How to tackle the sustainable improvement of neighborhoods and housing through regulatory and financial instruments?

To date, Spain has one of the biggest housing hub in Europe, placing ninth in the ranking of countries with the highest percentage of housing in property regime of 2013. According to 2007 estimates from the Ministry of Housing, in Spain there are a total of 551 houses per thousand inhabitants, versus the 508 in France of the 485 in Germany. In 2014, Spain had 25.492.335 houses, according to the Ministry of Development, where 19.113.128 houses were “main residences” and 6.379.207 “second residences”.

In addition, according to the report of the Working Group on Rehabilitation (GTR; Cuchí & Sweatman, 2013): one of every two houses (specifically, the 54% of the 25,2 million registered by the INE) was constructed before 1980, this is, before the adoption of the first technic policy on edification. In other words: this set of houses doesn’t follow the actual conditions of habitability, accessibility or even energy efficiency.

Moreover, this set of old houses not only present livability deficiencies, but also entail an unbearable passive expense on  Spain’s energy bill. Our country spends more than 60.000 million euros each year in primary energy, and a third of that energy is directed to buildings (Cuchí & Sweatman, 2013). The rehabilitation of these buildings, incorporating energy efficiency criterion, could improve the performance of this buildings between 40 and 60% in average, significantly reducing the pressure on the balance of payments of our economy, clearly hindered by the import of energy products.

The crisis of the past few years has triggered the “indefinite” delay of the rehabilitation and reform of old houses. The energetic rehabilitation of the residential sector, unlike what happens frequently in the terciary sector, isn’t economically profitable per se through energetic savings. Innovative financing resources are needed to reduce costs for owners and tenants, offsetting investments by revaluing real estate assets and improving quality of life. Rehabilitation is a source of local employment. If we rehabilitate between 250,000 and 400,000 homes per year, we could generate between 150,000 and 180,000 direct jobs in the construction sector, and reach a market volume between € 9,000 and 14,400 million / year that would benefit not only this sector, but also the immense set of activities that are part of its supply chain.

The necessary specific actions comprise:
  • Designing and implementing a systemic innovation platform, collaborative and open, as an instrument of intervention in transforming the participant cities.
  • Developing a governance and public participation system agile enough to activate an increasing number of actions by the final users (owner, tenants.). The tools for social innovation are key to endow credibility and transparency to the urban renovation process, as well as simplifying the messages directed towards potential receivers of the rehabilitation projects.
  • Boosting a portfolio of innovation projects connected to the aspirations of the local population.
  • Creating a network of public and private actors connected to the platform, where they will work together in an open innovation scheme.
  • Identifying a set of principles, criterion and methodology for the transformation of cities in Spain and Europe (learning through experimentation, demand redirection, approximation of the project portfolio and use of the transformation levers).
  • Establishing innovative public-private finance mechanisms, inspired by the experience of other cities and countries in our economic ecosystem. The solutions will definitely come from using public funding to endow guarantees and cover risks that will allow the attraction of private funding into this projects, commercializing specific finance products for extensive rehabilitation projects with reduced rates of interest. This initiative, combined with public subsidies directed to disadvantaged groups with difficulties to face loans, could unblock the barrier of financing this renovation projects at an urban scale.