Green Homes for All – Reconciling Climate Goals with Affordability

Europe's cities face the dual challenge of achieving net-zero goals while addressing a critical lack of affordable housing. Success hinges on long-term planning focused on total life-cycle costs, implementing innovative financial architectures like "blended finance", and fostering active citizen engagement to build trust and tailored solutions.

She pays just over 400 euros a month in rent for a two-room apartment with an eat-in kitchen and a large bathroom. Françoise (a fictional name to respect privacy) has lived in the same apartment in a social housing neighbourhood in Tourcoing, northeastern France, for 30 years and has no intention of buying her own home. Since the end of 2024, she can save on energy bills, because her apartment is one of 48 dwellings, spread across four buildings, that have benefited from extensive renovation and thermal insulation works on which local institutions (municipality, metropolitan area, and region) have invested, for a total funding of over 3.5 million euros. Nearly 200,000 euros come from European funds. This is no accident.

Affordable housing is now Brussels' number one priority for cities. According to the Eurobarometer on urban challenges and investment in cities released in June, "Lack of affordable housing is by far the most urgent issue for respondents living in cities, with 51% considering it to be an immediate and urgent problem". But how can this objective be reconciled with the Commission's other major priorities, energy transition and the fight against climate change? How can housing be made affordable, for which renovation work has been necessary to make them compatible with new requirements in terms of renewable energy and energy saving?

The integration of affordable housing with the energy transition presents both significant challenges and opportunities. The core tension lies in balancing environmental goals with social equity, as poorly implemented green initiatives can inadvertently lead to social exclusion and the displacement of vulnerable populations.

This is what Blanka Tarsoly denounces. For this young Hungarian, Vienna-based climate change and sustainability consultant, a fundamental choice for governments is whether to view housing as a "public good" or a "profit-maximising, market-driven sector". Tarsoly presents two contrasting experiences, in Barcelona and Vienna, which, according to her, vividly illustrate this dichotomy. Barcelona's "Superblocks" initiative, which promotes pedestrian spaces, green mobility, and community bonding, achieved environmental success. However, this increased neighbourhood liveability unintentionally raised rents and property prices: "In some areas per square prices increased by €3,000, which means that it drew in university educated people with higher purchasing power, a lot of new technology companies, but it also means displacing the communities that had lived there before, working class people who were forced out to move into places that have more concrete, less greenery, less access to green spaces."

Vienna, on the other hand, offers a compelling alternative model, maintaining affordability amidst green urban development through "very strong rent controls and substantial municipal/social housing ownership". Crucially, social housing is "disseminated nicely across the city" to prevent segregation, ensuring prices remain low even with green space development. The key lesson is that green policies must go "beyond environmental focus" and actively "focus on people" to avoid unintended negative social consequences.

A common misconception is that affordable housing cannot be comfortable, well-insulated, or energy-efficient. Experts like Tommaso Buso, an associate at Bankers Without Boundaries, firmly argue that affordable housing "should be energy-performing and should follow the general transition that the rest of private housing is undergoing". Michal Kuzmič, a specialist on energy-efficient buildings from the Czech Technical University, emphasises that making positive energy districts affordable "depends very much on the planning phase". If well-planned, "the long-term efficiency can make the total cost difference very small," eliminating the need for significant "top-up" costs for environmentally friendly solutions. This requires shifting the focus to the "total cost of the investment" over the entire life cycle, including operational efficiency and maintenance, not just initial capital outlay. This long-term perspective can unveil substantial savings and make environmentally conscious solutions more economical over time.

Despite the long-term benefits, a primary challenge remains the "funding gap" for energy renovations, given the high upfront capital investment. Several critical barriers hinder progress. Buso highlights data availability: accurate, "precise and granular data" on projected energy savings is crucial for investors to trust a project's economic viability and commit capital. He also points out the current "fragmented technical capacity" of energy renovation providers: he asserts there is a need for integrated technical expertise to determine optimal renovation strategies (e.g., heat pumps, solar), assess potential savings, and manage complex multi-flat units. He also points out regulatory and governance misalignment, noting that outdated regulations can significantly impede capital deployment in certain countries.

Kuzmič talks of an "organisational challenge": in larger cities like Prague, the design and investment phases are often fragmented across different departments, requiring continuous communication and advocacy to maintain the initial, well-thought-out design.

To overcome these obstacles, experts agree that innovative financial architectures are paramount. Tommaso Buso, for instance, advocates for "blended finance," which strategically combines public/philanthropic capital with private capital. The European Investment Bank (EIB) plays a significant role in providing loans, as demonstrated by the Vienna Smart City project.

A more global, almost holistic approach, not limited to the financial aspect, is the one proposed by the Eyes Hearts Hands project. A Decision Support System (DSS) Tool helps provide tailored recommendations from seven "lighthouse districts", offering customised guidance to European municipalities for developing and strengthening decarbonisation strategies. This web-based tool incorporates characteristics and lessons learnt across the social, economic, and technological dimensions, considering elements like total investment cost and energy poverty issues. The tool aims to help other cities replicate successful interventions by matching city characteristics with applicable models from the lighthouse districts, including citizen participation process and engagement.

Michal Kuzmič underscores the importance of "co-design from the early phase" with citizens for public buildings and spaces. Strategies like "emotion mapping" to identify problematic spots in neighbourhoods lead to "new findings" and avoid "wasted opportunity". As he states, "It's never wasted money when you do participatory exercises to improve the built environment". Eva Martinez from ICONS Innovation Strategies, a partner of the Eyes Hearts Hands project, highlights that engagement strategies must be "tailored to specific stakeholder profiles" with different needs and priorities. "Building trust and maintaining regular communication is essential to sustain momentum and meaningful participation", she states. Projects like Eyes Hearts Hands aim to involve as many key stakeholders as possible, including citizens, and help cities increase their capacity to undertake such work independently through training programmes. For example, in Osijek, Croatia, the community was consulted via a questionnaire about their intervention preferences, and their feedback was included in tender documentation to build trust and acceptance. The formation of resident advisory groups from early planning stages can also ensure the community's perspective is continuously included in the renovation process, thus ensuring citizen overcome their intrinsic lack of trust in government programmes, which can be a problem. As an example, Tania Hristova, mayor of Gabrovo, in Bulgaria, tells that "Some years ago, in Bulgaria, the government started with a big programme providing 100% grant for multifamily residential buildings, and it was a big surprise when at a certain moment there was a blockage from the citizens because they didn't trust that there would be 100% grant without any backward conditionality." For her, the involvement of local authorities is crucial to fostering trust.

The evidence is compelling: the energy transition can indeed go hand in hand with affordable housing. It requires a fundamental policy choice to treat housing as a public good, strategic long-term planning that accounts for life-cycle costs, and innovative financial models that blend public and private capital. Crucially, it demands significant regulatory reform and robust citizen engagement. The challenge now is to standardise approaches, foster collaboration, and unlock capital at scale across Europe, ensuring that green cities truly benefit all their inhabitants, especially the most vulnerable, like Françoise, who is happy to have a new apartment in the same place as the old one with lower energy costs.

Article by Selene Verri

Image credits: David McBee—Pexels

Contacts:

Project coordinator:

Marina Focarile, RINA Consulting, marina.focarile@rina.org

Communication Officer:

Denise Venere, ICONS, denise.venere@icons.it

Project website: Homepage—Eyes Hearts Hands

LinkedIn: Eyes Hearts Hands

Provided by iCube Programme