In France, an estimated 15% of condominiums are said to be very fragile. This amounts to 100,000 condominiums, or more than 1 million housing units. The dilapidation of condominiums is due to management difficulties which result in high operating expenses, uncontrolled unpaid rental charges, discouragement of co-owners, and shortcomings in routine maintenance. Public authorities have programmed large improvement operations to deal with the problem. But these programmed operations are very costly, on the one hand, and they lack effectiveness, on the other hand. They can only freeze the dilapidation process and fail to stamp it out, because they do not allow for ambitious energy retrofits.
 Study ANAH / CGDD on the condominiums having fragility issues (December 2012)
What we offer
We offer energy retrofits and provide co-owners with sound governance schemes. Instead of resorting to public subsidies, we involve a wide range of partner NGOs and private companies. We are currently testing this offer on condominiums which are already dilapidated, complementing public policies; but we are also acting preventively by providing support to vulnerable condominiums on the verge of dilapidation.
The challenge of dilapidated condos in France
The national agency providing housing improvement grants (« Agence Nationale d’Amélioration de l’Habitat », or « ANAH ») estimates that 15% of French condominiums are very fragile. This amounts to 100,000 condominiums, or more than one million housing units. In addition to this, the ANAH estimates that 5 to 15% of the remaining condos are on the verge of a similar decline.
The causes of condo dilapidation are well-known and are all related to management difficulties which result in :
- Expensive operating expenses
- Unpaid rent charges that tend to increase and become out of control
- Ineffective management, discouragement of co-owners and shorcomings in routine maintenance, ie. factors that tend to worsen the technical dilapidation of the building
This vicious circle is worsened by the fact that the most solvent co-owners will tend to leave the condo and will be replaced by low-income co-owners, which will in turn accelerate the previous phenomenon.
The shortcomings of public policies
Faced with the severity of the problem, public authorities have come-up with means and solutions that are unfortunately not up to the task :
- they have engaged in expensive improvement operations, with subsidies reaching sometimes 90 to 95% of the total cost of the operation, and are unable to handle a large number of housing units.
- they can only stop the dilapidation process temporarily because they do not address the causal roots of the problem which are the high level of rent charges and the governance failures.
Public authorities have tried to find new solutions. These are twofold :
- preventive actions : they have tried to set-up observation and prevention measures, they have implemented a register co-ownership associations (as a consequence of the ALUR law). They have also built a contingency fund in order to organize the upcoming construction works within the building (also a consequence of the ALUR law);
- global actions : public authorities have refocused on the structural causes of the problem (instead of only focusing on the built environment). They have implemented social diagnosis tools, and tried to remobilize co-owners.
Condo renovation projects are long and complex processes. They are often mismanaged. The problem is that condo renovation projects spread over 5 to 10 years in average, and involve a large number of stakeholders. This can jeopardise the overall success of the operation. It is absolutely necessary to reduce the length of these projects.
Furthermore, most of these projects only have a very small impact on energy costs. Yet cutting on such costs is essential, because energy cost savings are very aim justifying the cost of the operation. Reliability of estimations of the reduction in energy performance has to be insured through simulations. These simulations have to take into account the consumption habits of the residents.
Finally, the definition of a financing plan for any large project usually occurs at the end. We realized that the project design methods had to be renewed in order to provide co-owners with upfront, transparent information about the cost the project.
 From 2006 to 2010, ANAH gave over €471M of subsidies for delapidated condo rehabilitation. 52% of the total amount are dedicated to the co-ownership association, the other 48% depicts the individual subsidies. See Braye Report.  Only 1,3% of the very delapidated condo have been registered in the French Govenement operational measure between 2001 and 2011 (Forum of the private housing policies, « Workshop condo diagnostic », May 2013).  Among the condo which benefit from a rescue operation, 40% of the condo built before 1959, 55% of the condo built between 1960 and 1974 and 60% of the condo built after 1975 had renovation work of a total amount equivalent to less than 5 000€ per housing. This amount is not engouh to have impact on energy consumption.
The principles underlying our aproach to the problem
The Action Tank has been working since 2013 on a business model which would enable energy retrofits and the reestablishment of sound governance schemes within condos, with minimal resort to public subsidies. We target a broad range of condos, as we intervene both in condos which are already dilapidated, complementing existing public policies, but also in fragile condos which are on the verge of dilapidation.
We have been working with a large number of partners : a company specialized in renovation projects, called Brézillon ; energy and hydric experts from EDF, Total and Veolia ; potential financers, such as La Banque Postale, the Crédit Municipal de Paris and the Caisse d’Epargne; and non-profits such as Habitats Solidaires or Compagnons Bâtisseurs.
These are the principles which guided a work with them:
- Enabling renovation works, including energy retrofit, at an optimized cost (reduced or zero-margin, mutualization of construction costs), in order to decrease the operating expenses faced by residents
- Financing the remaining balance to be paid by co-owners, by selling rights to build, by mobilizing and prefinancing subsdidies, by resorting to housing microcredit. The impact on the households’ cashflows will be limited if the repayment schedule of the contracted loans and the savings resulting from the renovation works are aligned.
- Getting residents more involved, before, during and after the renovation works – so that residents can get acquainted with the project, adapt their energy and water consumption habits, and implement a sound governance within the condo.
The goal for us is help residents repay the loans they have contracted to finance their share of the renovation cost as quickly as possible. That way, we can restore the co-ownership’s financial capacity, already improved by the reduced levels of rental charges.
4 means of action were developed
- In each condo, we tried to explore the densification opportunities – extension or raising of the existing building – in order to sell building rights to a land developer ;
- We implemented energy performance contracts which guarantee the expected energy savings, in order to reassure residents and banks ;
- We provided support to the residents during the design phase and during the renovation phase to improve understanding and accountability. The support we provided turned out to be a real time saver;
- We supported organized participation of the residents to the project conception and after delivery of the operation, especially in the usage of water and energy spending.
As part of an experimentation project in Clichy-sous-Bois, the program was laureate of a national Call for Expression of Interest that was issued by the National Agency for Urban Renovation (ANRU), launched by the General Commissariat for Investment (CGI). The approach has been conducted on a condominium of 30 homes with a possibility of densification on the outdoor parking. All the conception studies were submitted to the co-owners, including the proposal of 3 energy scenarios: -35%, -45% and -60% guaranteed energy savings. Regarding the extension, additional studies are underway to offer residents a turnkey project enabling them to finance nearly 20% of their thermal renovation. In the first half of 2018, the co-owners will select in the General Assembly an energy scenario and a densification scenario.
The process also interested the Ministry of Economy selecting the Action Tank as a winner of its “Social impact bonds” call for projects.
The social impact bond allows any organization to carry out innovative and socially responsible projects in order to respond to social issues. The association becomes a program coordinator who may receive funding from (a) private investor(s). If the project turns out to be a success, the public authorities then reimburse the initial investors. The proposed-by-Action Tank-contract plans to launch this approach on twenty condominiums meeting the criteria defined by all stakeholders. The terms of the contract are being drafted.
We are interested in finding new testing grounds, in particular in the Greater Paris region.