Housing accessibility is one of the basic human needs. What kind of homes are we currently living in, and what awaits every homeowner in the context of the European Green Deal requirements? According to 2019 Eurostat data, 66% of the population in Latvia live in apartments, and 34% in private houses. Although the majority of the population (67%) own their home without mortgage debt, this does not indicate high purchasing power, but is primarily related to the privatisation process after the restoration of independence. As a result of the population's low purchasing power, the housing stock in Latvia is aging rapidly. Since the restoration of independence, approximately 10% of all residential buildings in Latvia have been built after 2003, whereas of the total proportion of multi-apartment buildings, only 3% were built after 2003, when new building regulation requirements came into force, setting significantly higher thermal performance standards. Even if residents wanted to improve the condition of their homes, a large part of society does not have the financial means to maintain their home in good technical order or to purchase a new one.

This grim statistic further reinforces the concerns that arise when reading European Green Deal documents, which outline a climate-neutral future with strict energy efficiency requirements for buildings. Latvia and other countries have already started renovating buildings to meet the goals set in the European legislative proposal package “Fit for 55”, but the forthcoming Energy Performance of Buildings Directive sets even more ambitious goals and deadlines. Furthermore, the Green Deal plans and the associated additional costs for homeowners coincide with a time when mortgage payments for all borrowers in Latvia have already increased significantly due to the rapid rise in EURIBOR rates. But first things first.

There are many Green Deal documents concerning regulations for buildings, as the topics overlap. The major frameworks are “Fit for 55” and “RePowerEU”, followed by various regulations and directives, some of which have already been adopted, while others are still being discussed in trilogue negotiations between the European Commission, the Council of the European Union, and the European Parliament. One of these is the Energy Performance of Buildings Directive, which has not yet been approved and its text may still change, but let us look at the future outlined by the version of the directive submitted for discussion. How does a regulation differ from a directive? When adopting directives, national legislatures must decide for themselves how to achieve the goals described in the directive; in the case of a regulation, all EU member states apply it directly as law.

The Energy Performance of Buildings Directive is being developed to improve the energy efficiency of buildings and reduce the volume of greenhouse gas emissions from buildings with the long-term goal of achieving European Union climate neutrality by 2050. The directive applies to all buildings, including private houses and apartments, and by 2050 all buildings must be zero-emission or climate-neutral. It is expected that each member state will have to develop a national building renovation plan, which will gather information on the state of buildings, categorising them into energy efficiency classes A, B, C, and D. It is estimated that by 2030, member states will have to renovate a total of 35 million buildings, starting with those in the worst condition or energy efficiency class D. There will also be strict energy efficiency requirements for newly constructed buildings – from 2028, all new buildings must be climate-neutral. As this will be expensive, the pace of new building construction could slow down. Moreover, it is already slowing down. Recently, Bloomberg wrote that a housing crisis is gathering momentum in Europe. Residential building volumes are shrinking, and the situation threatens to worsen growth and further increase political tension, as many politicians promised to improve housing accessibility before the elections, but the opposite is currently happening. This is related to both high costs and strict energy efficiency regulations.

What does building renovation mean in practice? The “deep renovation” approach involves insulating building walls and other structures, installing micro-generation equipment (solar panels, small wind turbines), and renewing or replacing engineering systems, including heating systems. When considering how sad the state of a large part of Latvia’s housing is (for example, Soviet-era block apartments, which are not only energy-inefficient but where sometimes even the existing electrical connection capacity is too low), it is difficult to imagine that solar panels or electric vehicle charging stations could be installed in such homes on a mass scale.

Although biomass (firewood, pellets, woodchips) is currently recognised as a renewable resource that may be used for heating in the Renewable Energy Directive, which the European Parliament approved in September, and natural gas is also currently considered “green”, the forthcoming Energy Performance of Buildings Directive emphasises that buildings must move towards the zero-emission goal by 2050, which means a gradual phase-out of natural gas and all types of biomass in building heating systems as well. Thus, if you have a firewood, pellet, or gas boiler at home, count on having to replace it in time. Moreover, in the near future, heating with fossil fuels will become more expensive in connection with the expansion of the emission trading system. The system works on the principle: if you create emissions, you pay for them! A study by the Polish Economic Institute calculates that, on average, heating costs for a household could increase by 429 euros per year. In turn, total “emission” costs over 25 years (from 2025 to 2040) for the European Union could reach 1.112 trillion euros.

The directive’s plan mentions that member states must take into account time and social costs when setting any target dates for building renovation, as approximately 50 million EU citizens live in “energy poverty”. However, this does not cancel the main goal – to make all buildings climate-neutral by 2050. Furthermore, the requirements of the directive may also affect the rental market, as we see in France, where it is already prohibited to rent out buildings that do not meet certain energy efficiency requirements.

Many member states are already making buildings more energy-efficient, but as the costs of construction materials and labour rise, continuing construction work is becoming increasingly difficult. For example, in Germany, the “renovation wave” has had to be slowed down because material and labour costs are too high. What does this tell us about the success of the Green Deal if even one of the European economic heavyweights cannot meet these requirements? There is simply not enough resource and infrastructure to support the pace of “greening” that the European Green Deal wants. Germany's Finance Minister Christian Lindner, a leader of the liberals who has to work in a complex coalition with the Greens and Social Democrats, realising that the green utopia must be balanced with real possibilities, said the following about the forthcoming Energy Performance of Buildings Directive: “I believe these plans are very dangerous. The directive may threaten social peace because the planned changes will make life in homes and the ability to pay for them more difficult.” French President Emmanuel Macron has also drawn attention to the fact that these rules will only harm European citizens and businesses, making Europe less competitive and potentially triggering new “yellow vest” protests in society. Meanwhile, the Swedish public building sector organisation Public Housing Sweden estimates that achieving the directive's goals by 2050 will cost more than 45 billion euros. Moreover, the true price could be even higher because costs increase every year. This is said by a country that is one of the wealthiest in the European Union and where the building stock is already relatively energy-efficient. Namely, if the volume of greenhouse gas emissions from the heating and cooling of residential buildings in Europe is on average about 700 kg of greenhouse gases per person per year, in Sweden it is a mere 26.2 kg.

How much could building renovation cost in Latvia? According to 2022 Altum data, the average renovation cost of a building in Latvia is 300-400 euros per square metre, and the average project size for a multi-apartment house is half a million euros. However, an overview of the energy efficiency of buildings in Latvia as a whole and the costs of their renewal at the national level has not been carried out. The responsible ministries should compile this data before we express Latvia's position regarding the Energy Performance of Buildings Directive. And the public must be informed about this, rather than something being accepted in haste, as the Ministry of Climate and Energy recently did, attempting to quickly approve the National Energy and Climate Plan for submission to the European Commission. The haste was justified by saying that Europe will punish us if we are late. That is nonsense; no one is going to punish us for that! Such important decisions, which will affect almost every resident of Latvia, must not be rushed.

Where to get the money for building renovation? Various support mechanisms are already available at both the European and member state levels, but it must be taken into account that the majority of costs will have to be covered by the building owners themselves. It is clear that not all residents will be able to afford to take out a loan for building renewal, even if it is partially co-financed, as the Altum programme currently does. For now, the goals of the Energy Performance of Buildings Directive look like a green utopia – a good idea, but practically impossible to implement in real life.