Mandatory renovation: less impact on home prices than expected

Since 2023, there has been considerable debate over the mandatory renovation requirement in Flanders. Homes with an EPC rating of E or F must be upgraded to at least a D rating within six years—originally five. The expectation? Poorly insulated homes would see a sharp drop in price, while owners would be more likely to undertake major renovations. With this measure—unique in Europe—the Flemish government hoped to spark a green revolution in the housing market.

The National Bank conducted a study to compare the impact of the mandatory renovation requirement on home prices. The verdict? 🎯 The impact turns out to be… surprisingly small! But why is that, exactly? 

Mandatory renovation ≠ falling home prices

The National Bank analyzed housing prices across various categories: energy-efficient homes, homes subject to mandatory renovation, and homes with no such requirements. What did they find? The impact of the Flemish mandatory renovation requirement turned out to account for only about 1.4% to 2% of the price. That’s it! 

And you know what? In many cases, the requirement doesn’t even have a direct impact. Why? Because buyers often already factor in renovation costs, or because older, less energy-efficient homes were already priced lower.

Anyone who bought or sold a home between 2016 and 2022 will surely recognize this: homes with high energy efficiency are more popular than ever. That makes sense, given the sky-high energy costs. The gap between sustainable and energy-wasting properties only widened in 2023 and 2024. But remarkably, this isn’t entirely due to the mandatory renovation requirement. Other factors play an equally significant role. 

The real causes of price differences

According to the National Bank, there are several factors that, taken together, create a snowball effect, apart from the renovation requirement:  

1. Uncertain and Rising Energy Prices
   Energy prices have become increasingly volatile since 2016. This automatically makes energy-inefficient homes less attractive. It’s no surprise: no one wants an energy-guzzling home when bills are sky-high.

2. The Asbestos Certificate: An Unexpected Hurdle
   Since the introduction of the mandatory asbestos certificate in 2022, older homes have come under even greater pressure. The "asbestos-safe" label is now a key selling point, and properties without this certificate are rapidly losing value.

3. Higher Labor and Construction Material Costs
   Construction costs continue to rise—both labor and material costs—making renovations more expensive. For many buyers, a "renovation opportunity" can quickly turn into a costly challenge. This is particularly problematic for older, less energy-efficient properties. 

4. Banks are paying closer attention to energy ratings
   A good EPC rating is important not only for energy costs but also for loan terms. Banks are giving this greater weight in their risk assessments, which is pushing buyers even more toward energy-efficient homes.

So the price difference was already built into the market.

Mandatory renovation: a drop in the bucket

The Flemish government hoped that the mandatory renovation requirement would spark a wave of renovations, but in reality it seems more like a drop in an already flowing river. Was this mandatory approach really necessary? According to the National Bank, not necessarily.

As early as 2022, 60% of homes with an E or F energy rating were voluntarily renovated to achieve at least a D rating. It turns out that Flemish residents are champions of renovation. After the introduction of the renovation mandate, that figure did climb to 70%, but the National Bank questions the actual cause. Is that extra enthusiasm due to the mandate? Or does misreporting of EPC labels play a role?

Whatever the reason, one thing is clear: the renovation requirement does not appear to be the decisive factor that many had expected. Flemish residents already knew how to tackle their homes—with or without an extra push.

Mandatory renovation: a hurdle for the lower middle class

While the renovation requirement may have little impact on home prices, it’s a different story for the lower middle class. This group faces a dilemma: they have just enough money to buy a home, but not enough to immediately undertake costly renovations. And that puts a serious damper on their housing aspirations.

Banks, now stricter than ever, look not only at the purchase price but also at the costs of renovating a home in a timely manner. For those who are barely making ends meet, this often means a "no" to their loan application. The dream of owning a home fades away, giving way to a prolonged reality in the rental market.

The result? More people are competing for the same rental properties, which drives prices even higher. The pressure on this group is mounting, while the gap between them and the homebuyer market is widening. What the future holds remains unclear, but one thing is certain: for many Flemish people in the lower middle class, the renovation requirement isn’t just a rule—it’s a barrier standing between them and their dream home.

Smart buyers and creative solutions

Interestingly, many buyers of homes requiring renovation actually choose to undertake a renovation project on purpose. Younger families, in particular, see an opportunity to buy an affordable home and renovate it entirely to their taste. It’s a smart investment and a way to lower energy bills.

In addition, it appears that homes with poor energy performance often have a lower quality of living to begin with. The price difference is therefore not so much due to the renovation requirement as it is to the overall condition of the home. So this is no surprise, but rather a logical development.

In short, a lot of (media) hype, but little impact

The mandatory renovation requirement appears to be more of a logical step in the shift toward more sustainable housing than a true game-changer in the housing market. The National Bank confirms that the impact on prices remains limited.