25-01-2023

A renovation wave is coming to the European housing market, how will it impact households?

The European Union (EU) is on its way to reducing greenhouse gas emissions by (at least) 55% this decade and becoming climate neutral by 2050. The transformation of the housing sector is at the core of European energy transition plans to reduce emissions, given that buildings represent 40% of greenhouse that EU region currently emits. Achieving the 2030 goals will thus require a substantial reduction in the energy consumption of buildings.

Against this background, the EU targets the renovation 30 million buildings to upgrade their building insulation, and switch gas appliances to electric sources. The renovation wave will not only reduce greenhouse emissions in the EU but also transform the living conditions of millions of households in multiple ways.

First, as described in a recent policy brief by Linde Kattenberg, Nils Kok, and Piet Eichholtz, the upgrades in the insulation of homes have the potential to generate substantial reductions in the energy bill of households.

Second, the improvements in insulation and electrification of heating and cooking appliances in houses can generate an improvement in the environmental conditions. Home-energy retrofits have the potential to reduce the exposure of households to extreme temperatures and air pollution, two important threats to humans widely studied by the environmental health literature. Exposure to extreme temperatures or air pollution has been linked to hospitalizations and deaths associated with cardiovascular and respiratory diseases, and documented sources of cognitive impairments in kids and adults.

The question of this blog is, what health effects can we expect after a home energy retrofit?

Juan1

Figure 1 Percentage of households reporting a renovation in their house

A new working paper by Steffen Kuenn and Juan Palacios tries to answer this question by analyzing the health impacts of the largest renovation wave in history. In the second half 1990s, the German government devoted €40 billion to upgrade the insulation and heating systems of over 3.6 million dwellings across the Eastern German region, representing about 50% of dwellings in the region. The renovations of these dwellings were part of large master plans of municipalities and/or private housing associations and therefore unrelated to households conditions or preferences. Using this setting, the authors link the renovations to individual health data from household panels and hospital records.

The results of the analysis show a reduction in hospitalizations after experiencing a renovation. This reduction in visits to the emergency care ward is driven by a mitigation of the risk of cardiovascular problems for older adults (45 years or older). In a secondary analysis, the authors find that the effects of the renovation are most salient in the data for days with extremely high and low ambient temperatures. The authors calculate that the renovations led to a reduction of 16,814 hospital admissions from 1995 to 2002 (study period), which led to total cost savings of about €52.7 million in health care costs in the region.

Thus, when thinking about the next upgrade in insulation or heating systems (e.g. installation of a heat pump), take into consideration the impact on the planet, the wallet, and your health.