France facing the challenge of energy renovation: What are the current issues regarding housing distribution, renovation costs, and financial aid?
19 Dec, 2024

Introduction

As the world acknowledges the unsustainability of its production and consumption methods, which are neither feasible nor desirable for the future of the planet, alarming reports (such as the IPCC reports in 2022 for 2050) reinforce this late awakening of the political and economic class. The damning reports on the failure to meet environmental agreements signed at international summits, or the shortcomings of some states in fulfilling their commitments, are not the only echoes heard concerning climate change and the necessary ecological transition. Carbon neutrality and the reduction of greenhouse gas emissions remain among the main goals for fighting global warming.

Several sustainability objectives for development were set by the United Nations General Assembly for 2030 on July 6, 2017, and have since been reviewed and refined annually until 2024. These objectives include France and anticipate a range of expected outcomes related to ecology and environmental sustainability, sustainable production and consumption of resources, and access to more sustainable energy sources.

The renovation of France’s most energy-inefficient housing, those with the worst Energy Performance Certificate (EPC) ratings, has become a priority. In 2021, 5.2 million French homes were considered energy (or thermal) sieves.

This article aims to provide an overview by examining the challenges of energy renovation in France, the set goals, associated costs, and available support measures to achieve a more sustainable and efficient housing stock.

 

Current situation 

EPC and distribution of low-energy performance housing

The Energy Performance Certificate (EPC) evaluates the energy and climate performance of a home or building by assessing its energy consumption and greenhouse gas emissions.

As mentioned earlier, in 2021, 5.2 million homes in France were considered energy sieves (EPC labels F and G, i.e., homes that consume the most energy and/or emit the most greenhouse gases). These homes are mostly located in the Île-de-France region, where 2.3 million dwellings had an F or G EPC rating (note that renovating co-owned housing, particularly Haussmann-style buildings, is more complex and less regulated).

Looking closer at these energy-inefficient homes, 55% of them are found in the private rental sector. Additionally, 48% of property owners own energy sieves. Effy, an energy renovation company, estimates that about 60% of these energy-intensive homes are owner-occupied.

Social rental housing is less affected, as in 2023, only 35% of such homes were classified as energy sieves (according to Effy). Newer homes (built after 2012) tend to have much better EPC ratings compared to older ones (built between 1948 and 2000).

EPC and heating systems

The EPC is highly dependent on the energy mix used in the home, as some energy sources generate more emissions than others. In 2021, over 70% of homes primarily heated with fuel oil had an EPC rating between E and G. In contrast, homes primarily heated with electricity, gas, or wood showed less severe ratings: 38% of homes heated by electricity, 34% by gas, and 32% by wood were rated between E and G.

 

Objectives and timeline

Among France’s goals is the renovation of the most energy-consuming buildings (with EPC ratings between E and G) according to the following schedule: 2025 (for G-rated homes), 2028 (F), and 2034 (E). Homes that do not meet renovation standards could face rental bans, freezes on rent increases, or even demolition for the most dilapidated buildings. For example, if E, F, and G ratings are considered, it is estimated that by 2034, without renovation, 48% of France’s private rental housing could be banned from renting.

Indeed, owners may be required to carry out renovation work for several reasons:

  • Protect tenants, especially those with lower incomes, from excessively high energy bills.
  • Allow property owners to gradually undertake renovation work and bring their rented properties up to standard through various incentive measures.
  • Reduce greenhouse gas emissions and ensure the residential sector contributes to the energy transition alongside other sectors (such as automotive, industry, and transport).

It is worth noting that tenants of energy-inefficient homes could also demand renovations from their landlords. By 2028, the law stipulates that rent increases for F- and G-rated homes will be banned upon lease renewal or re-rental, encouraging landlords to complete these renovations.

 

Cost and impact

Cost of renovation

The cost of renovating a home with an EPC rating of F or G varies significantly depending on several factors: size, age, overall condition, location, materials used for insulation, technologies and energy sources implemented, the number of energy classes to be improved, starting EPC rating, and specific standards that need to be met. According to a 2022 study by the French Environment and Energy Management Agency (ADEME), the average cost of energy renovation for a home can range from €5,000 to €50,000, depending on the accumulation of these factors.

Renovating a home with a G rating, the lowest in terms of energy efficiency, may require more extensive work, with costs exceeding €50,000. Such renovations can include complete insulation of the building, replacement of the heating system, installation of double-glazed windows, installation of controlled ventilation systems, and more. While energy renovation costs are high, they lead to significant reductions in energy expenditures, primarily through more efficient heating and better insulation.

Impact on property owners and tenants

The costs of energy renovation may be passed on to tenants through rent increases, potentially making some homes too expensive for certain renters. A 2024 study by UFC-Que Choisir revealed that transferring renovation costs to rents could result in significant rent hikes, which may force some tenants to look for more affordable housing. Moreover, UFC-Que Choisir highlights the risks of misleading practices faced by property owners during renovations, which they explore in a dedicated article. The National Housing Information Agency (nb: ANIL in French) also notes that property owners are legally allowed to pass some of the renovation costs onto tenants via rent increases, particularly in high-demand areas where housing is scarce.

 

Financial aid and subsidies for energy renovation

Financial assistance programs are available to support low-income households in their energy transition efforts. One key program is “Ma Prime Rénov’,” a government subsidy that covers part of the costs of energy renovations. The “Prime Effy” is another financial aid program that encourages renovation work aimed at improving the energy efficiency of homes. Typically, these subsidies can cover between 30% and 50% of the total expenses, depending on eligibility criteria and the nature of the renovations. In addition to these programs, various other grants and financial incentives are available, including tax credits, low-interest loans, and local subsidies. These financial aids are designed to reduce the overall cost of renovations, making homes more energy-efficient while easing the financial burden on low-income households.

 

Conclusion

In reviewing the major challenges of energy renovation in France, it is clear that the issue of energy-inefficient homes, or “energy sieves,” is particularly concerning, with a significant portion of housing requiring substantial renovations to improve energy efficiency. Energy renovation not only addresses environmental goals but also plays a critical role in reducing household energy costs and contributing to the nation’s broader transition toward sustainable development. However, the financial implications for both property owners and tenants, alongside the need for extensive public support through subsidies and incentives, remain key elements in successfully achieving this transition.

Energy renovation does not only create challenges for tenants but also for owners of energy-inefficient homes who live in these properties. Some of these owners may be forced to temporarily vacate their homes during the renovation process and find alternative housing that aligns with their income level.

For lower-income homeowners of properties with EPC ratings of G or F, the cost of extensive renovations may be financially overwhelming, especially in the current difficult economic climate. These renovation costs could be passed on to tenants through rent increases, potentially making the housing unaffordable and forcing tenants to relocate if the rent exceeds their housing budget. While financial assistance is available for low-income households to support energy renovation efforts, it is important to note that these subsidies do not cover the full renovation costs. They primarily serve as incentives for property owners to undertake the work, with the hope of realizing energy savings in the future. It is essential to explore the available financial aid, such as government grants, tax credits (like Ma Prime Rénov’, launched in 2020), or low-interest loans, which can help reduce the overall renovation expenses.

Such a scenario could also impact the financial sector, prompting banks and insurance companies to tighten their lending policies for energy renovations due to the increased risk of loan defaults.

More in-depth studies are needed to assess the feasibility of these renovation targets and to determine whether the proposed timelines are realistic. However, a more dynamic and personalized management of the housing stock could contribute to the sustainability of the energy transition, improve the profitability of rental investments, and reassure financial institutions.

Indeed, thanks to Artificial Intelligence (AI), it is now possible to develop dynamic models for classifying homes based on multiple factors, such as EPC ratings and their energy mix, to optimize renovation policies for France’s housing stock.

For example, such classification could provide an annual dynamic view of the national housing stock or a specific real estate portfolio up to 2050 (or beyond, depending on the integrated scenarios). This could also enable personalized assessments based on the client’s objectives, such as evaluating the creditworthiness of a loan for purchasing or renovating a property. Additionally, it could incorporate extra data to anticipate climate events, estimate their impact on a housing portfolio, apply mitigation costs, and reduce potential financial losses.

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