Socially just energy efficiency: prioritising those who need it most
In Germany, tenants are particularly likely to belong to the group of vulnerable households that should benefit from energy-saving measures. Statistics show that lower-income households are considerably more likely to rent than higher-income households. At the same time, tenants have little influence on energy-efficient renovations, as investment decisions are usually made by the landlords. This structural separation of costs and decision-making power – the so-called ‘landlord-tenant dilemma’ – makes it difficult for those who are particularly financially burdened to benefit from energy efficiency measures. This makes it all the more important to focus specifically on this target group when implementing EU requirements.
Social targeting required: What the EU directive demands
According to Article 8 of the amended EU Energy Efficiency Directive (EED), Member States are obliged to achieve binding annual energy saving targets. A key element of this requirement is the obligation to achieve a certain proportion of the savings primarily, but not exclusively, for ‘people affected by energy poverty, vulnerable customers, people in low-income households and, where applicable, people living in social housing.’ Measures in the building sector are an obvious choice, as there is a high savings potential there and, at the same time, a large number of low-income groups. However, it requires existing instruments to be adapted.
Measure: Renovation of social housing
The renovation of social housing helps to ensure that energy costs remain affordable for low-income households in the long term and prevents energy poverty. To this end, additional national funds earmarked for energy-efficient renovation should be created so that the existing funds for social housing promotion can continue to be used primarily for the urgently needed construction of social housing. The following could be supported:
- The renovation of social housing: renovation extends the tie to the social environment and prevents additional flats from falling outside of the scope of state-subsidised housing.
- The renovation of previously non-social housing: these flats can receive funding if they become social housing in the course of the renovation. Thereby, this contributes to the funding programme for increasing social housing for low-income households.
One example in Germany is the Funding programme for public housing in North Rhine-Westphalia, which supports the creation, modernisation and maintenance of affordable housing with restrictions on rent and occupancy. The prerequisite is that the modernisation saves energy, and the flats remain permanently available to low-income groups. In return, occupancy and rent restrictions apply. The energy cost savings and the total rent are considered in conjunction here: exceeding the rent approved by the competent authority is only permitted to a limited extent and depends on the efficiency standard achieved after modernisation. There are also incentives for landlords to achieve the highest possible level of efficiency, as the state grants further subsidies incrementally for ambitious efficiency standards for housing. If a net zero standard is achieved, an additional subsidy of 20 per cent can be obtained.
Measure: national subsidy for efficient buildings and rent cap
In order to make Germany’s federal subsidy for efficient buildings more socially acceptable, it would be advisable to combine the new subsidy bonus with a temporary rent cap, as outlined in the study ‘Socially just subsidies for energy-efficient refurbishment in the rental housing sector’ (available in German only). Landlords would receive an additional subsidy bonus of, for example, 15 percent of the investment costs if they commit to keeping the rent for the next 10 years after the energy-efficient refurbishment at least 10 percent below the local comparative rent. In their subsidy application, they would have to provide binding information on rental prices and compliance with the rent cap. Tenants would have to be informed about the subsidy bonus. Regular reporting requirements or random checks could serve as a means of control.
Measure: Adjustment of urban development funding or energy-efficient urban development
As demonstrated by the examples of the Munich's development area Neuaubing-Westkreuz and the Social City of Weingarten-West (Freiburg im Breisgau), both urban development funding and energy-efficient urban development are, in principle, well-suited to supporting neighbourhoods with a high proportion of vulnerable households and encouraging energy-efficient renovations of residential buildings in these areas. Urban development funding explicitly provides for climate mitigation measures, but these need to be explicitly geared towards energy-efficient refurbishment in the rental housing sector, where low-income households predominantly live. Social aspects need to be taken into account in energy-efficient urban development.
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Individual measures are not enough. A mix of instruments is needed that
- provides incentives to improve energy efficiency measures,
- promotes their economic efficiency, and
- counteracts negative distributional effects.
Socially just climate policy is needed!
Dr Sibylle Braungardt is Senior Researcher in the Energy & Climate Division of Oeko-Institut in Freiburg. Her research focuses on the green transition of the heating sector.
Together with several partners from civil society, the Öko-Institut launched a joint campaign in 2025 to promote a more socially inclusive approach to climate and environmental protection. They are campaigning for climate protection measures to be assessed more closely in terms of their social impact and designed in such a way that everyone can benefit from the ecological transformation. The focus is on fair cost distribution, affordable housing, new opportunities for gainful employment and the socially acceptable implementation of climate protection measures in people's everyday lives.
