In view of the climate emergency, the argument of profitability does not hold.

Each month, we interview different sectors and professions about specific topics.

For this November, we went knocking on the doors of developers and large real estate groups to get their point of view on a particularly sensitive topic these days in Bern: subsidies for building renovation.

The responses of Nicolas Rebier, Senior Project Manager Real Estate Consulting at Wincasa

A group of experts appointed by the Federal Council proposes to drastically reduce subsidies for building renovation. How do you view this idea?

The granting of subsidies is one of the components of the national strategy to reduce CO2 emissions. The risk, of course, is that reducing subsidies will break the national momentum and make property owners' decision-making even more complicated. As with corporate taxation, stability and predictability of support mechanisms over the medium and long term are necessary for owners' strategic planning.

Fewer incentive funds could therefore lead to a significant drop in the number of energy renovation projects. Owners may be less inclined to invest in energy improvements if subsidies are reduced or removed.

Drastically reducing subsidies would also send a bad signal to the public, at a time when the strategy must be strengthened to hope to reach the ambitious and necessary goals of continuously reducing our energy consumption per capita. Especially for privately used properties, for which incentives are more significant than for investment properties (value-added measures and the possibility of passing on costs).

In Bern, authorities should rather consider redeploying these aids if they deem them ineffective, or find alternatives to subsidies, such as taxes on the least sustainable buildings.

I would not want to miss the opportunity to mention here that, among other things, the challenges of tenancy law are slowing down renovation measures.

In Bern, authorities should rather consider redeploying these aids if they deem them ineffective.

Experts argue that most solutions for renovation are already profitable and that, in that case, subsidies no longer make sense. Does this argument seem valid to you?

The question of the profitability of renovation projects is crucial, because unfortunately it weighs more than environmental awareness in the majority of energy renovation decisions. In the field of real estate investment, we distinguish three distinct cases.

• First, energy renovation projects for which profitability can be demonstrated and allows owners to make quick decisions. The concerned areas are mainly cities and urban agglomerations where rent increases are possible.
• Next, projects for which possible rent increases are smaller, and the advantages of energy renovation for maintaining the property's value in the medium and long term are less evident in the eyes of owners. It is indeed not always easy to convince owners that non-renovated buildings could see their value decline compared with energy-efficient buildings.
• And finally, there are regions where rent increases are almost impossible, outside urban centers or in cities where regulations prevent them.

We can state that even in favorable cases, few owners believe or are aware that renovation solutions are profitable or interesting in terms of maintaining long-term value. It is not surprising that the consulting firm Wüest Partner found, in a study published recently, that the profitability of energy renovations in Switzerland was only assured in a few places.

Removing aid will not make decision-making easier. In view of the climate emergency, the profitability argument therefore does not hold.

As for private owners, removing subsidies would lead to a decrease in financial accessibility for some people, particularly those with lower incomes.

Without these subsidies, should we fear a sharp increase in tenants' bills?

Without subsidies, in the case of investment properties, investments will be passed on more strongly to net rents, where owners have the possibility to do so. Tenants, for their part, would benefit from a reduction in their energy bills. The relationship between net and gross rents must be examined.

In the event of non-renovation due to lack of subsidies, these same tenants would remain exposed, as they are today, to the risk of rising fossil energy costs and taxes in the years to come. Added to that is the inconvenience in terms of quality of life, comfort and image of not renting a renovated property.

Without subsidies, in the case of investment properties, investments will be passed on more strongly to net rents, where owners have the possibility to do so.

Could this jeopardize Switzerland's 2050 carbon neutrality goals?

Any obstacle to owners' rapid decision-making aimed at reducing greenhouse gas emissions and increasing buildings' energy efficiency contributes to delaying Switzerland's carbon neutrality goals.

Less funding can also limit innovation in energy renovation technologies, which could slow the development of new, more efficient and sustainable solutions.

Another effect would be the strengthening of regional inequalities. regions with higher vacancy rates could be more affected than others, exacerbating inequalities between urban and rural areas in terms of building energy efficiency.

But other subjects also play a role in achieving carbon neutrality goals, such as alternatives to these subsidies, alternative energy production, consumption habits, or geopolitical influences.

As owners, what other remaining obstacles would hinder achieving this carbon neutrality?

The lack of information on the actual condition of buildings, on opportunities to reduce consumption, as well as on the costs and profitability of investments is an obstacle to decision-making. The lack of structure in strategic planning is another. Our teams in the Consulting & Sustainability service are precisely tasked with addressing these needs for clarification and advice.

In the highly competitive commercial property sector, the fear of losing tenants if rents increase also acts as a brake.

In general, owners of real estate portfolios face challenges in allocating energy renovation budgets and the availability of internal and external resources to carry out multiple projects in parallel, which often leads to postponements and staggered scheduling of these projects.

This article has been automatically translated using AI. If you notice any errors, please don't hesitate to contact us.