Without data you don`t know what to prioritize
Between a rock and a hard place
Housing associations and landlords find themselves at the intersection of tenant expectations and growing regulatory demands.
This dual pressure creates a challenging environment where balancing tenant satisfaction and compliance is not only critical but also increasingly complex.
Without data you dont know what to prioritize
The regulatory frameworks
In recent years, the regulatory landscape for housing associations and landlords has become increasingly stringent, largely due to the urgent need to combat climate change and comply with global and regional commitments such as the Paris Agreement and the European Green Deal. Residential buildings contribute with one-third of global CO2eq emissions, making them a key focus for decarbonization efforts.
Aiming to achieve a fully decarbonised building stock by 2050 the revised Energy Performance of Buildings Directive (EPBD) (https://energy.ec.europa.eu/topics/energy-efficiency/energy-efficient-buildings/energy-performance-buildings-directive_en ) entered into force in all EU countries in May 2024. The EPBD identifies clear targets for improving energy efficiency and reducing emissions in the building sector.
Larger organisations are also affected by the Corporate Sustainability Reporting Directive (CSRD) (https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en ) that asks for extensive documentation of climate and sustainability related risks and mitigation strategies.
These regulatory frameworks directly impact how housing associations operate, driving them to take proactive measures in reducing their carbon footprints. Compliance requires detailed reporting and a comprehensive approach to upgrading energy performance by retrofitting existing buildings and adopting renewable energy sources.
The regulatory and reporting standards at a glance
GRI
The Global Reporting Initiative (GRI) is an independent not-for-profit organization that provides a voluntary but widely-used framework for companies and organizations to report on their sustainability practices. Established to promote transparency and accountability, the GRI Standards help entities disclose their ESG performance in a standardized and comparable way.
The GRI framework covers a wide range of topics, such as energy use, carbon emissions, labor practices, human rights, and anti-corruption measures.
One of GRI’s key strengths is its stakeholder-centric approach. With its global reach, GRI is used by thousands of organizations around the world, making it the most widely adopted sustainability reporting standard.
CSRD
The Corporate Sustainability Reporting Directive (CSRD) is a new European Union regulation aimed at enhancing and standardizing sustainability reporting by companies. It builds on and expands the scope of the previous Non-Financial Reporting Directive (NFRD) to improve transparency around ESG factors.
The CSRD requires companies to provide detailed reports on how their operations impact the environment and society, as well as how sustainability risks affect their business. This includes information on issues such as climate change, human rights, diversity, and corporate governance practices. The directive aims to ensure that investors, consumers, and other stakeholders have access to reliable and comparable data to make informed decisions about a company’s sustainability performance.
The CSRD requires companies to have their sustainability reports independently audited for accuracy.
By aligning with international sustainability frameworks, such as the EU’s Green Deal and the Paris Agreement, the CSRD promotes corporate accountability, encourages more sustainable business practices, and helps the EU achieve its climate and social objectives.
GRSB
EU Taxonomy
The EU Taxonomy is a framework developed by the European Union to define what qualifies as environmentally sustainable economic activities, with the goal of steering investments toward projects that support the EU’s climate and environmental objectives. It is part of the EU’s broader strategy to achieve carbon neutrality by 2050 and includes specific guidelines for various sectors, including the building industry, which plays a significant role in resource consumption and greenhouse gas emissions.
Implications for the Building Sector
The EU Taxonomy has significant implications for the building sector, pushing it toward stricter sustainability standards in both new construction and the renovation of existing buildings. One of the core areas of focus is energy efficiency. New buildings must meet near-zero energy building (NZEB) standards, meaning they must have very high energy performance, with the majority of their energy coming from renewable sources. For existing buildings, they must rank in the top 15% of the national building stock in terms of energy performance to be considered sustainable.
In terms of renovations, the EU Taxonomy requires that major renovation projects lead to a substantial improvement in energy efficiency, typically by reducing primary energy demand by at least 30%. This is aimed at upgrading Europe’s aging building stock to make it more environmentally friendly, thereby reducing its overall carbon footprint.
Another key aspect is climate change adaptation. The EU Taxonomy requires buildings to be resilient to the impacts of climate change, such as extreme weather events, flooding, or heatwaves. New and existing buildings need to incorporate measures that improve their durability and long-term sustainability in the face of climate risks.
The Taxonomy also emphasizes sustainable construction practices, requiring the use of environmentally friendly materials and responsible waste management during construction. Buildings must adhere to the “Do No Significant Harm” (DNSH) principle, while pursuing climate goals like energy efficiency, they must not harm other environmental objectives, such as water management or biodiversity.
From a financial perspective, the EU Taxonomy has major implications for the investment landscape in real estate. As investors and lenders increasingly prioritize sustainability, buildings aligned with the Taxonomy benefit from green finance, including EU Green Bonds, while non-aligned assets may be perceived as higher-risk
IFRS
The International Financial Reporting Standards (IFRS) are a set of globally recognized accounting standards developed to ensure transparency, consistency, and comparability in the financial statements of companies. They are issued by the International Accounting Standards Board (IASB), an independent organization based in London, and are widely used by companies across more than 140 countries, including many in the European Union and several other major economies.
The IFRS provides guidelines for how companies should report their financial position, performance, and cash flows. By standardizing financial reporting across borders, it helps investors, regulators, and other stakeholders make informed comparisons between companies operating in different countries. The standards cover various aspects of accounting, such as revenue recognition, leases, financial instruments, and income taxes.
In addition to traditional financial reporting, the IFRS Foundation recently expanded its focus on sustainability reporting. In 2021, it launched the International Sustainability Standards Board (ISSB) to develop global standards for reporting environmental, social, and governance (ESG) factors. This move aligns sustainability disclosures with the same rigor and comparability as financial reporting, reflecting the growing importance of non-financial factors in assessing a company’s overall performance and risk profile.
Tentants' expectations
On the other side of the equation are the tenants, who have their own set of expectations, primarily revolving around rent stability and living comfort.
Tenants expect housing associations to maintain or even improve the quality of their living spaces while maintaining rent stability.
Common expectations of tenants include:
- Timely maintenance and repairs
- Safe and secure living environment
- Stable and reasonable rent
- Minimal disruption from construction and renovations
Resource Limitations
Compounding these challenges is the issue of limited resources. Housing associations and landlords often operate under budget constraints, lack of personnel, and limited time.
While the severity of these constraints might differ from one country to the other, most landlords face at least one of these substantial constraints. The financial resources required for ESG compliance are significant, yet the return on investment may not be immediately evident.
The complexity of the task, balancing regulatory demands with tenant satisfaction, is further magnified by these resource limitations.
The Role of Digitalization
In this complex environment, a lack of digitalization significantly hinders professional landlords from meeting the growing demands of both tenants and regulatory bodies.
Without digital tools, it becomes increasingly difficult to allocate limited resources in a way that yields the maximum results in terms of required activities and reports.
Digital solutions are no longer just an option, they have become a critical necessity for housing associations.
