It would cost up to €8 billion to bring all rental homes in the State up to an efficient Building Energy Rating (Ber), the Economic and Social Research Institute (ESRI) has said.
Improving the energy efficiency of homes is a key goal of the Government’s Climate Action Plan, which sets a target of retrofitting 500,000 dwellings to a B2 Ber rating or higher by 2030.
However, the ESRI said there would be significant challenges in achieving this target in its report, Exploring Investment Requirements for Energy Efficiency Upgrades in the Private Rental Sector, which was funded by the Department of Housing.
The Ber scale runs from A, the most energy-efficient and comfortable rating, to G, which is the least energy-efficient rating with the highest energy bills.
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The report, published on Friday, found 80 per cent of rented dwellings have a Ber below the B standard, which equates to between 240,000 and 260,000 properties.
Most of these have a C or D rating while a smaller proportion have low energy efficiency ratings of E, F or G.
The ESRI said the average cost of upgrading the Ber of a building runs from €43,000 for a G-rated property to just under €30,000 for a C-rated property.
“Our estimated aggregate cost for the required upgrades in the sector ranges between €7 billion and €8 billion in total,” it said.
The cost of retrofitting only the lowest efficiency rentals, with current Ber of E1 or below, is estimated at €1.7 billion to €2.3 billion.
The report said there would be “considerable challenges” for landlords in financing these upgrades, with almost half of them unable to cover a €25,000 investment in their property.
It found a finance gap – the difference between savings and the level of investment – of €14,000 in the case of a €25,000 investment.
The age profile of landlords, the limited time some may have to recoup any savings from their investments and their inability to secure credit to cover any finance gaps were pointed to as the main challenges to upgrade works, it said.
However, it said that unlike in many other countries, landlords in rent pressure zones in Ireland were eligible for exemption from the standard rent increase limits if their property underwent a substantial renovation.
“This is an important factor in terms of incentivising landlords to make upgrades,” the report said.
While there were challenges in retrofitting the residential housing sector as a whole, the ESRI said the “the requirement is even more acute for the rental sector”.
It said there was a higher share of lower-efficiency properties on the rental market, which was making up an increasing share of overall housing provision.
“The combination of these two factors regarding this sector suggests considerable challenges in attempting to meet the climate targets set for this residential housing market cohort,” the ESRI said.
It also said the “major implications of energy upgrade requirements for tenants, both in terms of likely monetary costs and tenancy security, must be kept in mind”.
It was important to weigh up the need to make progress on retrofitting while also weighing up the potential dangers this process might pose for tenants “as it could potentially result in a reduction of the rental stock at a time where there are already significant shortages relative to demand”.
Dr Conor O’Toole, co-author of the report, said the analysis pointed to “a need for external financing [through loans or otherwise] if these investments are to be realised”.
