Housing construction is not getting off the ground. “We are still a long way from recovery or growth for the third year in a row,” said the Austria head of the building materials manufacturer Baumit, Georg Bursik, to APA. The construction economy is “shitty, still,” outlined the industry expert bluntly. In addition, the state subsidy for thermal insulation and boiler replacement – an important stimulus for the renovation sector – was initially stopped in December.
The slump in construction affects “Austria – and Germany even worse,” reported Bursik, who is responsible at Baumit for both countries. “Austria has the problem that nothing is being built at all, even though we have immigration,” he sketched the situation vividly.
“New construction is at a standstill – not in 15 years have so few apartments been completed as now,” said Bursik. Already at the beginning of the year he had appealed that more should be built again – if possible, at least halfway affordable. In order to meet the rising demand, according to his information, between 40,000 and 60,000 housing units should be built annually. At that time, the target was still about 40 percent away.
The business with cement, concrete and building materials is sluggish.
And the small increase in the renovation sector does not offset the decline in new construction, said the company head. In this country, according to his information, there are over two million buildings “that need renovation, that do not meet the thermal standard, that consume a lot of heating and cooling energy.” Climate-related improvements are, in his view, not progressing quickly enough.
“If we continue at this pace, we will not have renovated the two million houses in 100 years,” noted Bursik.
Slowed thermal renovation
The government is currently evaluating all climate and environmental subsidies. In view of the immense budget deficit, the state subsidy for thermal renovation is to be continued, but significantly reduced. When money will flow again is still open. According to the Environment Ministry, the subsidy rate will in future settle at 30 percent – until the end of 2024, 75 percent of the costs for replacing oil and gas heating systems were subsidized.
“The subsidy was relatively abruptly shut down with December,” criticized the Baumit head. Yet the subsidy, in turn, contributes to the domestic gross domestic product and maintains or creates jobs, he listed as advantages of the state cash flow. In addition, increased renovation would avoid penalty payments to Brussels, which have to be made if the EU’s CO2 targets are not achieved. “It is better to invest in Austria’s economy,” said Bursik.
Households are waiting
“The building sector is the second largest CO2 emitter, after transport,” emphasized the Linz economist Friedrich Schneider. The renovation offensive for private households in 2023 and 2024 – with the renovation bonus for the “individual component renovation exterior walls” and the program “Out of Oil and Gas,” with which the boiler replacement from fossil to heat pump was subsidized – was “very well received.”
At present, consumers are waiting to see how subsidies will continue. The market is practically at a standstill.
Schneider underlined the advantages of state support.
“There is a considerable economic effect – since the economy is not doing so well, that is a pleasant side effect,” said the economist. The total of around 1.5 billion euros in subsidies that most recently flowed into thermal renovation had triggered investments of 5 billion euros – with the 801 million euros in federal subsidies for facades and windows it was 3.5 billion, with the 739 million euros for boiler replacement 1.5 billion. “The program paid off,” Schneider stated. The state is doing something sensible both economically and ecologically. It also has returns through tax revenues.
“Still enormously much to do”
“And it is not finished yet – especially with facade renovation, but also with boiler replacement there is still enormously much to do, so one should continue this program,” said the economist, who taught for years at Johannes Kepler University (JKU) Linz. Subsidies can always be debated.
“Our budget is out of joint, so we must save accordingly.” The question is where one sees the higher ecological and/or economic dividend when it comes to cutting subsidies. “From possibly good reasons in the past we subsidize things that we no longer need to subsidize,” criticized Schneider.
“State subsidies are only justified if they contribute to the reduction of negative external effects,” held the economist and referred with regard to thermal renovation to fewer CO2 emissions and the reduced import need of fossil energy carriers. The big counterargument against subsidies is “the so-called free rider effect.” About 30 percent of recipients would have carried out the construction measures even without money from the state. All in all, however, Schneider considers subsidies for thermal renovation to be sensible both ecologically and economically. The data and findings he cited are the result of a study he carried out on behalf of Baumit.
Subsidize more differentiated
When subsidies are continued, Schneider recommends applying more differentiated criteria for the distribution of funds. For it is clear: “We must save.” In future payments, for example, particularly poor facades or particularly old heating systems could first enjoy subsidies, suggested the economist.
Bursik also believes that the design could be refined somewhat. “It would make sense to split the subsidy fund,” he said. The funds for thermal renovations and boiler replacement should, in his opinion, be financed from different subsidy pots in order to prevent competition between the two subsidies. The building materials head recommends a fifty-fifty split of the sum. Heat pumps also only make sense, according to Bursik, if the electricity comes from renewable energy such as wind turbines or hydropower.
Furthermore, subsidies should follow the principle “Insulate first, then heating replacement.” “So far the horse has been harnessed from behind,” noted the company head. The subsidy for boiler replacement was well received by the population. “From my point of view, the lobbying work of the heat pump was quite good,” confirmed Schneider.
