The rehabilitation of building stock will be public-private, or not at all

Guest article by Jordi Salvador Culí, Municipal Auditor of Olot City Council (Spain)



Jordi Salvador Culí

Publication date

July 8, 2021

It is clear that building stock, especially housing, requires structural changes in terms of accessibility, safety, and eco-efficiency. In Europe, many of these buildings date from before 1980 and do not meet the standards and needs of modern living.

Health, quality of life, and the need to preserve the condition of the planet, i.e., its habitat, require rapid, smart, and feasible actions. These actions must also be universal in nature, and here lies one of the drawbacks: the economic vulnerability of many families. Rehabilitation cannot be carried out in isolation; it is preferable to implement programmes at the neighbourhood level, or in specific urban areas.

Concepts such as subsidies and aid must be left behind. Public resources should not and cannot assume the cost of the actions to be carried out, and now more than ever, public-private partnerships are essential. Such a collaboration has been widely debated but has not yet come to fruition. The public sector distrusts the economic interests of the private sector, and the private sector distrusts the much-debated inefficiency of the public sector. This reluctance must be overcome in the short term by first assuming the role that corresponds to each actor involved, then through regulatory changes that allow and legitimise this essential collaboration for the achievement of a common goal.

Such proposals for European aid do not allow in-depth rehabilitation measures due to the low numbers. The rehabilitation proposal in Spain must increase from 25k per year to 150k based on efficient reforms. This increase cannot be achieved through “business as usual”, i.e., by following the customary channels. A paradigm shift is essential.

While it is true that European countries, especially those in the south, will soon receive the long-awaited European funds for post-pandemic economic recovery (Next Generation); the fact remains that these resources are of a temporary nature when the need we are facing is one of structure, concept, and culture, and must be maintained in the long term if rehabilitation is to be comprehensive, safe, universal, and sustained over time. Furthermore, it is unclear how these public funds will be distributed, who will distribute them, and for what purposes they will be used.

Initiatives have begun in different parts of Spain, some of these are sponsored by the European Commission such as: EuroPace / “HolaDomus” in the city of Olot (Catalunya), “Open Gela” in Euskadi, “Regenerate” in Menorca (Balearic Islands) and “PACE” in Madrid, among others. These are programmes that aim to promote eco-efficient rehabilitation through public-private partnerships with affordable financing, while taking into account social circumstances (economic vulnerability). The current regulatory situation is not conducive to its development. An example to be taken into account in terms of taxation and the assignment of claims to third parties is the Italian “superbonus”.

Public administrations, especially local ones, must be guarantors of procedures, prioritise actions in their urban fabric, support actions to be developed, and facilitate bureaucratic procedures (licences, permits, etc.); however, in no case can they assume legal, economic, and financial liability for the programmes, let alone develop them in an integral manner without forgetting that the responsibility for urban planning and its development is public. Local administrations must seek collaboration with other necessary actors such as Land Registries, Notaries, and Urban Property Chambers. They can also, depending on their budgetary possibilities, open lines of aid for competitive tenders, especially for situations of economic vulnerability, establish tax rebates adapted to current legislation, and even participate in social guarantee funds that facilitate the beneficiaries’ access to private financing.

Opportunities for legislative adaptation, such as the drafting of Law 7/2021 of 20th May on climate change and energy transition (LCCTE), have been overlooked. For example, Article 8 of the Law: Energy efficiency and renovation of buildings, offers a bolder, more forward-looking text. In fact, an amendment sponsored by the “PACE” and “EuroPACE” programmes was debated, which proposed important regulatory changes to achieve a more active position and guarantee the PACE amendment (consideration of private financing contributions from the programmes as PPPnT (non-tax public property benefits)) for local public authorities, and therefore the consideration of public revenue with all the prerogatives that this entails. This amendment also proposed changes to Article 78 of the General Tax Law (constitution of the tacit legal mortgage) and to Article 74.5 of the consolidated text of the law regulating local estates (to extend the bonus of up to 50% of the full share of the Property Tax for the implementation of eco-efficient measures in property).

Technicians and academics of different origins working tirelessly in this area will continue to try to advance and legitimise the proposed amendment. In fact, Article 8.4 of the “LCCTE” establishes a period of less than 6 months for the Government to prepare a Housing Rehabilitation and Urban Renovation Plan; it could be an opportunity to introduce the concepts that the amendment provides.

The debate on regulatory changes could be extended to the Horizontal Property Law (communities of owners), to the General Mortgage Law (registration prerogative of “PACE” fees), to the VAT Law (reduced rates in eco-efficient rehabilitation actions), the Personal Income Tax Law, and Corporation Tax (tax deductions), among others.

The energy communities that are formed could also play their role.

Many factors are converging to ensure that we do not miss the opportunity to definitively legitimise public-private collaboration and facilitate financing for the rehabilitation of the building stock with a criterion of eco-efficiency and universality, while paying special attention to situations of economic vulnerability.