Energy upgrades can deepen housing inequality

Winter is closing in. In Norway, that means turning on the heating. 

Energy upgrades can make homes warmer, reduce pressure on the power grid and protect households from future price shocks. Energy efficient homes are also an important part of Europe’s green transition.

But there is a difficult question behind this transition: who can afford to take part?

Norwegian households rely heavily on electricity for heating. On the coldest days, demand can rise sharply as people turn up the heat. Making homes more energy efficient can help, but it can also raise housing costs.

Findings from the European project ReHousIn show that this issue is growing across Europe.

Why upgrade homes?

Energy upgrades include better insulation, new windows and more efficient heating systems. There are several good reasons to upgrade:

• Warmer, more comfortable homes. Better insulation, windows and heating can improve indoor comfort while reducing energy use – particularly important during long Norwegian winters.
• Less pressure on the power grid. More energy-efficient homes use less electricity when demand is at its highest. That can help ease pressure on the system on very cold days.
• More protection from price shocks. A home that needs less energy is less exposed when prices rise. It can act as a buffer against future shocks.
• Better preparedness. Homes that retain heat need less energy when supplies are disrupted or demand suddenly increases. This can make both homes and the power system more resilient.

Energy renovation is not, however, only an energy issue. It is also a housing issue.

When renovation pushes people out

Across Europe, governments have introduced subsidies, tax incentives, renovation targets and, in some cases, minimum energy standards for existing homes.

France, Italy and Spain have invested heavily in renovation schemes. Switzerland has backed energy upgrades for decades.

These policies can reduce emissions and energy use. They can also help households cope with high energy costs - but they can create new problems.

When landlords pass renovation costs on to tenants through higher rents, people may be forced to move. This is sometimes called renoviction: when higher rents after renovation force existing residents to leave.

In Switzerland, for example, renovation costs can easily be passed on to tenants. This puts climate goals at odds with affordable housing.

Norway’s quieter approach

Norway has support schemes through agencies such as Enova and Husbanken. It has also promoted heat pumps, smart systems and solar power. But the system is largely voluntary.

Support is not generally linked to income. And there is no broad legal requirement for private homeowners to carry out energy upgrades.

For many Norwegians, renovation remains a private responsibility. People renovate to lower bills, improve comfort, maintain the value of their home or deal with needed repairs.

Climate and preparedness matter too, but they are not always the main reason.

That leaves people with more money, knowledge and time better placed to use the support on offer. The issue is not simply whether lower-income households want to renovate. They may be less able to do so.

The national report also points to red tape: applying for support can mean a lot of paperwork and know-how, another hurdle for people with fewer resources.

Housing cooperatives can make upgrades easier

Housing cooperatives, known as borettslag, offer a different way to organise upgrades.

Residents own and manage the building together. The board handles day-to-day work, while residents must approve major projects at the general assembly.

The cooperative usually borrows for the work. Residents repay the loan through monthly common housing costs, known as felleskostnader.

This shared system can make large projects easier to carry out. And it ensures that the residents themselves control the whole process.

In the Oslo cases studied in ReHousIn, residents had invested in façade work, insulation, new windows and solar panels.

But not all cooperatives have the same ability to act.

Size and organization matter

Some of Oslo’s largest housing co-ops are in eastern parts of the city, including less well-off areas. Their size can give them better capacity to organise major renovation work.

They may have experienced boards, paid staff or outside advisers.

Smaller co-ops can lack the skills and capacity to plan and carry out major work. The situation is even more challenging for condominiums, which face the same renovation and upgrading needs but lack the organizational framework, including the financial safeguard mechanisms, that housing cooperatives have in place.          

Shared buildings, unequal budgets

There is another challenge within each co-op.

Residents share the cost of renovation. But they do not necessarily have the same ability to pay.

A single cooperative may include people who bought their homes decades ago and now live on modest incomes. It may also include young families with large mortgages and households that recently bought expensive apartments.

For an older resident with a valuable home but a low income, even a rise in monthly common costs can be difficult to manage. Board members are aware of this.

One board member described how the board repeatedly worked out what each investment would mean for residents’ monthly costs. The question was not whether to improve the building, but how to do so without putting too much pressure on people’s finances.

The cost of doing nothing

There is often broad support for improving buildings. But boards also have a duty to residents who may struggle with higher monthly costs. That creates a difficult paradox.

Renovating can create financial pressure, but not renovating can also deepen inequality.

Homes that remain inefficient leave households exposed to high energy use and future price changes. They may also face more expensive upgrades later if European energy rules become stricter or Norway adopts more of them.

This is a challenge across Europe. Policies can fail to reach households that need help the most. Or they can create new affordability problems when residents are expected to cover the cost.

Energy policy is also housing policy

Norway faces a choice.

If energy renovation remains largely voluntary, progress will depend on what individual homeowners, condominiums and housing co-ops can afford and organise.

If stricter rules are introduced, the costs could put far more pressure on households with tight budgets.

The solution is unlikely to be simply more subsidies for everyone.

Energy and housing policy need to work together. Support should reflect people’s ability to pay, and technical help should be easier to get. Policies must also allow deeper upgrades without making homes unaffordable.

Can Norway learn from Europe?

Austria offers one example. Its renovation policies combine support for buildings with help for households. The programme Sauber Heizen für Alle has provided subsidies to low-income owner-occupiers to replace fossil-fuel heating systems with climate-friendly alternatives.

France has taken a different route. Through MaPrimeRénov’, it has shifted from tax incentives towards direct subsidies to both owner-occupiers and landlords. The aim has been to cut the upfront cost of renovation, especially for lower-income households, and focus more on the least efficient homes.

Neither country offers a perfect model.

Austria still struggles with fragmented implementation. France has faced political resistance and trouble meeting its renovation targets.

Both show that targeted programmes need enough funding and easy access. They also show that social and climate goals do not have to compete.

For Norway, the challenge is not simply to make homes more energy efficient. It is also to ensure that the households that find it hardest to pay for the green transition are also among those given the strongest support for the necessary work.

That is how Norway can make its homes greener without making housing less affordable.

Sources:

• National report on the regulatory system of environmental and energy policies: Norway
• Case study report: Oslo 
• Comparative Report on the Regulatory Systems of Environmental and Energy Policies

Professor Roberta Cucca, Associate Professor Anne-Kristine Kronborg and researcher Rebecca Cavicchia are based at the Department of Urban and Regional Planning at the Norwegian University of Life Sciences.