Investing in sustainability of rental homes
The government has been stimulating real estate owners for a while through covenants, subsidies and legislation to reduce the building related warmth demand. With this, there will first be a focus on professional real estate owners because they are easily approachable through branch organisations, can work on a large-scale, and are expected to deliver. The government has, for instance, signed a covenant with Aedes, the branch association for housing associations, in which the housing associations sector has promised to improve their housing stock from an average energy performance certificate ‘D’ to an energy performance certificate ‘B’ by 2020. Private residential investors have indicated to have at least a minimal certificate ‘C’ for 80 percent of their homes before 2020.
However, the government is not satisfied yet with the progress of the sustainability process of the housing stock. The current pace is too slow to achieve the Dutch climate goals from the Paris Climate Accord. All signs point to an increasing pressure from the government to accelerate this process. Meanwhile, the banking sector has started to turn. Banking financing of non-sustainable investment real estate will become difficult or even completely impossible to secure.
For professional home owners such as housing associations and institutional investors, it is therefore necessary to make sustainability the main focus of their policy and make it a high priority.
In the Netherlands, the idea exists that investment in sustainability is expensive. This idea arises from the accepted practice in which sustainability is combined with other renovation investments. Moreover, the sustainability demands are often too high and accommodating measures are ineffective.
Sustainability method of Tsavo
Tsavo has developed a sustainability method with which post-war homes with certificate E, F or G can be brought to certificate A, B or C with an average of 15,000 euro of investment per home. The increase in home appreciation points that correlates with the improvement of the energy performance makes it possible to implement an increase in the monthly rent of around 100 euros. The gross yield of this sustainability investment is 8 percent.
For the current tenants of these homes the improvement means that the living standards will strongly improve while the total living and energy costs will not increase. The maximum rental growth potential that this sustainability investment brings can be realised through tenant turnover and the annual rental growth.