"For investors, this financial assistance represents a crucial lever."

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

For this November, we went to knock 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: that of subsidies intended for building renovation.

Responses from Emanuel von Graffenried, Director & Partner at Bernard Nicod Conseils SA.

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

The proposal to reduce subsidies for building renovation is worrying. It will have major repercussions on the real estate sector and on energy transition efforts. These subsidies are indeed essential to encourage energy renovation, especially for owners who, without this support, would not have the means to invest in costly but necessary improvements. Reducing this aid would considerably slow progress towards energy-efficient buildings and thus compromise long-term sustainability goals.

For investors, this windfall is a crucial lever. It reduces the initial costs of renovation projects, which is all the more vital in a context where regulatory requirements for energy efficiency are increasingly strict. Furthermore, these subsidies increase the value of real estate assets by making them more attractive to tenants and potential buyers, while meeting ESG (environmental, social and governance) criteria, which are now essential for investors.

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?

Although some energy renovation solutions can be profitable in the long term, initial costs remain a considerable obstacle for many owners. It is important to recall that profitability depends closely on each owner's financial situation, making any generalization risky. Subsidies are therefore essential to remove this financial barrier by reducing the cost of initial investments and facilitating wider adoption of green technologies.

For investors, long-term profitability is certainly a key factor, but subsidies significantly reduce initial financial risk and accelerate the return on investment. In addition, they boost innovation by making new technologies more accessible and encouraging their large-scale adoption. Without subsidies, owners would be much less incentivized to invest in innovative solutions, which would slow technological progress in the sustainable construction sector.

Owners will seek to recoup their investments, which would make housing significantly less affordable for many tenants.

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

Yes, it is almost certain that renovation costs will be passed on to tenants in the form of higher rents. Owners will seek to recoup their investments, which would make housing considerably less affordable for many tenants. This would worsen social inequalities, as low-income households would be the most impacted by rent increases.

Unrenovated buildings are also often less energy efficient, leading to higher heating and electricity bills. Without these subsidies, we risk facing a real vicious circle where high energy costs combined with rising rents make housing increasingly unaffordable for tenants.

Could this jeopardize Switzerland's 2050 carbon neutrality goals?

Without a doubt. Subsidies are an indispensable lever to achieve carbon neutrality goals. We cannot hope to reach carbon neutrality without massive investments and strong state support. If the authorities decide now to reduce or even eliminate their support, it is clear that the 2050 target will not be met.

By removing financial incentives, we risk significantly slowing the pace of energy renovations, which will compromise our climate commitments for 2050. Subsidies make renovation projects more attractive and financially accessible, which is essential to encourage owners to invest in energy improvements.

Institutional investors, who play a key role in the real estate sector, could also completely revise their investment strategies if subsidies are reduced. This would have a catastrophic impact on decarbonization efforts, as energy renovation projects would become far less financially attractive.

The lack of qualified labor in the sustainable construction sector also significantly slows these projects.

As owners, what other obstacles would remain to achieve this carbon neutrality?

Aside from financing, owners face major challenges such as the complexity of regulations, lack of information about available technologies, and sometimes resistance to change. Continuous and increased support, both financial and technical, is crucial to overcome these obstacles and encourage more sustainable building practices.

Investors and owners, such as the Bernard Nicod Group, stress the vital importance of regulatory stability (management of objections and the various complex and restrictive regulations), speedy administrative procedures and strong tax incentives to ensure sustainable and profitable investments.

The complexity of administrative procedures and the variability of local regulations are major obstacles to energy renovation projects. In addition, the lack of qualified labor in the sustainable construction sector significantly slows these projects. It is therefore essential to continue investing in training and skills development to effectively support the energy transition.

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