Rental property and the energy transition: renovation challenges and solutions

Faced with the challenges of climate change and the urgent need to reduce greenhouse gas emissions, the rental property sector is at the heart of a profound transformation. In France, the building sector accounts for almost 25% of national CO2 emissions, making it an essential lever in the energy transition. Landlords, who manage a significant proportion of the property stock, are now faced with the need to adopt energy-efficiency renovation strategies. But what are the implications of these renovations for them, both environmentally and financially?

Regulatory requirements and their impact

French energy transition regulations are becoming increasingly stringent. The Climate and Resilience Actadopted in 2021, sets an ambitious timetable for the gradual elimination of "passoires thermiques" - homes whose energy performance is deemed insufficient. For example, since January 2023, homes with excessive energy consumption (in excess of 450kWh/m²/year) have been banned from rental. In January 2025, this ban was extended to all G-rated homes, and will be followed by F-rated homes in 2028 and E-rated homes in 2034.

These measures are designed to speed up the energy renovation of rental properties. However, they pose major challenges for landlords. Bringing certain properties up to standard may require costly, major work, such as insulating walls, replacing windows or installing more efficient heating systems.

The environmental benefits of renovations

The energy renovation of rental properties offers undeniable benefits for the environment. By improving thermal insulation, replacing obsolete heating systems and reducing energy consumption, this work significantly reduces CO2 emissions. According to the French Agency for Ecological Transition (ADEME), a renovated house can reduce its energy consumption by 40-60%, or even more, depending on the work carried out.

What's more, these improvements help reduce France's energy dependency and protect tenants against volatile energy prices. By offering better-insulated homes, landlords are also helping to combat fuel poverty, a problem that still affects many households in France.

Financial implications for landlords

However, energy renovations represent a major investment for landlords. Costs vary according to the extent of the work and the characteristics of the property. For example, loft insulation can cost between 20 and 60 euros per m², while replacing a heating system with a heat pump can exceed 10,000 euros.

To help lessors finance this work, the French government has set up a number of schemes. These include :

• MaPrimeRénov': This aid, available since 2021 to landlords, helps finance part of the energy improvement work. The amount of assistance depends on the owner's income and expected energy gains.
• Energy-saving certificates (CEE): These premiums, paid by energy suppliers, can supplement government subsidies.
• Zero interest eco-loan (éco-PTZ): This loan enables you to finance renovation work interest-free.

Despite these subsidies, landlords often have to bear a significant share of the costs. Some may be tempted to pass these costs on to rents, but this is limited by regulations governing rent increases for renovated properties.

Property valuation

Another important financial aspect of energy renovations is the increase in value of properties. Energy-efficient homes are increasingly sought after by tenants and buyers. According to a number of studies, a home with an A or B DPE rating can be rented or sold for up to 20% more than one with an F or G rating.

This added value is a major argument in convincing owners to invest in renovations. Not only do they improve the comfort of their tenants, but they also strengthen the competitiveness of their property in a real estate market that is increasingly attentive to energy performance.

Challenges for small owners

Despite the environmental and economic benefits, energy renovations remain a challenge for small homeowners. Many do not have the financial capacity to undertake costly work, even with existing subsidies. This problem is particularly acute in rural areas or small towns, where rents are low and renovations can represent a disproportionate financial effort.

In response to this problem, some local authorities are offering additional assistance or support schemes. However, a more comprehensive approach may be needed to ensure that these new requirements do not lead to a reduction in the rental supply, particularly for low-income households.

Conclusion

Rental property plays a key role in the energy transition, but the necessary renovations raise complex issues for landlords. Between high initial costs, regulatory constraints and long-term benefits, each market player has to strike a balance between its obligations and its financial capabilities.

While public subsidies and property valuation can encourage owners to undertake this work, it remains essential to provide better support for lessors, particularly those of modest means, to ensure a fair and equitable transition. Ultimately, the success of this energy transition depends on close collaboration between the State, landlords and tenants, with a common goal of sustainability and energy efficiency.