Why is the rate of building renovation so low despite the subsidy programme?
The renovation of buildings represents important investments that often do not prove to be profitable under the current conditions of low energy and CO2 prices. The Buildings Programme does not seem to be sufficient to change this situation. In addition, owners are often unaware of the need to renovate their buildings, and do not always have the possibility to pass on the cost of renovation to the rentals.
Switzerland’s building stock consumes around 40% of our final energy [→ Q30]. Launched in 2010, the Buildings Programme is a joint federal and cantonal incentive instrument that provides financial assistance to owners who decide to renovate their buildings to make them more energy-efficient. The results of the Buildings Program are mixed. The rate of energy retrofitting of the existing building stock is currently only 0.9% per year, which more or less corresponds to the natural renovation cycle in the absence of a support programme. A rate of around 2.2% would be necessary to achieve the objectives of the federal government’s energy strategy [→ Q86].
It would therefore seem that the Buildings Programme, which can be granted up to about 5% of the cost of renovation work, is more of a windfall for owners who would have decided to renovate anyway than a real incentive to renovate. All the more so as tax law for private owners favours the phased renovation of buildings, with the possibility of spreading the investment over several years. This is obviously not compatible with the requirements of the Buildings Programme, which aims to accelerate as much as possible the energy renovation of the building stock.
Today, there are still many obstacles to the renovation of buildings. First of all, the overall renovation of a building represents a very substantial investment, amounting to tens or even hundreds of thousands of francs. The decision to renovate will therefore be based primarily on economic criteria. From this point of view, the currently very low energy costs do not justify an energy renovation, since the expected gains in energy savings offer a return on investment in at least 20 years to almost 100 years, depending on the scope of the renovation. Only a massive increase in the price of energy or the CO2 tax would make it possible to shorten this period significantly [→ Q83] and [→ Q84].
Finally, with only 37% of households owning the housing they occupy, Switzerland remains a country of tenants. However, landlords who rent out their buildings often cannot defer the investment made during a renovation to the rent. The reason for this differs from region to region. Where the supply of housing exceeds demand, as in the Jura, for example, the market simply does not allow prices to be passed on, since demand dictates rent levels. On the contrary, in regions where demand exceeds supply, such as Zurich and the Lake Geneva region, energy renovation is often a pretext for increasing rents, as the market accepts any increase a priori. But when these rents reach pain thresholds, tenants have an increasing tendency to assert their rights, in particular the right to adjust rents to the mortgage rate. If rents have not been adjusted to the decline in mortgage rates, which have plummeted from 7% in 1992 to 2% in 2014, then an increase in rents following a renovation would be partially absorbed by the mandatory decline linked to the adjustment to the mortgage rate.
In addition, buildings undergoing in-depth renovation are in principle not inhabitable during the works, which also represents a significant brake, since there are often no solutions for re-housing tenants. Finally, the owners often have no idea of the energy quality of their building. In this respect, the energy audit proves to be a very useful incentive instrument as it raises awareness.
- Contrôle Fédéral des Finances (2014)
- Contrôle Fédéral des Finances (2014). Programme Bâtiments de la Confédération et des cantons - Evaluation du modèle de calcul des effets en matière d’émissions de CO₂ et de consommation d’énergie.
- Dalang, F. and Reber, J. and Fuchs, St. and Hiltbrand, F. (2012)
- Dalang, F. and Reber, J. and Fuchs, St. and Hiltbrand, F. (2012). Le coût de l’assainissement énergétique du parc immobilier du canton de Genève. noé21 - projet CEPIC.