It is crucial to mobilize all levers to clean up the housing stock more quickly.

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

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

The responses of Jean-Jacques Morard, CEO and Managing Director of the real estate company deRham SA.

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

In view of the climate stakes and their implications for the energy renovation of buildings, I do not understand the proposal of this group of experts to reduce subsidies. It seems crucial to me to mobilize all available levers to accelerate renovation measures for the Swiss building stock, and subsidies constitute an important tool to support this dynamic.

This proposal, which I consider irresponsible, could also herald a progressive and proportional reduction of subsidies with the introduction of new binding regulations, like the recent Vaud energy law. One can fear that, if building renovation became mandatory, the State would decide to forego incentive aid!

The 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?

I wonder how these experts calculate the profitability of energy renovation measures for buildings. In reality, we observe that such investments are not profitable or present such low profitability that it is not enough to encourage owners to carry out works.

Restrictions imposed by public law (such as the Vaud L3PL) combined with limitations of private law (notably tenancy law and article 14 OBLF) invariably lead to the same conclusion: energy renovations do not guarantee satisfactory profitability for owners.

The only energy renovations we have carried out that generate an acceptable return concern buildings that allow an increase in rentable space, for example through additional storeys.

Although I am usually in favor of deregulation and liberal policies, I am convinced that only the imposition of reasonable but binding renovation deadlines will make it possible to reach the set targets.

Without these subsidies, should we fear a sharp rise in the bill for tenants?

Tenants suffer on the one hand rent adjustments because of the (too) low passing on of renovation costs, and on the other hand they pay the bills related to heating charges, hot water production and other ancillary recoverable costs in accordance with tenancy law. An energy renovation improves the energy efficiency of buildings, which leads to a reduction in energy consumption and, consequently, a decrease in charges.

However, it is obvious that the reduction or elimination of subsidies would have a direct impact on the total cost of the works to be passed on. The rent adjustment would then be calculated on the basis of a higher amount of works, leading to more significant rent increases for tenants.

Could this jeopardize Switzerland's 2050 carbon neutrality goals?

Given the scale of public and private investments required, I doubt that we can achieve carbon neutrality by 2050. While the issue of subsidies is important, it is clear that other measures will be essential to reach that goal.

Although I am usually in favor of deregulation and liberal policies, I am convinced that only the imposition of reasonable but binding renovation deadlines will make it possible to reach the set targets.

It also seems to me that additional incentive solutions could encourage owners to undertake the required work on their buildings. This could include financing facilities, greater flexibility in passing renovation costs onto rents, or the implementation of a sustainability rating system to add value to renovated buildings.

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

I see three that could concretely slow the achievement of carbon neutrality:

• The first concerns the availability and cost of raw materials. Whether it's insulation materials or photovoltaic panels, I question the capacity of industries to meet a growing international demand. It is likely that demand will far exceed supply, inevitably leading to an increase in material prices.
• My second concern relates to the workforce needed to carry out all the work on the building stock. One current trend aims to control demographic growth, which, in my view, contradicts the increased need for skilled labor. Even if we succeed in attracting these workers to fill the new jobs, there remains the crucial question of their housing in a context where our country suffers from a shortage of available housing. In addition, almost all real estate projects are subject to popular referendums and are often rejected. This situation makes solving the equation extremely complex.
• Finally, it is urgent and essential to simplify and streamline the procedures for obtaining building and renovation permits. We are facing an inflation of requirements and response times that continue to lengthen, thus paralyzing our country's real estate economy.

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