcome occupants’ reluctance to face renovation work.

Major dissatisfaction can be avoided if the owners (occupant and landlord) have been sufficiently informed of the renovation plan and the possible disruption.

Good practice example

Practitioners from the architectural office ‘La Casa por el Tejado’ met during the 4th International Workshop case study visit in Barcelona reported the importance of the fact that their business model is based on adding a lightweight construction, prefabricated in a factory and installed rather easily and quickly on top of the building that has already been prepared.

2) Regulatory barriers and solutions

While technical issues can, most of the time, be solved if a sufficient budget is available, there are a certain number of regulatory aspects that might impede large scale renovations. Additional obstacles might even occur in the case of AdoREs implementation. Those barriers have been extensively analysed during previous phases of the project, notably the 3rd round of National Meetings and the 3rd International Workshop. They can be highly specific to the national and local situations: In a project like ABRACADABRA which has a European objective, it is also worth mentioning that most of these regulatory obstacles will fall under national competence and are not subject to European

13 Chaves, F.J. et. al : Building information modelling to cut disruption in housing retrofit, Proceedings of the Institution of Civil Engineers Engineering Sustainability (2016), p. 3.

https://uipi-my.sharepoint.com/personal/rogala_uipi_com/Documents/EU%20Projects/ABRACADABRA/IW%20Brussels%208-9%20FEB%20'18/REPORTING%20documents/Deliverable%20D2.5%20-%20User%20constraints%20(Report)/lacasaporeltejado.eu/

http://eprints.hud.ac.uk/id/eprint/30556/1/jensu.16.00063.pdf


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rules. In a nutshell, these legal obstacles arise from condominium or tenancy law, urban or planning legislation and construction as well as building norms (the later might partly result from national norms).

Once again, the purpose of this paragraph is not to repeat what has been said in previous reports, but rather to stress and further explain those aspects which are or primary importance for property owners.

i. General lack of knowledge, diversified regulatory frameworks and legal uncertainty

Among one of the most apparent barriers that property owners experience in relation to AdoREs are of legal and regulatory nature. First of all, there is a general lack of knowledge on the regulatory framework surrounding AdoREs. This legal uncertainty is the most quoted reason that discourages property owners to opt for building additions and renewables. Given the fact that AdoREs solutions are still very new and only a small number of actual successful implementations can be found in the different Member States, the awareness and trust of property owners in these solutions being legally possible is still rather low. The implementation of AdoREs creates also a potential legal/juridical risk that some owners or co-owners might not be willing to take, e.g. neighbours or co-owners legal action. Next to that, the heterogeneous and extremely diversified legal and regulatory frameworks not only between EU Member States, but also specifically on regional and local level add to the high level of complexity.

The barrier of lack of awareness and knowledge is one of the most quoted hurdles in literature14 and has been discussed in depth also at all National Meeting and at International Workshops organised by the project.

Suggestions

A common denominator of the solutions to the above mentioned barriers and obstacles is adequate information provision. A considerable amount of legal uncertainty can be cancelled out if property owners’ awareness of the legal framework surrounding AdoREs is provided. The most efficient way would be the establishment of “one-stop-shop” models at regional or local level, as this would ensure that local and regional specificities regarding the regulatory landscape are addressed. Furthermore, it would enhance property owners’ trust in having sufficient knowledge of the legal obligations and implications regarding AdoREs solutions to be able to take the decision to invest.

Information provision could be done first of all by the appropriate administrations through information campaigns and easily accessible and comprehensible information available on site (e.g. in the form or leaflets) and online (e.g. in a dedicated part of a website).

In addition, property owner associations could potentially play a crucial role in assisting individual property owners to identify the possible options, the legal implications and building trust. For this purpose, the project is developing a guidance for property owner associations which would also specifically deal with the issue of legal and regulatory matters and what associations could do to contribute to more legal certainty (see ANNEX I).

14 See for e.g.: BPIE: Europe’s Buildings under the Microscope - A country-by-country review of the energy performance of buildings (2011), p. 12 (BPIE (2011)). Economidou, M.et. al. :European Commission’s Joint Research Centre Technical Report: Financing Building Energy Renovations (2014), p. 8 (Economidou et. al. (2014)).

http://bpie.eu/wp-content/uploads/2015/10/HR_EU_B_under_microscope_study.pdf

http://publications.jrc.ec.europa.eu/repository/bitstream/JRC89892/final%20report%20on%20financing%20ee%20in%20buildings.pdf

http://publications.jrc.ec.europa.eu/repository/bitstream/JRC89892/final%20report%20on%20financing%20ee%20in%20buildings.pdf


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In Latvia, a large-scale information campaign called “Dzīvo siltāk!” (“Living warmer!”) has been launched that encourages apartment owners to participate in the management of common property. It stimulates upgrading of the energy performance of buildings also through demonstration projects for large-scale energy saving measures in existing residential buildings. It organised over 186 informative events which attracted more than 8500 participants. In 2013, the “Dzīvo siltāk” campaign received the EU Sustainable Energy Week Winner Award in the category “Communicating”.

ii. Urban planning legislation and bureaucratic procedures

In many cases, rigid urban planning legislations and bureaucratic procedures are posing a serious threat to potential AdoREs implementation. Often, planning and approval procedures entail significant amount of bureaucratic effort and lengthy procedures which require for example the necessity to obtaining special permits. Additionally, land use and building regulations are often too restrictive or not adapted to include AdoREs solutions, which was particularly highlighted in the sessions in Bulgaria and the Netherlands. On top of that, building additional living space can entail other legal obligations such as the necessity to add parking spaces for each additional apartment, as identified in the first round of the Dutch National Meetings. Another example of linked additional obligations is the need to install elevators (as of a certain number of building levels) if another floor is added to the buildings such as highlighted during the 4th International Workshop in Barcelona, Spain. These additional requirements can add to the regulatory complexity of AdoREs solutions as well as considerably increase the cost of add-ons.

Suggestions

As regards strict land and planning laws as well as linked regulatory obligations, one of the solutions could be raising the national, regional and local authorities’ awareness of the benefits of the AdoREs strategy. It should be demonstrated that AdoREs are a viable option of punctual densification with energy efficiency benefits and inclusion of renewable energy, while at the same time increasing housing options in highly populated urban areas. Therefore, the obtainment of derogations for AdoREs should be facilitated in view of the added overall benefits.

Additionally, a review of current regulatory obligations linked to building extensions and renewables should take place and an assessment of their necessity and appropriateness in the case of AdoREs should be made.

In line with this, current bureaucratic and lengthy administrative procedures should be scrutinised and appropriately streamlined and simplified. This would lead to an overall more efficient administrative system which would aid the uptake of AdoREs. This will not only benefit property owners and inhabitants of buildings, but would also be in the general public interest by contributing to energy efficiency and renewable energy goals and the provision of housing.


The city of Paris has recently created a full department dealing with building addition permits and which has started to streamline procedures to ease the bureaucratic burden on property owners.

https://www.em.gov.lv/lv/es_fondi/dzivo_siltak


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Derogations such as for having to provide additional parking spaces per newly added apartment have been granted more easily in recent times, fostering the uptake of building additions in the densified area of Paris.15

Additionally, France recently relaxed rules on building additions such as rooftop extensions (such as AdoREs) on multi-family houses.16

iii. Decision-making in condominiums

Given the fact that a significant part of the existing building stock in many Member States is composed of multi-apartment buildings, often with multiple owners, decision-making rules on necessary majorities can be complex. Making a decision for energy retrofits in condominiums requires a majority higher than 50% in some countries, while in others the consensus of owners should exceed 75% according to the national condominium laws and can even require unanimity, notably in the case of add-ons. Another aspect influencing consensus building is a potential uneven distribution of benefits and costs of an energy retrofit to the individual apartments.

The complexity of decision-making rules was highlighted, in particular, in the National Meetings in Latvia and Italy as these countries have an especially high number of condominiums in the existing national building stock as well as during the 5th International Workshop, by both panellists and participants. The significance of the collective agreement hurdle has equally been elaborated on in a number of publications relevant to this topic, most notably in the 2017 Report on “Overcoming the split incentive barrier in the building sector” of the European Commission’s Joint Research Centre.17

Next to that, condominiums also pose a particular difficulty and legal uncertainty when it comes to allocating the gained benefits among the owners, such as ownership of additional living space/units, compensation for lost rights (e.g. loss of windows or balcony due to add-on), rights to use renewable energy sources installed etc.

15 As reported by representatives of Planete sur Elevation at the 4th International Workshop of this project in Barcelona, Spain. 16 Article 61 of Loi no 2014-366 du 24 mars 2014 pour l’accès au logement et un urbanisme rénové, JORF n·oo72 du 26 mars 2014 modifying Article 35 of the Law of 10 July 1965.

17 See: Castellazzi, L. et. al.: European Commission’s Joint Research Centre Technical Report: Overcoming the spit incentive barrier in the building sector (2017) (Castellazzi et. al (2017)), p.61;

Also: Federal Institute for Research on Building, Urban Affairs and Spatial Development of Germany: The investment processes of condominium owners’ associations with particular emphasis on energy-efficiency and age-appropriate renovations (2014) (BBR (2014));

Matschoss, K. et al.: Energy renovations of EU multifamily buildings: do current policies target the real

problems? ECEEE Summer Study (2013), p. 1485-1496; BPIE (2011), p. 12.

http://www.planete-surelevation.com/

http://www.fnaqpa.fr/fr/espace-documentaire/lois-et-ordonnances/191-loi-n-2014-366-du-24-mars-2014-pour-l-acces-au-logement-et-un-urbanisme-renove-alur/file

http://publications.jrc.ec.europa.eu/repository/bitstream/JRC101251/ldna28058enn.pdf


http://www.bbr.bund.de/BBSR/EN/RP/FurtherProgrammes/CondominiumOwnersAssociations/01_Start.html?nn=1159598&notFirst=true&docId=1164760




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Suggestions

The often complex decision-making process and consensus building in condominiums could be facilitated by making available easily understandable information from the outset as to the implications of choosing AdoREs specifically in multi-apartment buildings with a heterogenous ownership structure. Adequate information is the first step to lowering reluctance to invest by property owners.18

The provided information should not only focus on the benefits in terms of energy efficiency, housing quality etc. but should also specifically address condominium concerns relating to individual owners’ rights towards the building addition and renewables installed as well as any obligations, pre- and post-construction, which the construction of AdoREs might entail. Most notably, ownership claims and usage rights of the additional surfaces and renewables should be clarified prior to construction to avoid legal uncertainty and possible complications at a later stage.

Another potential solution would be the simplification and streamlining of majority rules to ease decision-making, however, while respecting individual property owners’ rights. Additionally, condominium laws could be reviewed to ensure a better definition of the democratic rules with respect to changes and maintenance work undertaken in the building and the roles of each property owner.19

Good practice examples

Examples of good practices can already be found in some Member States where websites have been created dedicated to information provision for condominium owners to foster decision-making and generate a higher uptake of retrofitting. Such examples include:

CoachCopro is an online collaborative tool that facilitates decision-making bringing together property owners, local governments and building professionals. It also provides useful information about the barriers and benefits of building retrofits in condominiums.

Global Technical Diagnosis is a tool designed to inform condominium owners about key technical aspects in buildings, including an overview of the status of communal parts/equipment, legal and regulatory obligations, possible technical improvements and energy performance diagnosis or energy audit.

Another good practice example can be found in France where recent legislative changes in condominium law revise the majority rules. It is noa longer necessary to obtain unanimity for building or selling the right to build on rooftops of multi-apartment buildings. Instead, the new rules mandate only a ¾ majority, easing the decision-making process and promoting the uptake of building additions such as AdoREs.20

18 See also: BBR (2014). 19 See also: Castellazzi et. al. (2017), p. 5. 20 Article 61 of Loi no 2014-366 du 24 mars 2014 pour l’accès au logement et un urbanisme rénové, JORF n·oo72 du 26 mars 2014 modifying Article 35 of the Law of 10 July 1965.

https://www.coachcopro.com/

http://adrianleeds.com/french-property-newsletter/archive/view/mailid-1096?key=9D4GuSrr&tmpl=component

http://www.fnaqpa.fr/fr/espace-documentaire/lois-et-ordonnances/191-loi-n-2014-366-du-24-mars-2014-pour-l-acces-au-logement-et-un-urbanisme-renove-alur/file


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iv. Cultural heritage buildings

An additional hurdle are buildings or areas which are subject to specific legal requirements related to preservation of cultural heritage, often leaving little flexibility to implement AdoREs. Hurdles can relate to prescribed usage of materials, space limitations and preservation of the aesthetical value, as energy renovation has been frequently perceived as a degradation factor of the aesthetical value of a building which is associated with high risk of value depreciation, as pointed out in the Italian National Meetings. This was highlighted, in particular, in the Norwegian National Meetings as the cultural heritage preservation policies affect a large number of properties, in addition to rigid land use restrictions. This topic was also discussed during the presentations and panel discussions at the 5th International Workshop in Brussels and is represented in literature.21

Suggestions

A potential solution to this problem could be a review of existing legislation and clarification in which circumstances and what kind of building additions can be implemented.

Furthermore, a simplification and streamlining of procedures to obtain the necessary permits and derogations should be envisaged in order to facilitate the uptake of AdoREs retrofitting also in buildings protected under e.g. cultural heritage status.

Furthermore, information should be provided on possible solutions for heritage building retrofitting including AdoREs.

v. Rental law restrictions

Obstacles of regulatory nature are also found with regards to rental price adjustments post-renovation to reflect the increased property value and quality. As specifically reported by the Austrian property owner association, landlords are often not allowed to increase rent, or if in exceptional cases they are, the increase is too marginal to finance the renovation. On top of that, under Austrian legislation, tenants must give their consent to renovation which sets up yet another hurdle to fostering the uptake of retrofitting.

21 See e.g. Pickard. R: European Heritage Laws and Planning Regulations: Integration, Regeneration and Sustainable Development in Gustin and Nypan (ed.): Cultural Heritage and Legal Aspects in Europe. Koper (2010), p. 61 (Pickard (2010).

http://ehhf.eu/sites/default/files/Cultural%20heritage%20and%20legal%20aspects%20in%20Europe%20BOOK.pdf


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In some Member States, like Germany and the Netherlands, the maximum amount of rent to be charged to the tenants is defined. This can be done by rental indexes which are based on a list of specific criteria, as was highlighted during the respective National Meetings, in literature22 and the 5th International Workshop where both participants and panellists discussed the issue of passing on investment costs and/or adjusting rents post-renovation.

Suggestions

The obstacle of being unable to adjust the rental price post-renovation by property owners could be solved by updating the existent rental indexes based on a list of criteria to take proper account of the benefits AdoREs entail and make it a fixed part of the valuation procedure. In addition to that, rent control systems found in many Member States should be revised. In many cases they are one of the primary factors for reluctance to renovate as, next to the split-incentive dilemma, the inability to pass on at least a part of the investment costs to the tenants, strips property owners of another incentive as the payback period can be very long.

National legislation should not allow for a potential single-handed blockade of retrofitting by requiring consensus of tenants.


The possibility of allocating renovation cost to tenants through rent increases constitutes and essential precondition for an adequate distribution of costs and benefits of retrofitting interventions and finding a balance to soften the split-incentive.23

A good practice example can be found in Germany, where the concept of so-called “energetic improvement” was introduced which describes the action of refurbishment that results in lower end-use energy consumption. Under German law, tenants cannot oppose such refurbishments. Coupled with a statutory rent-raise of up to 11% of the renovation costs upon completion, this system contributes to sharing the burden of retrofitting among property owners and tenants. Nevertheless, the implementation of this system is complex as German experience shows that the distinction between maintenance and energetic improvement is difficult to make, leading to many legal proceedings. Therefore, a clear and simple distinction between the two concepts should be introduced.

3) Financial challenges and solutions

Financial aspect is one of the highest ranking barriers for owners and co-owners when it comes to renovation.24 Any renovation requires money. The implementation of AdoREs requires an even more significant investment. Yet, the purpose of including AdoREs solutions is to develop a framework that will have cost-efficiency as a key consideration and objective. Understanding the underlying issues related to financing and how those issues are perceived by the investors, especially when

22 See e.g. ten Donkelaar, M.: Experiences with financing social housing refurbishment, InoFin Project Report (2008), p.30 (ten Donkelaar (2008). 23 As rightly acknowledged also in: Castellazzi et. al. (2017), p.21. 24 BuildInterest : Deliverable 5.2 Financing Platform Report-France, (2017), p.29.

https://www.ecn.nl/publicaties/PdfFetch.aspx?nr=ECN-E--07-012

http://buildinterest-project.eu/wp-content/uploads/2017/07/D5.2_Financing-Platform-Report_FR_FIN.pdf


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those investors are individuals that might have other than fully rational concerns is fundamental for developing appropriated AdoREs and energy efficiency solutions.

i. Payback expectations and investment horizons

The time taken for the initial outlay to be recouped is a major barrier. Many business and landlords will not consider non-core investments that do not pay for themselves within 3-7 years.25 The objective of the ABRACADABRA project is to propose solutions that would tackle this issue and considerably reduce payback period or even, in best scenario, cover the full amount of the cost of renovation.

Suggestions

Propose AdoREs solutions that would have a maximum payback period of 7 years (or below). If all scenario can be presented to the owners, professionals (notably architects) willing to propose a limited number of solutions should include in their propositions scenario with short (less than 7- year payback period) if they want to make sure that they have a convincing case for they energy efficiency and AdoREs solutions.

Factoring in the profitability of renovation in terms of building life cycle costs and raising awareness of the possible long-term maintenance costs that can be avoided, thanks to energy efficiency deep retrofitting, is crucial.

Promote a holistic view of the benefits of energy efficiency retrofitting and floor extension including the increased level of comfort, safety, aesthetical value and health benefits of a better indoor environment.

ii. Upfront financing

The initial investment costs can be high and this is seen as an obstacle to consumer investment decisions. The most ambitious retrofits will undoubtedly require considerable upfront funding.26 The addition of building add-ons will require even more investments. Yet, some of the solutions to be proposed under ABRACADABRA model could, in theory, limit upfront investments by either selling the right to build, ‘selling off-plans’ the building extension(s) before the actual execution of the work or selling them before the (full) completion of the energy efficiency renovation work per se. The first two are the only ones that can fully guarantee sufficient cash-flow pre-renovation. The third one entails a high part of risk and uncertainty and is highly dependent on the local real estate market and the sale price asked for the extension.

25 This was extensively reported during the TRAINREBUILD EU-funded project and is also mentioned in several studies such as BPIE (2011), p. 56 ff. 26 BPIE (2011), p. 56.

http://trainrebuild.eu/


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Suggestions

Business-models should only propose AdoREs solutions as a way to finance up-front costs in cases where:

- the ‘right to build’ (e.g. ‘droit à surélever’ in France)27 or the ‘right to the air above your building’ (e.g. ‘derecho de vuelo’ Spain)28 can be sold;

- or with a word of cautiousness in markets with very high housing demand where properties sell rapidly and under the prerequisite that the added dwellings are put on the market at local market price.


A growing number of businesses and organisms propose full package solutions: they acquire the ‘right to build’ and renovate the building for example ‘Planète surélévation’ in France

iii. Lack of funding opportunities

Lack of funding opportunities and/or inability to secure finance on acceptable terms is generally one of the most cited barriers to investing in energy efficiency measures. This applies at the level of the individual householder as well as large or small landlords. This issue is exacerbated in the case of AdoREs for which specific funding sources remain almost inexistent (no specific funding opportunities has been identified so far in the course of this project). Therefore, most of the time, the only available source of funding for the private real estate sector are subsidies for energy efficiency renovation and the installation of renewable energy sources.

With the reduction of public spending, those funding opportunities became scarce and the uncertainty and volatility of the schemes proposed increased. Policy-makers, notably at European level, are increasingly encouraging the reduction of grants and instead promote revolving financial support that combine public and private resources.29 Yet, grants remain a considerable argument to incentivise property owners to renovate. This has been reported during the National Meetings and the 5th International Workshop where it was widely acknowledged that the cost versus benefit equation for deep retrofit will not work without subsidy – unless a high value area. It is also an agreed fact and continuous observation reported by property owners’ associations. In surveys conducted within the framework of Energy Days in several countries during the European Sustainable Energy Week in 2011, it clearly appeared that, for the majority of owners interviewed (e.g. 75% in Belgium), financial incentives can convince them to renovate.

In addition, as reported during the National Meetings, in many cases, rather than the lack of funds per se, the lack of awareness, unwillingness or incapacity to bother with complex application procedures might be the issue.

27 See e.g.: Baticopro: Surélévation d’un immeuble : guide pratique (2016). 28 See e.g. Abogado Amigo: Derecho de Vuelo ¿Qué es y qué características tiene? (2016). 29 European Commission: Press release - Commission launches two new financial instruments to boost investments in start-ups and sustainable urban development (2016) (EC Press Release (2016).

http://www.planete-surelevation.com/

http://www.baticopro.com/guides/surelevation-d-un-immeuble-guide-pratique.html

https://www.abogadoamigo.com/derecho-de-vuelo/

http://europa.eu/rapid/press-release_IP-16-2448_en.htm


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Suggestions

Adequately informing owners about funding opportunities and providing advices, notably through “one-stop-shop” mechanisms, can considerably improve the uptake of energy efficiency renovation work.

In case of project aggregation possibilities, it is suggested that information is also provided including also the funding of aggregated interventions.


The experience of KREDEX in Estonia also demonstrates that a successful energy efficiency scheme is based on a scheme that combines loans and grants to be successful.30

iv. Tax advantages, reductions, deductions and other fiscal incentives

Tax advantages and tax deductibility of investments are a clear driver for renovation work among property owners. It can also support building addition. This has been mentioned in almost all round of National Meetings and all International Workshops. Reduced VAT for renovation work is also a key factor when it comes to decision to renovate. A high VAT can considerably increase the cost of renovation work especially in countries where labor costs are high. Reduced VAT is also part of the equation when it comes to the attractiveness of new dwellings resulting from extension. As reported during the 5th International Workshop, in Belgium for example new build units are subject to a 21% VAT on sale price, while an extension could fall under a 6% VAT rate.

Another aspect, is the lack of determined and well-targeted fiscal policies to balance property taxation and incentives to invest in AdoREs solutions.31 These fiscal hurdles have been identified in all project countries both during the series of National Meetings as well as at the International Workshops.

Suggestions

The legal framework of taxation, fiscal incentive should be revised to raise legal certainty as to their applicability in the case of AdoREs. A clear-cut legal framework would ease construction and financial planning and with that contribute to a potentially higher uptake by increasing legal certainty. As will be stated in more detail below, the knowledge on funding opportunities through tax and other incentives is still a major problem from the perspective of property owners

Good practice examples

A fiscal measure exists in France since 2011 to exempt from property added-value tax revenues from the sale of the so-called “right to build“ particularly relevant for ABRACADABRA business

30 See e.g. Kuusk, K. and Kalamees, T.: Estonian grant scheme for renovating apartment buildings, Energy Procedia, Vol. 96, pp. 628-637 (2016). 31 Couder, J.: Status-Quo Analysis of efficiency policies in 8 EU countries (2015), p. 29.

http://www.kredex.ee/en/

https://ac.els-cdn.com/S1876610216307524/1-s2.0-S1876610216307524-main.pdf?_tid=spdf-e81cebf4-cef9-4ac9-b935-a19ccc35e5dc&acdnat=1519837038_cc2862f061b6410cfe5a4c71dd6cced1

http://www.heron-project.eu/images/Case_Studies/1.2/1.2-Belgium.pdf


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model as it allows to sell the right to build on top or aside in exchange of deep (energy efficiency) retrofitting. The 2018 Finance law extended it for another 2-year period.

The Italian Ecobonus is a Fiscal deductions of 65% of total investment for private building refurbishment namely related to transparent and opaque envelopes, thermal solar plants for production of sanitized hot water and ; high efficiency boilers and heat pumps in heating and cooling systems. The International Energy Agency recently mentioned this measure as a best practice at international level, with specific reference to its role in the spreading of an energy efficiency culture at local level. Between 2007 and 2014, more than two millions of interventions have been realized, and at 2013 households had invested EUR 22 billion, with a cost of EUR 13 billion in terms of fiscal revenue.32

v. Split-incentive and financial investment

A well-known and a much-discussed topic33 is the so called “split-incentive dilemma”, in which the main recipient of benefits (e.g. lower energy bills, increased comfort) does not fully coincide with the party making the financial investment (i.e. the landlord or co-owner), creating a disincentive to invest in the first place. The split-incentive has been discussed during the whole duration of the project, but has been very specifically addressed during the 5th round of National Meetings and during the 5th International Workshop in Brussels which aimed at identifying property owner barriers and make the business case for them to invest in AdoREs.

Given the overarching nature of this dilemma, it is addressed in relation to other technical, regulatory, financial and social aspects covered in this report and is not exhaustively discussed under this heading.

Suggestions

Promote AdoREs as a solution to overcome split incentives. Contrary to energy efficiency renovation, AdoREs can generate:

- a direct benefit for the owner or co-owners in the form of a financial income (generated by the sale or rent of additional units);

- a way to reduce the shares of each co-owners in the condominium charges: an increased number of owners would mean that common charges are recalculated and slip accordingly between the co-owners.

A revision of the rental, condominium and tenancy acts could also encourage energy efficiency investments by enabling voluntary agreements between landlords and the tenants, such as “green leases”.34 Creating an appropriate legal framework and defining the conditions for sharing the costs and the benefits of an energy upgrade could foster the investment decision of property

32 Concerted action on the Energy Efficiency Directive, 2016, EED implementation in Italy. 33 See for e.g. Castellazzi et. al. (2017), p.3 ff.; BPIE (2011). 34 Definition provided by Duquesne, B.: Latest developments on the use of green leases in Europe, in: Castellazzi et. al. European Commission’s Joint Research Centre Technical Report: Overcoming the spit incentive barrier in the building sector (2017), p. 16.: “A green lease is a lease agreement which is intended to ensure that a leased property is used and managed in a manner which fosters sustainability. The tenant and the landlord thus mutually undertake to conserve natural resources and energy with regard to the leased property. The parties may also document the sustainability of the leased property by acquiring or receiving certification and creating the conditions for the environmentally friendly use of resources.”



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owners. Both landlords and tenants should be aware of the cost and benefit-sharing practices and condominium laws should ensure that the roles of all involved actors are clear.35

vi. Imperfect mortgage market for energy efficiency and retrofitting project

Imperfect mortgage markets are a major market failure to the uptake of energy efficiency renovation as banks remain reluctance to provide loans for energy efficiency projects does not assist either owners-occupiers or landlords in deciding to borrow in order to invest in energy efficiency refurbishments. The same applies for the implementation of AdoREs when homeowners or landlords who cannot take out a second mortgage would have a hard time financing big investments, even if these investments are profitable and home equity increases.

The strengthening of borrowing rules in most EU countries have considerably increased administrative requirements on the credit application process that has contributed to discouraging homeowners from seeking bank loans. Banks and lenders require collateral for loans. A second mortgage in the present regulatory climate is difficult to acquire. Mortgage-free households are older and often phase difficult to get a new mortgage.


Energy efficiency improvements beginning to be linked to ability to raise money and ground-breaking new proposals for a European ‘energy efficiency mortgage’ scheme have been recently launched by the EU-funded ‘EeMAP’ initiative, which pioneering banks are preparing to pilot across Europe.36

vii. Loan eligibility of condominium owner associations

In many Member States, condominiums owner associations are often not eligible for loans or mortgages which would allow the common financing of retrofitting interventions such as AdoREs. Even in the case they are eligible, the attached conditions are restrictive or unattractive, as identified in particular in the National Meetings in Romania and in Deliverable 2.1. This creates a disincentive in multi-apartment buildings to engage in a common retrofitting effort.

On top of that, in the specific case of AdoREs, it was reported during face-to-face interviews conducted in preparation of the 5th International Workshop that collateral based on common part of multi-apartment buildings are uninteresting for banking institutions. Basing collateral on newly built properties would then be the only option if the condominium association was to be the promoter of the project. Yet this might create transaction difficulties if the buyer is to apply for a mortgage on a property that is already used as collateral, even temporarily until the property is sold.

Suggestions

The general loan conditions should be revised to allow condominium owner associations to take out loans for the purpose of retrofitting and should be made more flexible with attractive conditions to increase retrofitting actions in multi-apartment buildings.

35 As rightly stated also in: Castellazzi et. al. (2017), p. 6, 8 and 15 ff. 36 See for e.g. BBR (2014).

http://energyefficientmortgages.eu/


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The possibility to take out loans as a common condominium owner association should be communicated at an early stage to inform on options, create financial certainty and ease the decision-making process.

viii. Cautiousness when it comes to property value

If a growing number of studies reveal general argument supporting differential values between energy efficient versus traditional stock, feedbacks from property owners translate a different reality. Experts from the valuation sector who extensively analysed related studies and sectoral evidence expressed a word of caution during the 5th Internal Workshop.

Results vary significantly across and even within national markets and cannot be automatically transferred to other locations and building types. Residential owner-occupier markets are subject to a different range of value drivers compared to the rental market. Market factors and average construction and quality standards vary across countries. The extent to which energy efficiency and other sustainability features result in price differentiation will always depend on the conditions within a given local (sub-)market as some sub-markets are more ‘sensitised’ than others. The same applies for AdoREs solutions. In term of increase of value of a property thanks to floor extension: a simple (and sometimes simplistic) assessment would lead to the conclusion that an increase in m2 lead to an automatic increase of value. Yet, the situation might be more complex. Indeed, if at the local market there is essentially a demand for two bedrooms houses, extending the floor surface and adding two additional bedrooms will not lead to a linear increase.

Therefore, a one one-size-fits-all type of cost/value equation.

Suggestions

A deep local understanding of local sub-market is needed to find the best customised solutions.

ix. Maintenance costs

Another aspect to consider from a property owner’s perspective are the long-term maintenance costs which are linked to retrofitting. In the case of AdoREs,it includes maintenance of for example heating and cooling systems (on top of structural maintenance) but also maintenance for the renewable energy sources installed. Especially the usage of new technologies may entail quite significant costs due to a still small n umber of qualified service providers and resulting high contracting costs. Floor extension can also imply the installation – when it is imposed by law when a building reach a certain number of floor – but also the maintenance of a lift, which is one of the main sources of spending for condominium.


25



Suggestions

In order to create trust and allow for appropriate financial planning, maintenance costs should be assessed from the outset (at the planning stage) and provided to the property owner. Only that way sound financial planning can be guaranteed.

x. Relocation and vacancy costs

In the case of deep renovations, given the possible level of disturbance, moving out whilst the works are undertaken is likely to be the only viable option and the negative impact this will have on people’s lives is likely to mean they will not consent to any work being undertaken. For homeowners this might also generate additional re-housing costs (in a hotel for example). Landlords would either have to re-house tenants at their own expense (adding to the renovation costs) or plan longer void periods if the renovations are to be done between tenancies. For landlords, any vacancy means lost rent which increases the cost of deep renovation. The acceptable period of vacancy is also part of the owner calculation to renovate or not.

Suggestions

Appropriate measures and a calculation methodology to access the cost-effectiveness of energy efficiency renovations should factor in, in the business plan, possible relocation and vacancy costs to avoid any disagreeable surprise.

Good planning and the usage of plug-and-play solutions are key to limit disturbance period. (See further under technical challenges and solutions p. 12)

xi. The aesthetical value of AdoREs?

Several stakeholders mentioned during various project meetings, the potential increased aesthetic value of a property post-installation of AdoREs and even suggest to quantify this aspect (e.g. in Deliverables 2.1 and 2.4). By opposition, national stakeholders reported at several occasions during the National Meetings (notably the 5th National meeting in Italy) the possible negative impact of AdoREs on the aesthetical value of the building. This argument is of course only valid for those buildings that have an aesthetical value and is highly dependent on the architectural solution proposed, its social acceptance and capacity to comply with local aesthetical standards. Yet this element should not be ignored.

Suggestions

In order to avoid devaluation risk and fully reap the benefits of AdoREs and energy efficiency renovation, as well as to increase the acceptance for energy efficiency renovation work, principally advice AdoREs solutions for buildings in need of aesthetical improvements.

Proposing innovative solutions for building addition and extension should be done in respect of the architectural landscape. Such solutions do not only make the acquisition of a building permit easier in protected areas, it also limits the risk of devaluation of the property following extension or energy efficient work.


26




Good practice examples can be found in Norway where the use of traditional material and construction techniques are used and promoted in order not to disturb the aesthetical value of the building and prevents devaluation.

V. Guidelines for Property Owners Associations (Annex I)

i. Purpose of the Guidelines

The initial aim of the project was to draft 7 Policy Recommendations, each on one of the following topic: technical, regulatory, financial toolkits, final user constraints, social housing policy and financial aspects (see Grant Agreement, WP 2, Task 2.4 – PR5 on final user constraints). These recommendations were to be developed before each respective International Workshop, discussed by project partners, in National Meetings and at the International Workshop to gather input for the final version which is to be disseminated widely among property owner associations, the ABRA Community and through the project’s webpage.

The concept of policy recommendations, which by definition address policy-makers, turned out not to be a good fit for the aim of addressing property owners’ associations and was, therefore, renamed to the more suitable title of Guidelines.

The guidelines are meant to fulfil the objective of finding solutions to finance energy efficiency renovation in the private building stock to strive to achieve the European Union’s 2020 and 2030 objectives and to be a tool to. They consider the possibilities and added-value of installing AdoREs. It can also be a way to ensure replicability and continuity of use of the financial, technical and regulatory tools developed in this project and, therewith, increasing the potential for future uptake of the AdoREs solutions proposed.

ii. Addressees of the Guidelines

First and foremost, these guidelines target national or local property owners’ associations (in line with WP2) that are willing to help their members, i.e. individual property owners, condominium or larger real estate companies, to investigate AdoREs as possible solutions to finance energy efficiency renovations. Furthermore, also other stakeholders in direct contact with property owners that are willing to promote such alternatives could use these guidelines (e.g. public authorities, architects, one-stop-shops created to support an individual decision, real estate managers, etc.).

Property owners associations are best suited to provide tailored information which takes appropriate account of national, regional and local specificities as they often already are the source of information for property owners on a variety of issues and many associations already provide services to their


27



members (private property owners) in the form of advice, information provision, intermediate party establishing contact etc.

iii. Development methodology

The Guidelines were developed by the International Union of Property Owners (UIPI) which has in-house expertise on property owner concerns across Europe through its 29 members in 28 countries. Based on this expertise and an extensive knowledge already gathered through other parts of the project (notably deliverables 2.1-2.4), a draft version of the guidelines was developed. It was then circulated, well in advance of the 5th round of National Meetings and the 5th International Workshop, among project partners to gather first input.

In addition to that, UIPI has prepared an extensive set of materials for the organisers of the 5th round of national meetings which aimed at helping to steer the discussions, address relevant aspects and gather the appropriate input from the attendees. One of the focal points of the prepared presentations was dedicated to the discussion of the draft guidelines among the participants in order to “test” the specific guidelines on the ground, gather input for improvement and also collect examples to illustrate points and best practices participants were aware of at national, regional and local level. Furthermore, all 29 member associations of UIPI have been given the possibility to comment on the draft guidelines and propose improvements.

At the 5th International Workshop on 8 February 2018, the draft guidelines were presented to the participants which included a wide range of relevant stakeholders, decision-makers and most notably representatives of property owner associations from across Europe. Following a presentation by UIPI of the guidelines (presentation to be found in ANNEX II), the participants were invited to discuss them in the course a coffee break and to come up with suggestions to improve the presented guidelines. Following that, the comments were gathered, and all participants were invited to vote on each of the proposed guidelines. All the proposed guidelines were (including the comments and necessary adjustments) approved by all participants by a simple majority.


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All of the inputs gathered throughout the development phase have been included in the version of the guidelines included in ANNEX I.

iv. Division and drafting manner

Given the broad division into three categories (technical, financial and legal barriers), the guidelines provided are aimed at the main barriers encountered and how to address them. The individual guidelines have a generalistic approach in order to ensure the possibility for national, regional and local adaptation -as necessary and relevant - and to make them flexible enough. It is important to leave enough room to manoeuvre and adapt the guidelines by the addressees who can best judge in what way to convey for e.g. information to private property owners in each specific context as solutions and habits can vary significantly between Member States. Each of the three categories also provides for a case example to further illustrate the type of barriers that can be encountered on the ground, and are substantiated, where possible by very concrete national or local specificity examples or best practices gathered through the inputs received from stakeholders, project partners and property associations.


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ANNEX I

Why this Guide?

Finding solutions to finance energy efficiency renovation in the private building stock is an important objective of the International Union of Property Owners and is necessary when striving to meet the political objectives of the Union for 2030 and 2050. We encourage and support our members in 29 countries to promote similar activities at national, regional and local level.

These guidelines were developed in the framework of the EU funded ABRACADABRA Project, are meant to be a tool to further and fulfil this objective. They consider the possibilities and added-value of installing building additions and renewable energy sources (AdoREs) to generate additional income and/or to increase the value of a property in order to make large scale, deep energy efficiency renovation more bankable. This can be done by selling or renting out additional apartments that have been built (an additional floor or side extension) to help finance the overall renovation costs. Moreover, this can also be calculated in terms of additional value, e.g. for a single-family house in terms of additional value of the property generated by volume extension, the addition of balconies or the use of renewables.

It is also a way to ensure replicability and continuity of use of the financial, technical and regulatory tools developed in this project and, therewith, increasing the potential for future uptake of the AdoREs solutions proposed.

The Challenges

There are many regulatory, social, financial and technical aspects that needs to be taken into consideration when such solutions are foreseen. In some cases, AdoREs can even complicate further the energy efficiency renovation. For instance, they could make the whole project technically more difficult, more expensive, increasing red tape or requiring a higher decision-making majority in multi-apartments buildings.

This Guide aims at showcasing the benefits of the developed AdoREs solutions and highlighting the aspects technical, financial and legal aspects. These should be considered prior to commencement of work in order to have a good understanding of the necessary steps and to be able to assess the practical outcomes relevant to property owners:

GUIDELINES FOR ASSOCIATIONS ON HOW TO PROMOTE ADORES SOLUTIONS


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• Final technical solutions possible,

• How to finance the renovation and what would be the payback period, and

• Full compliance with regulatory obligations.

Is this Guide for You?

This guide targets, in priority, national or local property owners’ associations that are willing to help their members, individual property owners, condominium or larger real estate companies to investigate AdoREs as possible solutions to finance energy efficiency renovation. Furthermore, other stakeholders in direct contact with property owners that are willing to promote such alternatives could also use the guide (e.g. public authorities, architects, one-stop-shops created to support individual decision, real estate managers, etc.).

TECHNICAL

1. Showcase the different technical solutions of AdoREs and Assistant buildings (facades, additional floors etc.).

2. Identify benefits and barriers at national or local level (benefits such as energy savings, increase of comfort, in-door air quality, etc. and barriers such as feasibility of renewable energy installations, foundation capacity, etc.).

3. Inform on customisability of renovation action / AdoREs solutions and resulting energy savings (possibility to use various built-in technologies, renewable energy sources, architectural design etc.).

Case Example

A vertical extension of a building will require an analysis of the strength of the building (foundation and construction load-bearing capacity) as one of the preliminary steps. Given the specific technical and typographical characteristics of the building, the different AdoREs solutions must be tested for their feasibility.


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FINANCIAL

1. Provide information on public funding opportunities available on local, regional and/or national level.

2. Raise awareness of the private financial possibilities and implications (e.g. increase of taxation, borrowing capacities of condominium or individuals and collateral for loans such as mortgages, guarantees, assignment of rents etc.).

3. Showcase potential business case using the ABRACADABRA financial toolkit (increase in property value, rent or sales income, energy savings and lower energy bills, etc.).

4. Promote the developments of financial solutions for coupling energy efficiency renovation and building add-ons among private banks and public funding authorities.

5. Advice on project aggregation possibilities and available funding for such projects.

Case Example

The investment in energy efficiency renovations of a building may be eligible for national, regional or local public funding, which could be coupled with private funding. Cooperative systems and financing schemes which might include public ESCOs associations of public owners to invest in AdoREs intervention should be considered as viable financing options. The opportunities and best financing systems should be explored through public information services.

LEGAL

1. Provide information and advice on the general legal situation in the country or at local level concerning energy efficiency in buildings, add-ons, and renewables.

2. Provide information on tenancy law, condominium and co-ownership laws, including legal preconditions.

3. Inform on potential regulatory matters on regional and local level.

4. Provide information on permits, registration and certification obligations.

5. Provide advice on how to address and solve co-ownership concerns.

6. Provide information on how to overcome the split incentive dilemma in rental property by highlighting property owner benefits such as increase of value.


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7. Provide information on possibilities to manage and use renewable energy sources installed at building level.

8. Identify and highlight the impact of regulations to national and local policy-makers.

9. Provide information on environmental, social, operational and financial aspects related to AdoREs.

Case Example

A vertical extension of a x-floor in an existing building in Spain will require the installation of an elevator. This is a legal requirement and should be considered during the planning case. Such specific regulations might be imposed not only on national, but also on regional and local level.

Disclaimer:

This Guidance is for information purposes only and does not provide legal advice in any form.


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ANNEX II

Presentation of the Guidelines used during the International Workshop for voting


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