Profitability of energy efficiency refurbishments in the private rental market
The EU Council has been mobilising Member States to put in place energy efficiency measures in the residential sector that will cut emissions by 30 % by 2030. Yet investors need certainty that energy efficiency improvements in the private rental sector are profitable. Without this information, the real estate sector is unlikely to take the necessary investment decisions and contribute to the EU's 2030 carbon reduction targets. The www.rentalcal.eu (RentalCal) project worked to incentivise investment into energy efficiency in rented dwellings. "Our aim was to provide transparent information that will help guide investment decisions on energy-efficient retrofit of buildings. We took care to ensure that comparisons are possible across countries. To this end, a key focus was to develop methods and calculation standards that can meet the respective national laws in each country," says Project Leader Ms Iris Behr. Facilitating retrofit investment decisions With a consortium comprising practitioners and research institutions from eight European countries, RentalCal developed an advanced Profitability Calculation software, which enables owners and investors in the private rental sector to calculate the financial implications of any investment in energy efficiency. The tool takes into account all financial considerations, including architectural costs, government grants and tax benefits. It provides a clear picture of the costs and benefits, by country and by type of rental property. "The RentalCal tool applies a dynamic model that enables property owners to assess the profitability of any mandatory or discretionary investment in modernization that enhances the energy performance of the rental property," notes Behr. She explains further: "The newly developed tool calculates important profitability metrics such as the return on equity. In addition, it shows how the retrofit investment impacts on the net rent and the gross rent." Yet the tool is not limited to calculating certain key performance indicators; it also calculates the true 'green value' of the retrofit investment — that is the energy use. The RentalCal tool can strengthen dialogue amongst all actors in the housing industry and financial sector who are primarily concerned with planning, financing and regulating green retrofits of buildings. The tool is available in two versions (targeting professionals and tentative investors) and seven European languages. Providing incentives for green retrofits The RentalCal software provides the required transparency for investors who are uncertain about the measurable financial benefits of energy efficiency retrofits in their rental property. It enables investors to conduct a detailed and realistic viability analysis of potential retrofit measures. The tool also reduces split incentive barriers by translating the positive effects of energy-efficient and sustainable renovations into real-value and financially feasible investments for the real-estate industry.
Keywords
RentalCal, tool, green retrofit, rental property, retrofit investment, green value
