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Global Economy

Renovating old buildings costs trillions

Heating and hot water are drivers of climate change: around 14 percent of the greenhouse gases that Germany emits annually come from the building sector. In order to achieve the climate goals, this value must drop significantly, for example through renovation and better insulation, and that will cost a lot of money. This was calculated by a study commissioned by the Association for Housing Construction. It estimates the costs at up to 150 billion euros per year. By 2045 – the year in which Germany wants to be climate neutral – that would total 3.6 trillion euros. That is more than Germany's gross domestic product in 2020.

Discussion on energy efficiency standards

However, the associations warn that it could become even more expensive if the federal government implements the standards that it has written in the coalition agreement: The coalition partners want to raise the energy efficiency standards for newly built houses to the currently highest possible level by 2025 (Efficiency House 40) and are also setting them when refurbishing to high standards (Efficiency House 70). The study expects significantly less stringent climate protection modernizations (efficiency house 70 for new builds and 115 for renovations), which are basically already standard in construction, and thus comes to the mentioned 3.6 trillion euros for the renovation of old buildings.

It is the big conflict: On the one hand, affordable apartments should be built in sufficient numbers for everyone, on the other hand, apartments should be climate-friendly. Does that match? The housing alliance, in which real estate companies, the construction industry, trade unions and the tenants' association are represented, among other things, proposes a dual strategy: only refurbish to medium standards so that the alliance believes it is economically viable, and then completely open up heating and electricity Switch to renewable energies. However, many sectors – for example chemical companies – are currently relying on "green electricity" to reduce their greenhouse gas emissions. This poses major challenges for the energy supply anyway.

Are rents rising "intolerably"?

Everyone wants to achieve the climate protection goals, emphasizes Robert Feiger, head of the IG Bau union. But the whole thing must also be handled in an affordable manner. Feiger believes that if older buildings were renovated to the highest standard, there would be a risk "that rents would rise to unbearable levels".

The Institute of German Economics in Cologne (IW) also sees this dilemma. Leaving the standards as they are now and not upgrading them to higher ones is still not the solution. Because that's not how the climate protection goals can be achieved, says Ralph Henger, IW expert for real estate markets. The federal government's proposal to apply the highest energy efficiency standard 40 to new buildings in three years is in principle the right way – if the framework conditions for the construction industry are improved accordingly at the same time.

Ministers discuss with the construction industry

The housing association, on the other hand, is hoping for a middle ground and a large funding package. 30 billion euros in funding per year are needed. They want to discuss their demands with politicians at today's housing construction day. In the afternoon, Minister of Construction Klara Geywitz from the SPD and Minister for Economic Affairs Robert Habeck from the Greens will speak at the event.

The study by the Institute for Contemporary Building also examined how space could be created for the 400,000 new apartments per year that the federal government has announced. There is great potential in the conversion of offices into apartments. Institute director Dietmar Walberg calculates that around 1.9 million new apartments could be created in this way. This is also relatively cheap with conversion costs of less than 1200 euros per square meter. For comparison: for a new building it is more than 3100 euros, according to Walberg.

The expert calls for a conversion offensive. In addition to offices, residential buildings could be increased. Builders could also add one or more floors to administration buildings, office complexes, supermarkets and multi-storey car parks. A total of 4.3 million new apartments could be built without "requiring just a single additional square meter of building land," according to Walberg.

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