"The financial rationale for pooling spaces is not systematic"

"By transforming buildings during their refurbishment in a way that reduces private spaces and increases shared areas, it would be possible to offer each resident more square meters while reducing the overall area per person," wrote, in a previous opinion, Philippe Thalmann.

According to the EPFL professor of environmental economics, this model can be economically viable. "If the same building houses 40 people instead of 30, it becomes possible to increase rental income while reducing the rent per person. The owner thus recoups the cost of the refurbishment and transformation of the building. Everyone wins!"

Following the many reactions provoked by this idea of greater sharing of spaces, we wanted to know the opinion of players and experts in the real estate sector. Third installment of this series with David Ribeiro, an independent consultant specializing in Owner’s Project Management Assistance (AMO).

Could increased sharing of spaces be a serious option for the future of the real estate sector in Switzerland?

This proposal raises a number of questions that should be explored along several lines: economic rationality, societal trends and the nature of the underlying demand, as well as the current legal framework.

Depending on the structure of the existing building, this type of work can generate very variable costs from one property to another (location of load-bearing walls, provision of natural light, arrangement of technical ducts to serve the premises, circulation spaces, etc.). While it is relevant to examine possibilities for densification or typological changes during major renovations, generalizing them does not seem easy to implement. 

Because of the wide variability in associated costs, the economic rationality of such modifications is not automatic. It is also important to add that this type of work is not compatible with keeping tenants in place and requires rehousing them or terminating leases, which represents a significant risk of opposition for the owner.

Buildings must also meet the needs of occupants, and in this respect it is essential to take into account the evolution of societal trends. We are observing an increasing individualization of lifestyles: couples form later, separate more often, and family recompositions are increasingly common. Added to this is the progressive aging of the population.

These developments lead to a structural increase in the number of households (more housing units), at a constant population. This translates into a rise in demand for small apartments (1 to 3 rooms) and a decline in demand for large apartments (4 rooms and more). If this structural change is underway, it is nevertheless not certain that the sharing of living spaces would be accepted within a society whose lifestyles tend toward greater individualization.

Finally, taking into account the current legal framework is essential to understand the issues related to the housing shortage and the obstacles to energy renovation. Rents are set either according to a market price, reflecting the balance between supply and demand, or indexed to the return on capital invested in the building. This system of rent setting, combined with a persistent scarcity of supply and an almost non-existent substitution effect in the housing sector, has led to rent increases far exceeding the cost of living, thereby creating strong tensions on the market.

In retrospect, we observe that this legal framework allows owners to rent properties meeting old standards at a price close to that of modern housing, provided tenant turnover is sufficient. Moreover, this system discourages tenants from changing apartments when their personal situation leads them to seek a smaller area, since it is precisely at the change of tenant that rents can be increased.

These two observations reveal a market failure, making energy renovations unprofitable. A change of paradigm, introducing a rent-setting system indexed to the building's energy and quality standards, would make them much more profitable.

Adding additional floors nevertheless offers several advantages: it allows tenants to remain in place, limits rent increases for existing apartments that have already been renovated, and ensures higher profitability on the newly constructed surfaces.

Would this sharing of spaces allow more resources to be devoted to renovation rather than to building new housing – and thus make up for Switzerland's lag in transforming its building stock?

Energy renovation of buildings should not be set against the production of new housing. It is imperative to accelerate on both fronts simultaneously, because the housing shortage leads to higher land and rent prices which, by cascade effect, reduces or even cancels the profitability of energy renovations.

In a global reflection on densification, sharing of spaces is one solution, just like adding floors (adding one or more storeys to an existing building) or densifying the urban fabric (transforming a low- or medium-density area into a medium- or high-density area).

All of these approaches make it possible to house more people without encroaching on green spaces, to improve the energy standards of buildings, while offering owners the possibility of generating new rental income and thus making their work profitable.

Adding additional floors nevertheless offers several advantages: it allows tenants to remain in place, limits rent increases for existing apartments that have already been renovated, and ensures higher profitability on the newly constructed surfaces. Pressure on rents is therefore concentrated only on these new surfaces, making profitability more easily attainable for owners and reducing the need for public subsidies. This type of operation is more easily replicable than the sharing of spaces and is better aligned with current lifestyles, in line with major societal trends.

Another densification avenue, whose feasibility and profitability are proven, consists of transforming low-density zones into medium-density zones. This would involve requalifying certain villa zones to allow the construction of small collective residential buildings.

These forms of densification, however, require changes to building rights, which fall under municipal regulations (buildable height, maximum number of housing units, etc.). It is legitimate to question the timeframes for implementing such adaptations within the current land-use planning framework, and the relevance of cantonal-level governance for the most critical zones.

For years, we have heard of the need to reduce dwelling sizes, but the sector seems deaf to this demand...

Data on average dwelling sizes by period of construction and number of rooms are available. We observe a shift between the 2001–2005 and 2006–2010 construction periods.

It is always possible to do better, particularly for high-end dwellings or apartments with 6 rooms or more. However, for non-luxury housing the effort will remain marginal and tend asymptotically toward an incompressible value. Indeed, for each housing typology (1, 2, 3 or 4 rooms), minimum areas are necessary for the rooms and circulation spaces.

The issue therefore lies more with how these dwellings are occupied. As mentioned earlier, the lack of market fluidity – notably due to incentives not to change apartments to avoid a rent increase – seems to have a more significant impact.

The main thing to keep in mind is that a multi-criteria approach will lead to a far more resilient building strategy.

What concrete avenues exist to reduce the climate impact of the Swiss real estate sector?

The first measure to adopt, and which offers the best impact/investment ratio, is to measure all consumed flows (heating, cooling, electricity, domestic hot water), as well as the heating temperatures inside apartments, with annual checks to ensure there is no drift relative to the building's occupancy standards.

This common-sense measure makes it possible to objectify consumption and raise users' awareness of their occupancy habits. It requires very few resources and can be implemented quickly. This step is essential, because even buildings renovated to the highest standards can consume a lot of energy if occupants are not made aware of practices consistent with the expected energy efficiency.

Second, it is possible to rationalize the renovation effort by prioritizing work on building elements that have a strong impact on energy efficiency, while keeping the budgetary cost reasonable. It is also essential to ensure that the materials and solutions chosen have low embodied energy and offer a long service life.

Currently, reflections remain largely focused on energy decarbonization and energy efficiency. However, given the importance of the built environment in our territories and the long duration of its life cycle, it is necessary to broaden the perspective beyond solely climate issues, even if this complicates the approach.

Other essential aspects must not be underestimated:

• The availability of raw materials and the embodied energy in materials.
• The integration and well-being of occupants (natural light, indoor air quality).
• Consideration of biodiversity: ensuring built spaces are not sterile, by landscaping exteriors to promote biodiversity.
• Adapting buildings to the challenges of the coming decades: aging population, accessibility, summer overheating, intense rainfall, etc.
• Diversifying the uses of built surfaces to reduce mobility needs.

This list could be extended, but the main thing to keep in mind is that a multi-criteria approach will lead to a far more resilient building strategy.

The real estate sector is currently facing an oversupply of offices. Could these spaces, once reconfigured, meet the growing need for housing that integrates more shared spaces?

This is all the more true for buildings constructed with few partitions, notably those based on a column-beam structure, without interior load-bearing walls. In these cases, it is much simpler and economically more rational to reconfigure interior spaces to adapt them to new layout concepts.

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