“It is impossible to guarantee social justice without tackling the climate emergency. ”

Can the construction sector combine sustainability with social responsibility?

The answer is not only that it can, but that it must. As a reminder, the World Bank estimates that 1.6 billion people are affected by the global housing shortage. Out of 200 cities worldwide, 90% were deemed unaffordable, with average housing costs exceeding three times the average wage. There is a dangerous notion that there’s a trade-off to be made between sustainability and social responsibility, when in fact our research shows that the two must go hand in hand.

The social pillar needs the environmental pillar.

It is impossible to guarantee social justice without tackling the climate emergency. Climate change disproportionately affects marginalized communities, whether on a global or city scale. The people most likely to be affected are those who live in substandard housing and have access to lower-paid jobs.

What role does social housing play in the countries you study?

It’s very difficult to paint a general picture, as housing in Europe remains largely a national issue, and the situation varies considerably from one country to another. Over the past two years, we have been conducting global research into a just transition in the built environment, looking at five different countries: Denmark, Spain, Portugal, Greece and Czechia. We found that around 20% of housing is social in Copenhagen, while in Athens it’s less than 2%! And there are places like the UK where there’s a whole spectrum, ranging from social housing to subsidized housing, affordable housing and market-rate housing.

What about the private sector? What initiatives can help reconcile low-carbon construction or renovation with reasonable prices?

The Austrian housing model is an interesting example. The amount of profit that operators can make on housing for rental and sale is limited by a cost-based pricing mechanism, rather than just maximizing profits. And nevertheless, the private sector is thriving there. The cost-based segment accounts for almost a quarter of the Austrian housing market, and has proved successful both in terms of its financial viability and its impact on society and the economy. In fact, it is attracting increasing international attention and has been held up as an example of good practice in the context of the current accessibility crisis in many cities across Europe.

There should be a fair sharing of risks and benefits between the public and private housing sectors.

It’s a way of promoting greater collaboration between the private and public sectors, without socializing the risks and privatizing the benefits, which is what we see all too often. For example, the public sector often builds social housing or provides subsidies to the private sector to build housing, but then, after ten years, this public housing can be privatized. To avoid this, we need a framework that guarantees a fair sharing of risks and benefits.

The policy adopted in the Flemish region of Belgium is also very interesting. Landlords can only increase rents from one year to the next in line with inflation, and this increase is linked to the property’s energy performance. If the property has a very poor energy rating (E or F), the rent is frozen for good. If the property is rated C or D, the rent can be increased by half the rate of inflation, and if it is rated A or B, by the full rate of inflation. This kind of mix of incentives and penalties is an ingenious way of encouraging renovation while preventing the worst social impacts.

In Belgium, rent increases are linked to the energy performance of the property, to encourage renovation while avoiding the worst social impacts.

What about innovation? Can R&D or new materials be part of the solution?

Absolutely, that plays a huge role. It is extremely important to bring down renovation costs, and technological developments can be transformative in this respect. However, innovation can also often involve social or governance issues. For example, a major challenge in many European countries, where living in an apartment is much more common, is to renovate the whole building rather than individual apartments, but this is often complex from a social point of view. Innovative models that enable large-scale renovation can offer huge financial savings and speed up decarbonization.

Innovative models that enable large-scale renovation can offer huge financial savings and speed up decarbonization.

Another major problem is the lack of know-how: many people simply don’t know where to start or who to contact. The Energy Performance of Buildings Directive (EPBD) offers one-stop shops where you can discuss your renovation needs with skilled professionals, get reliable advice and find funding, which is a very good step in this direction. This model has worked extremely well in Vienna. The EPBD suggests one such unit for every 80,000 residents, but we hope that Member States will be able to develop more when they transpose the EPBD into national legislation.

In your studies, you urge investors to shift from the search for high short-term returns to the search for lower but stable long-term returns…

We need significant changes in the regulations to align broader social outcomes with financial returns. When investors seek stable long-term returns, this can lead to the creation of new jobs and high-quality infrastructure. There has now been something of a paradigm shift, with ESG considerations becoming a decision-making factor due to the Corporate Sustainability Due Diligence Directive (CS3D) and the Corporate Sustainability Reporting Directive (CSRD).

Ten years ago, investors looked only at the return on investment. Today, ESG considerations are also a factor.

The Belgian group Inclusio is a particularly striking example, as it is a listed company, owned by its shareholders, which does not rely on public investment. This company aims to provide housing for people who would not be able to afford market rents.

With the aim of keeping costs as low as possible, they have developed models focusing on the renovation of buildings that were previously empty or had lost their market appeal, and they then lease them to social partners with a long-term commitment. When redeveloping these buildings, they strive to minimize the waste generated and the amount of new building required. In our discussions with them, it was interesting to note that they don’t even consider themselves to be a “green” company. It was almost the first time they had attempted to quantify their environmental benefits. And that sends a key message: when you start from social considerations, you’re also likely to generate environmental benefits.

When you start from social considerations, you’re also likely to generate environmental benefits.

In the global South, how can the challenges of decarbonization be reconciled with access to decent housing for all? Do you have any examples of success stories?

Clearly, it is absolutely essential that the richest countries, which generate more emissions, take the initiative to reduce them. Countries currently suffering from the negative impacts of the development of the global North need to emit carbon to improve the living conditions of their communities, including most of the 1.8 billion homeless people or those living in grossly inadequate housing.

That said, there are also many legacy construction models handed down by local communities, which tend to rely more on materials of natural origin. These more regenerative or less carbon-intensive materials can be rediscovered to ensure that building can take place while minimizing carbon emissions.

There are many legacy construction models which tend to rely more on materials of natural origin which are less carbon-intensive.

The project really focuses on low-income communities through new build, but also through adaptation and mitigation. There have been a few teething problems, but this initiative is a very good sign of the attempt to ensure that green initiatives take the social dimension into account.

So, there’s no way of guaranteeing social justice without tackling the climate emergency, and there’s no way of combating climate change without tackling inequality: sustainability and social responsibility must go hand in hand. Focusing on the people most directly affected by the transition is obviously a way of delivering social justice and defending human rights, but it’s also a way of stepping up climate action. That’s the key message I’d like to conclude with.