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A Combined Energy Efficiency and Levelling Up Scheme: the Dutch ‘Volkshuisvestingsfonds’

Created on 25-06-2024 | Updated on 25-09-2024

The Dutch ‘Volkshuisvestingsfonds’ (VHF) aims to address both energy efficiency and socio-economic disparities by targeting renovation subsidies to neighbourhoods with substandard housing and socio-economic deprivation. Initiated in 2021 by the Dutch Ministry of the Interior and Kingdom Relations (BZK), the VHF seeks to prevent the decline of disadvantaged neighborhoods by supporting the retrofitting and upgrading of existing housing stock, as well as the improvement of public spaces. The fund prioritises municipalities with urban renewal areas and regions with population decline. Despite its innovative design, the VHF faces implementation challenges such as high administrative burdens on municipalities, the need for sustained financial resources, and complexities in measuring long-term impacts. Moreover, stakeholder engagement, particularly involving private landlords, and compliance with EU state-aid legislation present additional hurdles. Addressing these issues is crucial for the VHF to achieve its dual objectives of enhancing energy efficiency and socio-economic upliftment.

Instrument
Subsidy fund

Issued (year)
2021

Application period (years)
2021-2024

Scope
Country

Target group
Deprived neighbourhoods

Housing tenure
Private rental sector (primarily)

Discipline
Public policy

Object of study
Instrument

Description

Efforts to target renovation subsidies, particularly in areas with households at risk of energy poverty, have gained prominence across Europe. However, the way in which policymakers and governments design and implement the targeting process varies greatly. Targeting energy poverty is rather difficult because it is a multifaceted issue and you have to identify which households both have limited means and high needs of energy due to their personal circumstances or the energy inefficiency of their home (Dubois, 2012). This case study zooms in on a peculiar example of such targeting: the Dutch Volkshuisvestingsfonds (VHF), in which national government asks municipalities to proof both that their housing stock is of substandard quality and that these dwellings are located in deprived neighbourhoods. This way, the fund tries to combine boosting the energy transition as well as aiming for ‘levelling up’ targets.

Background

Recognising the pressing need to address issues of liveability and housing quality, the Dutch Ministry of the Interior and Kingdom Relations (BZK) initiated the VHF in 2021 (Ministerie van BZK, 2021). The fund’s creation was influenced by rising concerns about housing conditions in socio-economically disadvantaged regions, where private homeowners and investors are facing significant barriers to maintaining and upgrading properties. A possible rationale is to avoid a downward spiral where the physical quality of a neighbourhood declines, prompting middle-income residents with more resources to leave, which in turn further worsens the overall quality of life in the neighbourhood (Andersen, 2002). Consequently, the primary goals of the VHF include the retrofitting of existing housing stock, demolition and reconstruction where necessary, and the enhancement of public spaces in neighbourhoods that are deemed relatively deprived. The fund aims to support private landlords with insufficient financial capacity and to a lesser extent housing associations.

Policy design and delivery

The VHF's design emphasises a targeted approach, where municipalities must demonstrate the substandard quality of their housing stock and the socio-economic deprivation of these neighbourhoods. Priority is given to urban renewal areas and regions facing population decline (see Figure 1). Municipalities are then allocated resources based on the severity of these conditions. Specific consultancy groups are appointed to assist municipalities in preparing their bids, ensuring that applications are robust and meet the stringent criteria set by the fund. The bid evaluation process involves a detailed scoring system that considers several factors: the extent of housing quality improvement, the anticipated socio-economic benefits, the energy efficiency gains, and the sustainability of the proposed interventions. Once a municipality's bid is approved, the funds are disbursed to the municipality, which then channels the money to the ultimate beneficiaries (hence, primarily private landlords with limited means). These beneficiaries must use the funds for approved renovation projects, with strict monitoring to ensure compliance and prevent misuse. In its first round in 2021, the fund distributed approximately €412.6 million, financing projects aimed at upgrading around 22,000 homes. As of summer 2024, the fourth round is open, now allocating €114 million.

One of the unique aspects of the VHF is its dual focus on energy efficiency and socio-economic uplifting. By linking housing improvements with broader ‘levelling up’ goals, the fund addresses both the physical infrastructure and the social dynamics of neighbourhoods. This way, it could be seen as a preventive measure that addresses the risk of self-reinforcing decline in which a neighbourhood’s physical quality degrades, leading to the exodus of middle-income residents. To do this, the VHF employs a data-driven approach to target and allocate funds. Municipalities are required to provide detailed data on housing conditions and socio-economic indicators. This data is used not only to evaluate the bids but also to monitor the progress and impact of the funded projects, which holds the promise of transparency and accountability, making it easier to measure the success of the interventions and to make necessary adjustments. Finally, the VHF encourages collaboration between the national government, municipalities, private firms, private landlords, and other stakeholders, making it a comprehensive public-private endeavour.

Challenges in implementation

Despite the innovative design and promising objectives, several critiques have emerged regarding its implementation. The official evaluation commissioned by the ministry noted that one significant concern is the high administrative burden placed on municipalities, which makes the application process complex and resource-intensive (Eringfeld et al., 2022). This complexity can disadvantage smaller municipalities or those with less capacity, exacerbating regional inequalities. Additionally, they claim there is a need for a more permanent flow of financial resources to ensure the sustainability of improvements and to fund new projects continually. The report also highlights challenges in measuring the long-term impact of funded projects, particularly concerning socio-economic benefits and energy efficiency gains, necessitating more robust mechanisms for impact assessment.

Another critique centres on stakeholder engagement, with some municipalities struggling to involve private landlords and residents effectively in planning and implementation. Regulatory challenges further complicate efficient project execution, particularly compliance with EU state-aid legislation. Moreover, there is concern that subsidising private landlords with public money may have a regressive impact on income and wealth distribution, as it ultimately provides a housing value premium to private landlords (Fernández et al., 2024).

Alignment with project research areas

The Volkshuisvestingsfonds aligns with my research project by addressing the tensions between housing affordability and sustainability. By supporting municipalities with substandard housing and socio-economic deprivation, and allocating resources based on these conditions’ severity, the fund tries to ensure that aid reaches the areas that are most in need. Notably, the fund takes a distinctively Dutch approach, targeting improvements at the neighbourhood level rather than individual households, which enhances overall liveability. Moreover, the fund's focus on effective resource utilisation aligns with my project's goal of enhancing policy impact and public accountability. Its innovative, data-driven monitoring system is commendable, though the high administrative burden requires critical assessment as it diverts valuable resources needed for achieving a just transition towards sustainable housing. This interplay has been central to my recent work on energy poverty and just transition governance, emphasising the importance of recognitional justice and effective multilevel governance frameworks in addressing energy poverty across Europe.

Alignment with SDGs

References

Andersen, H. S. (2002). Can Deprived Housing Areas Be Revitalised? Efforts against Segregation and Neighbourhood Decay in Denmark and Europe. Urban Studies, 39(4), 767-790. https://doi.org/10.1080/0042098022011956

Dubois, U. (2012). From targeting to implementation: The role of identification of fuel poor households. Energy Policy, 49, 107-115. https://doi.org/10.1016/j.enpol.2011.11.087

Eringfeld, W., Geuting, E., Lucassen, M., & Thomasia, M. (2022). Reflectie op de regeling van het Volkshuisvestingsfonds (VHF). https://www.volkshuisvestingnederland.nl/binaries/volkshuisvestingnederland/documenten/rapporten/2022/01/31/reflectie-op-de-regeling-van-het-volkshuisvestingsfonds-vhf/rapport-reflectie-op-de-regeling-van-het-volkshuisvestingfonds-vhf.pdf

Fernández, A., Haffner, M., & Elsinga, M. (2024). Subsidies or green taxes? Evaluating the distributional effects of housing renovation policies among Dutch households. Journal of Housing and the Built Environment. https://doi.org/10.1007/s10901-024-10118-5

Ministerie van BZK. (2021). Regeling specifieke uitkering herstructurering volkshuisvesting. https://wetten.overheid.nl/BWBR0044932/2021-05-0

Related vocabulary

Energy Poverty

Just Transition

Area: Policy and financing

The in-depth study of energy poverty as a social phenomenon commenced in the late 19th century through the works of British social researchers Booth and Rowntree (O’Connor, 2016). This era was characterised by significant social and economic transformation, and these scholars were troubled by the living conditions and welfare of impoverished urban populations, who were residing in congested and unsanitary environments. Throughout the 20th century, poverty in policy contexts became quite narrowly defined as a lack of income. However, it was another social concern in the UK that led to the development of concepts like ‘fuel poverty’ or ‘energy poverty’ a century after Booth and Rowntree.[i] Following the 1973 oil crisis, the Child Poverty Action Group took the initiative to address how increasing energy costs were affecting low-income households in the UK (Johnson & Rowland, 1976). As essentials like heating, electricity, and fuels became necessary for maintaining a decent standard of living in modern British society, this advocacy group pushed for government financial support. Later, Bradshaw and Hutton (1983) introduced a narrower definition of energy poverty: “the inability to afford adequate heat in the home”. Since then, studies on energy poverty have typically excluded motor fuels, as they fall under transport poverty, a related but separate area of study (Mattioli et al., 2017). Energy poverty, as defined by Bouzarovski and Petrova (2015, p. 33), refers to "the inability to secure or afford sufficient domestic energy services that allow for participation in society." Although the precise boundaries of relevant domestic energy usage are still debated, this definition expands beyond mere heating as it encompasses energy used for cooling, which is particularly relevant in warmer climates (Thomson et al., 2019). Moreover, it enables a socially and culturally dependent understanding of what it means to participate in society (Middlemiss et al., 2019). On 13 September 2023, the European Union (2023) officially defined energy poverty as “a household’s lack of access to essential energy services, where such services provide basic levels and decent standards of living and health, including adequate heating, hot water, cooling, lighting, and energy to power appliances, in the relevant national context, existing national social policy and other relevant national policies, caused by a combination of factors, including at least non-affordability, insufficient disposable income, high energy expenditure and poor energy efficiency of homes”. The doctoral thesis and subsequent book by Brenda Boardman, Fuel Poverty: From Cold Homes to Affordable Warmth (1991), marked a significant breakthrough in energy poverty research. She emphasised the detrimental impact of energy-inefficient housing on health and quality of life. In the decades that followed, substantial literature confirmed her qualitative findings (Thomson et al., 2017). Notably, studies have demonstrated the adverse effects of living in energy poverty on physical health (Liddell & Morris, 2010), mental health (Liddell & Guiney, 2015), stress levels (Longhurst & Hargreaves, 2019), social isolation (Harrington et al., 2005), and absenteeism (Howden-Chapman et al., 2007). Boardman’s work introduced an indicator that has remained influential to this date, although it was not the first attempt to operationalise the concept of fuel poverty (Isherwood & Hancock, 1979). Her ‘2M’ indicator categorises a household as energy poor if it needs to allocate twice the median share of its budget for energy expenses to heat its home adequately. Boardman calculated this threshold to be 10% at that time. Due to its simplicity and ease of comprehension, many governments directly adopted this 10% threshold without considering specific contextual circumstances. Since the early nineties, numerous attempts have been made to develop alternative indicators. Highly influential ones include ‘Low Income High Cost’ (LIHC) by John Hills (2012), ‘Low Income Low Energy Efficiency’ (LILEE) that subsequently became the official British indicator (BEIS, 2022), and a 'hidden' energy poverty indicator by (Meyer et al., 2018). Critiques of these indicators focus, amongst other things, on their simplicity and perceived 'technocratic' approach (Croon et al., 2023; Middlemiss, 2017). This marked the beginning of significant government commitment, initially in the UK and later in other countries to address energy poverty. Although certain forms of cold weather payments had already been introduced by the UK's Conservative administrations, it was under the successive governments of Blair and Brown, following the publication of Boardman's work, that programmes such as the Winter Fuel Payment and Warm Home Discount were implemented (Koh et al., 2012). The UK examples highlight bipartisan support for addressing energy poverty, with both the Conservatives and Labour backing these efforts. This policy objective has also gained momentum in various legislative contexts, leading the EU to incorporate energy poverty alleviation as a fundamental pillar of the European Green Deal and a specific goal of its landmark Social Climate Fund (European Commission, 2021). Over the last three decades, public interest in energy poverty as a 'wicked' problem has surged, particularly during the recent energy crisis. This crisis began in 2021 when energy markets tightened due to a post-pandemic economic rebound, and it worsened dramatically after Russia's invasion of Ukraine in February 2022 (IEA, 2023). Extensive research on the impact of this price surge on energy poverty levels has been carried out throughout Europe and globally (Guan et al., 2023; Simshauser, 2023). Consequently, energy poverty has become a significant focal point in discussions related to the 'just transition,' especially within the realm of energy justice, as it serves as a valuable concept for targeting policies towards a specific vulnerable group in this context (Carrosio & De Vidovich, 2023).     [i] ‘Fuel poverty' and 'energy poverty' are used interchangeably, with the former being more common in the UK and the latter in mainland Europe (Bouzarovski & Petrova, 2015). Previously, scholars in the UK used 'energy poverty' to denote a lack of access to energy and 'fuel poverty' when affordability was the concern (Li et al., 2014). However, this distinction is no longer maintained.

Created on 17-10-2023

Author: T.Croon (ESR11)

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Area: Policy and financing

Justice theory is as old as philosophical thought itself, but the contemporary debate often departs from the Rawlsian understanding of justice (Velasquez, Andre, Shanks, & Meyer, 1990). Rawls (1971) argued that societal harmony depends on the extent to which community members believe their political institutions treat them justly. His First Principle of ‘justice as fairness’ relates to equal provision of ‘basic liberties’ to the population. His Second Principle, later referred to as the ‘Difference Principle’, comprises unequal distribution of social and economic goods to the extent that it benefits “the least advantaged” (Rawls, 1971, p. 266).1[1] As this notion added an egalitarian perspective to Rawlsian justice theory, it turned out to be the most controversial element of his work (Estlund, 1996). The idea of a ‘just transition’ was built on these foundations by McCauley and Heffron (2018), who developed an integrated framework overarching the ‘environmental justice’, ‘climate justice’ and ‘energy justice’ scholarships. The term was first used by trade unions warning for mass redundancies in carbon-intensive industries due to climate policies (Hennebert & Bourque, 2011), but has acquired numerous interpretations since. This is because the major transition of the 21st century, the shift towards a low-carbon society, will be accompanied by large disturbances in the existing social order. In this context, a just transition would ensure equity and justice for those whose livelihoods are most affected (Newell & Mulvaney, 2013). A just transition implies that the ‘least advantaged’ in society are seen, heard, and compensated, which corresponds with three key dimensions conceptualised by Schlosberg (2004): distributive, recognitional, and procedural justice. Distributive justice corresponds with Rawls’ Difference Principle and comprehends the just allocation of burdens and benefits among stakeholders, ranging from money to risks to capabilities. Recognitional justice is both a condition of justice, as distributive injustice mainly emanates from lacking recognition of different starting positions, as well as a stand-alone component of justice, which includes culturally or symbolically rooted patterns of inequity in representation, interpretation, and communication (Young, 1990). Fraser (1997) stressed the distinction between three forms: cultural domination, nonrecognition (or ‘invisibility’), and disrespect (or ‘stereotyping’). Procedural justice emphasises the importance of engaging various stakeholders – especially the ‘least advantaged’ – in governance, as diversity of perspectives allows for equitable policymaking. Three elements are at the core of this procedural justice (Gillard, Snell, & Bevan, 2017): easily accessible processes, transparent decision-making with possibilities to contest and complete impartiality. A critique of the just transition discourse is that it preserves an underlying capitalist structure of power imbalance and inequality. Bouzarovski (2022) points to the extensive top- down nature of retrofit programmes such as the Green New Deal, and notes that this may collide with bottom-up forms of housing repair and material intervention. A consensus on the just transition mechanism without debate on its implementation could perpetuate the status quo, and thus neglect ‘diverse knowledges’, ‘plural pathways’ and the ‘inherently political nature of transformations’ (Scoones et al., 2020). However, as Healy and Barry (2017) note, understanding how just transition principles work in practice could benefit the act of ‘equality- proofing’ and ‘democracy-proofing’ decarbonisation decisions. Essentially, an ‘unjust transition’ in the context of affordable and sustainable housing would refer to low-income households in poorly insulated housing without the means or the autonomy to substantially improve energy efficiency. If fossil fuel prices – either by market forces or regulatory incentives – go up, it aggravates their already difficult financial situation and could even lead to severe health problems (Santamouris et al., 2014). At the same time, grants for renovations and home improvements are poorly targeted and often end up in the hands of higher income ‘free-riding’ households, having regressive distributional impacts across Europe (Schleich, 2019). But even when the strive towards a just transition is omnipresent, practice will come with dilemmas. Von Platten, Mangold, and Mjörnell (2020) argue for instance that while prioritising energy efficiency improvements among low-income households is a commendable policy objective, putting them on ‘the frontline’ of retrofit experiments may also burden them with start-up problems and economic risks. These challenges only accentuate that shaping a just transition is not an easy task. Therefore, both researchers and policymakers need to enhance their understanding of the social consequences that the transition towards low-carbon housing encompasses. Walker and Day (2012) applied Schlosberg’s dimensions to this context. They conclude that distributive injustice relates to inequality in terms of income, housing and pricing, recognitional justice to unidentified energy needs and vulnerabilities, and procedural injustice to inadequate access to policymaking. Ensuring that the European Renovation Wave is made into a just transition towards affordable and sustainable housing therefore requires an in-depth study into distributive, recognitional and procedural justice. Only then can those intertwining dimensions be addressed in policies.   [1] To illustrate his thesis, he introduces the ‘veil of ignorance’: what if we may redefine the social scheme, but without knowing our own place? Rawls believes that most people, whether from self-interest or not, would envision a society with political rights for all and limited economic and social inequality.  

Created on 03-06-2022

Author: T.Croon (ESR11)

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