Report “Making Renewable Heating Accessible and Affordable. Overcoming Market Barriers in Renatal Sector”

Published by Climate Action Network (CAN) Europe.

Thirty percent of Europeans live in a home they do not own, a figure that can be significantly higher in major European cities (e.g. 63% in Brussels, 76% in Berlin). These tenants have little control, if any, over the heating systems in the house or apartment they inhabit. Such decisions are made by the owners. But owners do not reap the benefits of renewable heating systems, which often results in suboptimal decisions, both from an economic and environmental point of view. This split-incentive situation is known as the landlord-tenant dilemma.

Most policy measures that incentivise renewable heating are typically addressed to owners at large, but do little to encourage landlords specifically to renovate their buildings: grants, rebates, loans, tax cuts, etc.

In recent years, measures have been introduced in many countries to make renewable heating accessible and affordable to the most vulnerable families with tailored policies: grants that cover the full cost of the system, and do not require to pay upfront; loans that are state-backed and/or zero- or low-interest, etc. With energy poverty affecting one in ten Europeans, and high inflation putting more of the middle class at risk of falling into energy poverty, these are welcome efforts. But again, in most cases, these measures only help energy poor homeowners make the necessary investments, and fail to reach energy poor tenants.

This briefing explores what is needed to make renewable heating accessible and affordable for tenants living in Europe, with a special focus on the energy poor. At its core lies the idea that the heating decarbonisation transition should not leave anyone behind, regardless of their income and their tenancy status.

To frame its recommendations, the report builds on desk research, interviews with experts in housing and energy, including civil society organisations. From this, four main recommendations arise:

1. Build on what already exists. Step up efforts to promote renewable heating throughout the building stock, even if they do not specifically address the rental sector.
   This is because such measures: 1) create a market for renewable heating, thereby reducing costs via economies of scale and changing social perceptions; and 2) improve the economics of investments decisions of all owners, including landlords.
2. Address supply-side barriers while prioritising the most vulnerable. With large building stocks and a social raison d’être, social housing providers and social rental agencies are ideally positioned to provide affordable, quality housing with renewable heating solutions for the most vulnerable. The sector also provides a great opportunity to develop innovative solutions, to aggregate the demand that can create mass markets for deep renovations, and to address supply-side barriers to renewable heating. All while prioritising those who need it most.
3. Fill the gaps. Building on the tools and experience above, policy-makers can tweak existing renewable heating policy tools to make them fit for the rental sector and develop new measures from scratch, while ensuring that the necessary social safeguards are in place to protect tenants.
4. Information is power. Facilitate access to, and proactively provide, independent information on all existing tools available to facilitate the switch to renewable heating. Ensure that landlords and tenants understand the added value of renewable heating in their properties. And provide support to reduce administrative burden.

Report “Making Renewable Heating Accessible and Affordable. Overcoming Market Barriers in Renatal Sector“