For homeowners, lack of affordable, long-term and up-front financing remains one of the major barriers for them to carry ambitious home energy renovations. Innovative public financing schemes deployed in France, the Netherlands and Belgium address the problem and bring positive results.
Although some efforts have been made in the last years, financing the Renovation Wave remains a complex challenge. The current economic situation, summed to the energy crisis, are adding more pressure to Europe’s buildings renovation process. It becomes clear that the EU’s ambitious renovation goals cannot be achieved with traditional financing mechanisms.
Aware of the problem, national and regional governments in France, the Netherlands and Belgium have been experimenting with different innovative financing mechanisms that intend to facilitate the home renovation process. These three models look particularly promising:
- France: The long-term loans offered by Third-Party Financing companies.
Article L511-6 of the French Monetary and Financial Code specifies that third-party financing companies (Sociétés de tiers-financement) may perform credit activities as an exception to the prohibition “on any person other than a credit institution or finance company from carrying out credit transactions on a regular basis”. Their capacity to provide low-cost financing directly to homeowners is facilitating the decision-making process. Another crucial point is the way they evaluate the credit worthiness of homeowners: this deviates from the traditional banking criteria for assessing the credit risk because they take energy savings into account to evaluate the capacity of households to pay back the loan.
- The Netherlands: Home-based and on tax financing solution.
Promoted by the FITHOME project, the scheme takes advantage of the existing betterment tax and a tax-based collection mechanism to facilitate access to a long-term and low risk home-based financing. We’ve described the scheme in more details in this article.
- Flemish Region (Belgium): The 0% interest long-term loan
The loan is deployed by the Flemish Region through the Energy Agencies network. For more information, go here.
These financing schemes have two main advantages. Firstly, they pay attention to the capacity of homeowners to pay back the loan while also meeting their everyday financial needs. Once the monthly installments are paid, the amount of funds available on their accounts should not be too restrictive. Secondly, in case of home-based financing, they allow homeowners to cope with life situations when they are forced to sell their home urgently. The home equity should cover the remaining amount of all due loans. However, banks and mortgage providers sometimes do not allow homeowners to get involved in this type of mechanism because mortgages, in terms of priority ranking of credits, are placed behind tax credits.
These experiences, when tested over a long-enough time period, could help to measure the impact of the availability of low-cost and long-term financing mechanisms on the homeowners’ decision-making process. Because it is a decision of every single homeowner that we need to accelerate and massify ambitious home energy renovation in Europe.