Fit for 55: creating energy-efficient and adequate housing for the most vulnerable

Image source: https://ec.europa.eu/commission/presscorner/detail/en/IP_21_3541

On July 14th the European Commission presented its Fit for 55 package, including 13 legislative proposals. These pieces of legislation are aimed at getting the EU to reach its climate targets and to reduce its emissions by 55% until 2030. Within the chapeau communication to the package, the Commission has underlined its objective to provide “a socially fair transition” by “tackling inequality and energy poverty through climate action”.

In December the Commission will present another crucial part of the Fit for 55 package: the revision of the Energy Efficiency of Buildings Directive (EPBD) which is also the key legislation in the Renovation Wave Strategy that the Commission has announced in October 2020.

The Renovation Wave and Fit for 55 policies will have a major impact on housing in the EU Member States: upgrading the European housing stock and making it energy efficient can address housing exclusion. Nevertheless, there are also some major social risks especially related to higher housing costs that we will analyse after a quick overview of the proposals.

One proposal is a recast of the Energy Efficiency Directive that seems to promote energy efficiency as a solution to energy poverty. The new Article 8 of the proposal obliges Member States to ringfence energy savings for vulnerable customers and final users, people affected by energy poverty and people living in social housing. The Article asks Member States to make the “best possible use of funding” to removing adverse effects and “ensure a just and inclusive energy transition”.

A key point of the package is the proposal of the European Commission to extend the Emission Trading Scheme (ETS) to the building sector. This policy risks further burdening low-income households that are already struggling to afford decent housing, heating and cooling with rising costs of their energy bills. These are expected to go up by an average of €429 per year per European household as a result of including buildings in the ETS, according to a recent report from ERCST.

Already in 2019, before the outbreak of the pandemic, more than 1 out of 10 European households were overburdened by housing costs. The effect of expanding the ETS would be like a regressive tax in that the lowest incomes would pay the most for heating and cooling their houses. They are the ones living in the most energy inefficient houses and thus would need to pay the most. Furthermore, low-income households tend to spend a greater proportion of their income on energy.

As mitigation of the negative social consequences of the ETS extension to buildings, the European Commission proposes a Social Climate Fund. The plan is to dedicate 25% of the ETS revenues to this fund, meant to compensate vulnerable groups for higher costs of heating and transport fuels. The planed 72 bn€ are aimed to provide direct income support, helping vulnerable citizens finance their heating or cooling systems or to buy cars that consume clean energy instead of fossil fuels. A new social instrument is to be welcomed but it is clear that this is not enough to offset the price increases faced by energy poor households, support renovation and access to clean transport as well as other objectives like compensating micro enterprises. Rather than a compensatory mechanism, it would be better to design more socially just policy such as use of the existing ETS revenues for targeted renovation for people facing energy poverty.

The European Parliament and the Council of the EU now have the ball in their court to negotiate the drafts. It implies that the package and its legislations will likely stay high on the EU’s agenda over the coming months. The proposals of the Fit For 55 package presented last week together with the forthcoming EPBD can provide the unique opportunity to both improving housing conditions of poor people living in inadequate housing and tackling climate change. 13% of Europeans live in housing with a leaking roof, damp walls, floors or foundation or rot in window frames or floors. A fair and just climate transition needs to make sure that these people benefit from the transition. For that, sufficient investments in renovating the worst housing and making sure that newly renovated housing stays affordable is key. The package carries also the risk of rising energy and housing costs and hence contributing to more housing exclusion and even homelessness.

The Housing Solution Platform has identified some projects that have the potential to serve as models for renovation programmes specifically designed to lift vulnerable households out of energy poverty and worst housing. In our publication 50 out-of-the-box Housing Solutions we showcase, for instance the REELIH Project where Habitat for Humanity and the United States Agency for International Development (USAID) have set up residential energy efficiency projects in Central Eastern European countries, with the aim to support homeowners in multi-apartment blocks to collectively manage their buildings for improved energy efficiency and to alleviate energy poverty.

In France, the Fondation Abbé Pierre refurbishes or builds an average of 600 housing units per year under the Toits d’Abord programme. By funding renovation (93%) or construction (7%) this programme takes 900 to 1200 people away from poor housing and fuel poverty.

By dedicating targeted funding and technical assistance to projects of this kind, the EU can contribute to more sustainable, affordable and adequate housing solutions for vulnerable people that are currently locked out of the housing market or living in substandard housing.