Six French regions and a small Dutch town have launched unprecedent support services and financing solutions for homeowners who wish to renovate their homes. It has never been easier for them to invest because… they do not need to invest!
Home renovations are key for the EU to reduce CO2 emissions and to achieve its climate targets. But homeowners face numerous barriers to carry out the much-needed renovations, such as lack of financing and support during the implementation phase. Two examples of successful innovative public financing schemes tested in France and the Netherlands highlight the importance of active involvement of local authorities in creating a long-term financing offer for homeowners.
The French one-stop-shops offer a financing option to homeowners
In France, six regions have set up one-stop-shops for home energy renovation. These provide a turn-key service package including financing to homeowners who want to renovate their homes but are not able or willing to take a bank loan. Low- and very-low-income households are able to finance the renovation works without any upfront payment, relying solely on subsidies and on the integrated financing offer. French one-stop-shops are public or public-private entities, also called ‘third-party financing operators’ (sociétés de tiers-financement) backed by the founding regions. They have been operating since 2015 and today they strive to strengthen their financing capacity.
In the framework of the European ORFEE project, the French one-stop-shops joined forces to upscale the services they provide. There has been an effort to standardize and mutualize the procedures and to strengthen the quality control of the renovation works through a guaranteed compliance framework. The one-stop-shops also aim at aggregating the offered loan portfolio for prospective clients and to share the financing burden of homeowners. In that sense, ORFEE seeks to attract private investors.
The Wijk bij Duurstede municipality is paying upfront for home renovation works
A small town of Wijk bij Duurstede, 24 thousand inhabitants, located in the Dutch province of Utrecht province, got involved as a pilot city in the European project FITHOME. It has launched a one-stop-shop for home renovation and is now testing a so called ‘betterment tax’, an innovative ‘on-tax’ financing mechanism, to further facilitate home energy renovation.
A full support package is offered to homeowners. For example, a digital service “De Woonpas” aims at improving the customer experience by aggregating fundamental steps such as planning of the renovation process, providing cost estimate and the selection of contractors and materials, financing, work execution, and quality inspection. But the most remarkable service is financing. Citizens can have their homes renovated without any up-front investment. De Woonpas covers the cost of renovation and is also fully responsible for the operation and maintenance. This solution helps overcoming some of the key barriers preventing homeowners from renovating: high up-front costs, long payback periods and unattractive credit risks involved in renovation projects.
Photo by Maurice Smeets on Unsplash
This financing scheme is fully backed by the municipality which covers the upfront investment costs. The amortization of the investment is done in form of a voluntary betterment tax attached to the property and not the homeowner. The homeowner repays the up-front investment in monthly installments, over a fixed period up to 30 years. The installments shall not exceed the abatement achieved through the energy savings of the retrofit. A credit verification of the homeowner is not necessary, making it affordable to prospect debtors regardless of their income. If the house is sold, the new homeowner continues to pay the tax.
The betterment tax scheme offers a far more advantageous option for homeowners compared to burdensome conventional bank loans. The whole scheme is guaranteed by the Dutch public bank BNG, which adds more credibility to the scheme.
The financing mechanisms embedded in both projects are crucial for increasing renovation rates in these regions. Yet, the sector is underserved despite the strategic planning of local authorities and the urgency of the matter. Similar services to the ones presented here need to be deployed if Europe is to achieve its climate neutrality targets in time.