InvestEU took a hit

The EU Renovation Wave is expected this month. There is a lot of buzz about how it will facilitate access to EU funding for energy efficient building renovation. However, at the end of the day, it doesn't create new money; it's just a way for the European Commission to prioritise and allocate existing EU funds. Those funds come from the EU's budget, the Multiannual Financial Framework (MFF) 2021-2027 including the Recovery Fund. The new MFF, at € 1.82 trillion, has almost doubled compared to previous budgets.

We've been following the Commission's spending proposals since the start of the year. In June, we advised members to think of projects now so as not to lose time when windows open in the new year (epf20-44 of 10.06.2020).

The direct funding will come from various sources, but a very important one will be InvestEU, the successor to the Juncker Plan. Juncker was a sea change for real estate which had previously been the EU funding underdog. For instance, in 2018, Lar España got a € 70 million EIB Juncker loan on ultra-cheap terms to build a shopping centre! (epf18-68 of 29.10.2018).

Unfortunately, InvestEU fell victim to the final negotiations over the budget in July. In order to retain the Recovery Fund intact at € 750 billion, it was necessary to cut back on a number of programmes, and InvestEU was one of the worst hit. It went from € 75.15 billion to € 23.48 billion.

However, € 31.15 billion of the Commission's proposed € 75.15 billion was for "strategic autonomy" (fostering EU production of currently import-dependent strategic goods) and that part has been eliminated from InvestEU altogether (it has shifted elsewhere outside the EU budget) so if "sustainable infrastructure" (to which building renovation belongs) was € 20.5 billion out of € 75.15 billion, then, given its predominant weight among the four remaining investment operations, it should still come to around € 10 billion if the German Presidency doesn't tinker with the shareout between investment operations.

That is still a lot of money. The trouble is that the "sustainable infrastructure" investment operation covers a lot of ground:

"transport, including multimodal transport, road safety, including in accordance with the Union objective of eliminating fatal road accidents and serious injuries by 2050, the renewal and maintenance of rail and road infrastructure, energy, in particular renewable energy, energy efficiency in accordance with the 2030 energy framework, buildings renovation projects focused on energy savings and the integration of buildings into a connected energy, storage, digital and transport systems, improving interconnection levels, digital connectivity and access, including in rural areas, supply and processing of raw materials, space, oceans, water, including inland waterways, waste management in accordance with the waste hierarchy and the circular economy, nature and other environment infrastructure, cultural heritage, tourism, equipment, mobile assets and the deployment of innovative technologies that contribute to the environmental or climate resilience or social sustainability objectives of the Union and that meet the environmental or social sustainability standards of the Union." Proposal for a Regulation, Article 7(1)(a)

It's not as bad as it looks. That indigestable paragraph contains fluff that's there for political reasons. A very significant portion will go to building renovation and grid connection.

Furthermore, the Commission is quick to trumpet that this is seed funding, an "EU guarantee to support financing and investment operations carried out by the implementing partners (EIB-selected banks)" and that the EIB will leverage this and "mobilise" around 12 times the amount of the EU guarantee. However, as explained in our analysis of the Commission's proposals for financing the European Green Deal (epf20-04 of 30.01.2020), they're not clear at all about how this magic works, especially as a lot of it is supposed to be grants, not loans.

It doesn't matter. Despite all these setbacks and unknowns, it will still be by far the largest amount of direct funding the EU has ever allocated to real estate projects. If you have an idea for a project, especially if it's exemplary and has potential multiplier effect, the next two years may be the best opportunity ever, given the objective of front-loading spending to aid the recovery.

And if you can do it in cooperation with a local authority as Lar España did, all the better.

Full Secretariat report under epf20-62 of 10.09.2020