Investigating Energy Renovation of Multi-Owner Buildings and Real Estate Market Issues in a Degraded Greek Urban Area

Abstract

States establish ambitious policies and important measures to achieve targets for the energy upgrade of buildings but although some important barriers prevent their implementation in space, they are rather overlooked by research. In this paper, it is argued that extensive multi-ownership (MO) and weak performance of the real estate market in degraded urban areas impede the mass energy retrofitting of multi-owner buildings (MOBs), which are an important part of the urban building stock A deprived area of central Athens (Greece) that serves as a case study. With a pluridisciplinary approach based on extensive field surveys, cadastral data analysis and cases of energy renovation of buildings through a public–private partnership financing scheme as well as ways to overcome the MO issue were explored, according to the provisions of the Greek legal framework. The integrated urban regeneration approach is promoted as a means to encounter the MO issue and enhance the functioning of the real estate market by the generation of surplus values that will render the energy retrofitting of buildings more attractive to investors and thus achieve the deep renovation of MOBs towards the sustainability of the urban environment. This paper ultimately advocates the integration of energy planning with spatial planning.

1. Introduction

Buildings are one of the largest sources of energy consumption. Consequently, adaptation to climate change depends mainly on actions undertaken in urban areas, with cities being simultaneously part of the problem and its solution. Buildings are a key component of the cities but they are replaced slowly or never at all when it comes to listed buildings. They consume large amounts of energy but, at the same time, they also have the greatest energy-saving potential. Thus, the energy renovation of the existing building stock is a key element of climate change mitigation strategies for achieving the energy and climate goals that are set internationally [1].

European policies strive towards renovation of the existing building stock [2]. The European Commission recognizes that the implementation of energy policies on the building stock is not always efficient; there is a need to deal with market failures and encounter the multi-ownership issue of buildings, while focusing on the cost-effective renovation of the worst-performing segments of the building stock [2].

More than 40% of European housing stock is over 50 years old [3]. In Greece, 83.82% of buildings were built before 1980, when the first regulation for the insulation of the buildings came into effect. Table 1 presents the construction period of the main categories of buildings.

Table 1. Distribution of the number of existing buildings per use based on their construction period in Greece. Data source: [4], own elaboration.

	Use of the Buildings
Construction Period	Detached Houses	Apartment Buildings	Retail	Offices
1920–1940	220,345	178,479	11,264	4632
1941–1960	281,732	331,165	5428	3720
1961–1980	661,485	904,893	12,909	10,517
1981–2000	676,573	773,626	18,649	11,186
2001–2010	242,222	284,339	16,963	21,316
2011–2020	34,350	42,319	743	1694

Table 1. Distribution of the number of existing buildings per use based on their construction period in Greece. Data source: [4], own elaboration.

	Use of the Buildings
Construction Period	Detached Houses	Apartment Buildings	Retail	Offices
1920–1940	220,345	178,479	11,264	4632
1941–1960	281,732	331,165	5428	3720
1961–1980	661,485	904,893	12,909	10,517
1981–2000	676,573	773,626	18,649	11,186
2001–2010	242,222	284,339	16,963	21,316
2011–2020	34,350	42,319	743	1694

According to European statistics [5], 47.5% of Europeans live in apartments. In Greece, the figure is 58.2%, where there are 2,514,821 residential MOBs, mainly concentrated in urban areas, and 2,116,707 detached houses [4]. These apartments may be part of buildings where each apartment belongs to one or more owners, private or public. Such cases concern MOBs, which are buildings with various uses or a combination of them, often referred to as ‘condominiums’ or ‘strata-tile’, although their legal basis presents variations [6]. The percentage of the total number of these buildings is unknown. Also, the number of commercial MOBs concerned is unknown.

According to the energy balance of the year 2018 provided by the Greek Ministry of Energy, energy consumption related to buildings in Greece amounts to 6012 Ktoe, corresponding to 38% of the total energy consumption of the country, in all climate zones; Greece is divided into four climate zones, while the Athens area falls within Zone B [4].

Buildings built before 1980 have very low energy efficiency (class H, according to the official classification of the buildings regarding their energy efficiency, presented in Table 2). With reference to the energy category of residential buildings, it is observed that the largest percentage (66.83%) are classified in E-H categories, 26.81% in C and D and only 6.36% in A and B [7]. Therefore, the Greek residential building stock presents a particularly large energy-saving potential. The majority of these residential buildings require important renovation actions.

Table 2. Energy efficiency categories of buildings. Source: [8].

Energy Efficiency Category of Buildings 1	Classification to Categories	Classification to Categories
A+	ΕΡ < 0.33RR	T < 0.33
A	0.33RR < ΕΡ < 0.50RR	0.33 < T < 0.50
Β+	0.50RR < ΕΡ < 0.75RR	0.50 < T < 0.75
Β	0.75RR < ΕΡ < 1.00RR	0.75 < T< 1.00
C	1.00RR < ΕΡ < 1.41RR	1.00 < T< 1.41
D	1.41RR < ΕΡ < 1.82RR	1.41 < T < 1.82
E	1.82RR < ΕΡ < 2.27RR	1.82 < T < 2.27
F	2.27RR < ΕΡ < 2.73RR	2.27 < T < 2.73
G	2.73RR < ΕΡ	2.73 < T

¹ The RR index is taken equal to the calculated primary energy consumption of the reference building. The ratio T is the quotient of the calculated primary energy consumption of the examined building (EP) to the calculated primary energy consumption of the reference building and is the basis for determining the energy efficiency categories. The annual total primary energy consumption of the reference building corresponds to the upper limit of energy efficiency category B (for each use a particular reference building is defined) [8]. Buildings with lower or higher primary energy consumption than the reference building are classified in the corresponding energy category.

Table 2. Energy efficiency categories of buildings. Source: [8].

Energy Efficiency Category of Buildings 1	Classification to Categories	Classification to Categories
A+	ΕΡ < 0.33RR	T < 0.33
A	0.33RR < ΕΡ < 0.50RR	0.33 < T < 0.50
Β+	0.50RR < ΕΡ < 0.75RR	0.50 < T < 0.75
Β	0.75RR < ΕΡ < 1.00RR	0.75 < T< 1.00
C	1.00RR < ΕΡ < 1.41RR	1.00 < T< 1.41
D	1.41RR < ΕΡ < 1.82RR	1.41 < T < 1.82
E	1.82RR < ΕΡ < 2.27RR	1.82 < T < 2.27
F	2.27RR < ΕΡ < 2.73RR	2.27 < T < 2.73
G	2.73RR < ΕΡ	2.73 < T

¹ The RR index is taken equal to the calculated primary energy consumption of the reference building. The ratio T is the quotient of the calculated primary energy consumption of the examined building (EP) to the calculated primary energy consumption of the reference building and is the basis for determining the energy efficiency categories. The annual total primary energy consumption of the reference building corresponds to the upper limit of energy efficiency category B (for each use a particular reference building is defined) [8]. Buildings with lower or higher primary energy consumption than the reference building are classified in the corresponding energy category.

Official data presented in Table 3 prove that the energy saving potential (ESP) of the buildings in Greece is significant, as the energy consumption compared to the consumption of the reference buildings in all climate zones is more than double.

Table 3. Energy consumption (kWh/m²) peruse of the buildings and climate zone (period 2011–2021). Data source: [9].

Climate Zone	Energy Consumption per Building Use
	Residential			Retail			Offices
	AAEC 1	RBC 2	ESP (%) 3	AAEC 1	RBC 2	ESP (%) 3	AAEC 1	RBC 2	ESP (%) 3
A	248.50	94.39	62.01	451.69	234.9	47.99	356.82	198.92	44.25
B	265.75	103.56	61.03	492.34	253.18	48.58	372.40	212.36	42.97
C	353.08	142.23	59.72	534.77	251.59	52.95	394.99	214.62	45.66
D	392.49	147.31	62.47	574.45	250.08	56.47	409.22	211.08	48.42

¹ AAEC: Average annual energy consumption; ² RBC: Reference Building consumption; ³ ESP: Percentage of Energy Savings Potential, if the existing buildings were constructed according to the insulation regulation in effect [8].

Table 3. Energy consumption (kWh/m²) peruse of the buildings and climate zone (period 2011–2021). Data source: [9].

Climate Zone	Energy Consumption per Building Use
	Residential			Retail			Offices
	AAEC 1	RBC 2	ESP (%) 3	AAEC 1	RBC 2	ESP (%) 3	AAEC 1	RBC 2	ESP (%) 3
A	248.50	94.39	62.01	451.69	234.9	47.99	356.82	198.92	44.25
B	265.75	103.56	61.03	492.34	253.18	48.58	372.40	212.36	42.97
C	353.08	142.23	59.72	534.77	251.59	52.95	394.99	214.62	45.66
D	392.49	147.31	62.47	574.45	250.08	56.47	409.22	211.08	48.42

¹ AAEC: Average annual energy consumption; ² RBC: Reference Building consumption; ³ ESP: Percentage of Energy Savings Potential, if the existing buildings were constructed according to the insulation regulation in effect [8].

Despite the empirical evidence of the economic and environmental benefits of energy efficiency investments provided in the literature [10], these investments are not sufficiently undertaken in many countries. To date, the adoption of practices and technologies to improve the energy efficiency of buildings has been slow, as the current annual deep renovation rate stands at only 0.2% on average in the EU countries [11], which significantly compromises the achievement of energy and climate targets set by the EU. The benefits of energy retrofits contrast with the perceived under-allocation of resources for energy efficiency investments, resulting in what has been referred to as the energy efficiency gap [12]. The contradiction between the slow diffusion of energy-efficient technologies and the profitability of energy investments is called the ‘energy efficiency gap’ or ‘energy efficiency paradox’ and has become a critical issue in the debate on energy transition and climate change [10,13,14].

According to scholars, the energy efficiency gap is explained by market failures, such as (a) imperfect or asymmetric information that may exacerbate the apparent risk of energy efficiency investments. Research provides evidence that risk aversion is an obstacle to energy efficiency investments [10]. When consumers are imperfectly informed about the energy savings from investing in more energy-efficient products, then they may not be willing to invest in them [15]; (b) principal-agent problem that arises when one party decides something relating to energy use but another party pays or benefits from that decision (split incentives problem) [15]; (c) credit constraints: high upfront cost leads to limited access to credit that may prevent some consumers from efficiency-enhancing improvements of their properties [13]; (d) fluctuations in energy costs and in fuel pricing [16]; and (e) regulatory failures: economic regulation of electricity markets results in prices that differ from marginal costs and this difference can distort incentives for investment in energy efficiency [15]. For the transformation of the building stock at nZEB, deep renovation is required, which is possible with the efficient envelope of the buildings. If the EU is to achieve both its 2030 climate target and climate neutrality by 2050, this figure must drastically increase to reach 3% by 2030 and be maintained up to 2050 [11]. The energy upgrade of MOBs is one of the issues that must be encountered in order to achieve the goal that has been set.

The efficient use of the buildings ensures the necessary income for their maintenance. Although until the recent energy crisis, the results of research on the performance of energy-upgraded properties were not particularly encouraging [17], in the future, buildings that are not energy efficient will face the risk of remaining vacant or not generating sufficient revenue from their use. Since the financial interest in them will be minimal, the interest in their maintenance will be minimized. This risk is especially important for listed buildings, whose maintenance is more costly. If the buildings are not maintained and not used in an area, the urban environment is fatally degraded because it cannot be maintained either. Especially in Greece, a significant part of municipal revenues comes from local fees [18]. When the buildings remain empty, the municipal revenues used for the maintenance of the urban environment and the provision of services to the citizens are also reduced. Thus, a vicious circle is created: the buildings remain empty or are not used in an economically efficient manner; therefore, insufficient revenue is generated for the municipality, which, upon not receiving sufficient income, is unable to maintain the urban environment, which is progressively deteriorating. When the urban environment is degraded, the attractiveness of buildings for their potential users also decreases [19,20]. Consequently, the energy retrofit of existing buildings can improve their energy efficiency, which is deemed essential to promote environmental sustainability and enhance the value of the buildings.

There is no official or scientifically and generally accepted method for characterizing an urban environment as degraded. There are many types of degradation, which are usually determined on a case-by-case basis, based on quantitative indicators and qualitative characteristics related to economics (low income and unemployment), social (housing deterioration, education, and crime), environmental data (poor condition of building stock, pollution, and lack of public spaces), real estate data (vacancy rates and market values), aesthetic reasons, or the historic character of the urban area that may need improvement. Indicators for an area become meaningful when compared with those of neighboring areas or with those for the entire city, region, or even the country [21,22,23]. Very often, areas are demarcated following a political decision.

In already degraded urban areas, residential buildings are more often in a poor state of maintenance, energetically inefficient, and occupied by low-income owners or tenants experiencing energy poverty [24], while non-residential buildings host low-yield economic activities, facing high energy costs that often affect their viability. In these areas, both the renovation and the energy upgrade of the buildings may be required at the same time. But this is not easily achieved by the real estate market forces because potential users seek both a better urban environment and an upgraded public space. For this reason, public intervention is required, which should not be limited to financial measures to promote the energy upgrading of buildings, and their renovation, whenever necessary, but also be accompanied by interventions in the urban environment. These needs call for integrated urban regeneration initiatives, through which the real estate and the energy markets will be mobilized, in view of expectations for surplus values and capital gains of private investments. With this rationale, this paper aims to demonstrate the need for a broader approach to the issue of energy upgrading of buildings and link it to urban regeneration.

1.1. Literature Review

The implementation of the energy retrofit depends on many factors (Scheme 1), such as the following.

Technical feasibility. The technical specifications of the project depend on the building, the available technologies, and the policies and means for their use [25].

Costs of the deep renovation. An assessment by the European Commission concluded that nearly 90% of all energy renovations in Europe coincide with other general upgrades to the housing stock. Energy renovations are mostly a side effect of other investment priorities, with only 2.8% of homeowners investing because of a poor energy performance certificate [26]. Τhe total cost of implementing projects of energy efficiency upgrade and the entire building renovation is part of an indivisible project of comprehensive renovation to comply with current requirements in terms of accessibility, safety, aesthetics, and comfort, which, among other things, involves a major improvement in energy performance. Such renovations, called ‘deep renovation’, imply additional and important investment costs [27,28]. Usually, research and policy interests are not focused on whether buildings are suitable for energy upgrading or need additional improvements, although the state of a building can be an important factor influencing investments in energy upgrading [28,29].

Awareness of the energy efficiency incentives programs [30,31] means that implementing energy renovation often requires providing detailed information about services, products, and procedures to be followed. The information should be easily accessible and understandable for those concerned. The lack of reliable information on the benefits of ER and guidelines is considered a major barrier to energy retrofitting [32,33].

State aid is provided by governments, which is usually horizontal. Research analyses point to owners’ preferences for policy instruments to overcome barriers, including grants, subsidies, tax incentives, and soft loans [34,35]; they are applied in most developed countries.

The availability or willingness to invest private funds comes either from the owners of the buildings or investors [36,37]. From the owner’s point of view, an array of factors influences the decision making of a project. Systematic literature reviews point out the complexity of the decision process for the energy retrofitting of dwellings: functional requirements and the quality of living; aspiration related to aesthetics, lifestyle, social status, or prestige; preserving the environment; and economics [38,39]. However, the benefits that interest homeowners may not be energy-related; they may ultimately be financial [29,39]. High costs are required to improve the energy efficiency of existing buildings to the level of new ones. The investment cost of building renovation is a heavy burden, especially for low-income families, but improving energy efficiency may have significant effects [30,36].

The value increase in energy-retrofitted properties can motivate owners and be an important driver for energy investment [40,41]. There is some evidence that energy efficiency impacts the value of properties but this is small compared to other value drivers and it is context-dependent; it is not always clear, however, if the value increase also concerns deep renovated buildings or the degree of their energy efficiency upgrade [31,42,43,44,45,46,47]. From the property investor’s point of view, the energy upgrade of a building is a financial investment in a capital asset. A building is considered an entity and the focus is on its overall value, rental income, cash flow, and capitalized value, including residual value. Decision making is primarily based on the real estate market fundamentals but it is most effective when energy upgrade benefits are tangible, such as in the increase in property value [48].

The perceived consequences of the energy retrofitting of houses vary also across different homeowner groups [32]. The main problem concerning MOBs is their management, mainly in terms of making important and costly decisions for energy upgrades or deep renovation of the buildings, as this affects the management of property rights on individual properties and those of the common parts of the buildings. Streimikiene and others [49] identified the inability of co-owners to agree on the renovation of MOB as one of the two main barriers to energy renovation in residential buildings in Lithuania. Many issues are raised, depending on the contextually legal ownership models in each country, which are a combination of private and collective powers, and affect the decision making process for energy retrofit of MOBs. Weatherall, McCarthy, and Bright [50] state that MO is a barrier to the governance of buildings that prevents the efficient utilization of the available funding resources and incentives for energy upgrades of MOBs and often causes and exacerbates problems of inadequately defined property rights, leading to market failure.

The significance of the issue of the MO, as well as its importance to the deep renovation of the building stock, is rather overlooked by researchers and policymakers [51,52]. Although the number of people concerned with the energy upgrading of MOBs may actually be high, comprising owners and tenants but also investors, hitherto research on the issue has been surprisingly limited, almost exclusively focused either on multi-tenant or social housing buildings owned by one or a few private or public owners. As has already been observed a decade ago [53], the issue of MOB energy retrofit still remains not ‘very visible in the policy discourse, which focuses on barriers to energy investments on a relatively generic level’ and probably ‘existing policies do not target the real problems’.

The total cost of the projects, the technical possibilities for their implementation, and the expected energy savings are factors usually possible to estimate. On the contrary, the process of all the owners making the decision for the deep renovation of a building is unpredictable.

1.2. Research Questions

In this paper, energy retrofitting of MOBs is approached on the scales of the property unit as part of MOBs and the whole building itself. The effects of state-aid incentives in the real estate market, from both the investor and owner point of view, as well as the legal issues on multi-ownership, are investigated.

Urban planning regulates the spatial dimension of environmental, economic, and social phenomena in cities and is related both to the real estate market [54] and the issue of multi-ownership as a feature of the built environment. For this reason, in this work, its role and the possible solutions it can support are examined, especially through urban renewals. In this paper, it is questioned whether, through urban renewal, programs create the conditions for the energy transformation of cities and the development of the real estate market as well as the promotion of addressing the issue of deep renovation of MOBs in Greece.

Following the above considerations, the main research hypothesis of this paper is that extensive multi-ownership and weak performance of the real estate market in degraded urban areas prevent the mass-energy retrofitting of buildings. The research questions deriving from this hypothesis are the following:

• (RQ 1) Can the MO of buildings affect the decision making for their deep renovation?
• (RQ 2) Can the efficient utilization of state aid available for energy upgrading of MOBs be achieved through the operation of the real estate market?
• (RQ 3) Can urban planning strengthen the efforts for the deep energy upgrade of MOBs in Greece?

Section 2 presents the methodological approach followed in this paper, the sources, and the data collection. An ‘emblematic’ area located in the historical center of Athens, which serves as a key study area, is presented in Section 3. The dimensions of the MO issue and the legal entanglements in the management of MOBs are discussed in Section 4, while in Section 5 the potential of the local real estate market is explored through the elaboration of pre-feasibility studies of the deep renovation of buildings. Finally, the consideration that an integrated urban regeneration approach is necessary to address both MO and efficient real estate market functioning is discussed in Section 6. The final section presents the concluding remarks, explaining the originality of this study.

2. Methodology Approach

This work examines the issue of the deep renovation of buildings located within an extended urban sector, which was delimited within a wider socially, economically, and environmentally sensitive area, defined as an area of intervention by the Municipality of Athens [55].

In this study, a bottom-up approach is followed to identify both the dimensions of the MO of the buildings, as well as the potentially efficient functioning of the real estate market through state aid. The study was carried out in four stages. Quantitative data obtained entirely from field research were used, while the current institutional framework defining the management of MOBs in Greece was also investigated. Particularly (Scheme 2):

• An extensive field survey was carried out in order to record the state of the building stock in the area and to assess the need for deep renovation, the costs of which were determined. Deep renovation is considered to be the restoration of the building to a new condition with a deep energy upgrade, without special technical or architectural interventions.
• To highlight the effects of MO on decision making for the deep renovation of buildings (RQ 1), the ownership status (number and legal status of the co-owners) was investigated by the use of cadastral data. It was considered and explained that a high number of owners per building creates unfavorable conditions for the achievement of a common decision from the multiple owners, given the issues arising from the existing legal framework that were also investigated. For the visualization and better monitoring of the prevailing situation, the data obtained from surveys A and B were recorded in a database and thematic maps were produced using a geographical information system.
• In order to investigate the effects of the applied state aids on the economic performance and the attractiveness of the deep renovation of the MOBs (RQ 2) for the market, 11 preliminary case studies of building restoration were carried out based on a purpose-elaborated PPP scheme for the deep renovation of MOBs. Their construction plans were searched and examined, autopsies were carried out in order to determine their state of maintenance, and the need and cost of projects for their deep renovation were estimated. Real estate market data were also sought and used and the cost of the necessary renovation works was estimated. By the use of a discounted cash flow analysis, useful conclusions were reached on the financial viability of the renovation projects.
• The possibilities offered by the institutional framework of urban planning in Greece were investigated in order to strengthen the deep renovation effort of the building stock in the study area, both to address the issue of the decision for the deep renovation of the MOBs and to improve the economic performance and attractiveness (RQ 3) and thus enhance the effort for the energy upgrade of the building stock.

2.1. Data Collection

2.1.1. Ownership Status of the Buildings

In order to investigate the extent and severity of the issue of multi-ownership in upgrading buildings in the reference area (RQ 1), two categories of data were used: primary data on the ownership status of the buildings, provided by the company Ktimatologio SA. (the company that manages the Greek Cadastre), and 45,341 title deeds were provided for 1399 buildings located within the study area, while for 255 buildings there were no recorded titles. The following data emerged from their processing: (i) the number of owners of each building, (ii) the legal status of the owners (physical persons, companies, public, etc.), and also (iii) the gross floor area for each building, as there is no other source of such data.

In Athens, as in most regions of the country, the Cadastre has not been completed. Therefore, with special permission from the Ministry of the Environment, data related to the recorded registrations of the property titles for each building were requested and processed, leading to the determination of the ownership status of each building.

The processing of cadastral data from a questionnaire was preferred, for the following reasons: (a) there are no other data that can better describe the breadth of the MO phenomenon at the building level, (b) it is not possible to find the owners of each building, since they are not necessarily also users of the properties, and also (c) they would not be able to give clear answers to questions about the energy upgrading of their properties and the building, since this would require at least a very specific plan and data about the projects, their participation in the cost, the state of maintenance of their property, and the entire building.

2.1.2. State of the Building Stock

For the needs of this research, data on the condition of the building stock, collected by field research, was required. A large on-site inspection of all the 1650 buildings located within the study area was conducted during the second trimester of 2014. Internal autopsies were performed in 947 (57.4%) buildings that were accessible, in order to record the technical and construction characteristics and their equipment and to assess their age and state of maintenance. Vacant properties within the buildings were also recorded. The sample of buildings examined is considered statistically acceptable. For the remaining buildings (42.6%), assessments were made based on their external condition.

The data from the autopsies were used in order to estimate the cost of restoration and energy upgrading based on a methodology proposed by the technical chamber of Greece. In any case, the cost of the deep energy renovation of the buildings is extremely difficult to calculate because it requires the availability of a great deal of data and information and special technical studies. In Greece, this information about the buildings is not recorded. The data available from the National Statistics Office only concern the age of buildings for broad areas of cities (census areas) and are therefore not useful for this research. It is also noted that, especially in the case of Athens, often neither the technical plans nor the construction permits of the buildings before 1965 are available. In any case, the actual state of maintenance of the buildings is not known, nor whether they face significant problems (i.e., static issues). But even if it was known, it would not always make sense to calculate the cost because, in the case of deep energy renovation, significant renovations are often implemented in order to modernize a building as a whole. Furthermore, some unforeseen costs associated with building improvements throw the renovation budget out of control because some of the necessary interventions are difficult to identify in the early stages of the cost analysis [56].

With regard to the energy efficiency category of buildings, when a property is rented or sold, an inspection and the issuance of a certificate of energy efficiency is required. However, in MOB buildings, this certificate usually concerns individual units except when the deed concerns the building as a whole. In any case, these data are not available with reference to specific buildings. However, from the energy efficiency category of each building, no safe conclusions can be drawn about the cost of the energy upgrade, since this depends on the building’s special characteristics and also the goals of the renovation and energy upgrade. As a basis for calculation, the cost of energy upgrades officially provided by the Ministry of Energy was taken into account.

The data on the ownership status of the buildings as well as the costs of their restoration and energy upgrading were systematized and displayed on maps using a geographic information system.

2.1.3. Real Estate Market Data

Greece belongs to the semi-transparent markets [57]. Among other things, the country’s ranking in these markets implies that there is no sufficient and detailed data on the real estate market. The available data are published by the Bank of Greece and concern the real estate market of Athens as a whole; they are not specific by area. For this reason, a field survey is always required in order to evaluate the market value of the properties of interest, while their accuracy is always subject to assumptions and uncertainty [58,59].

The issue of the effective operation of the real estate market and its ability to support deep energy retrofit with the efficient use of the provided state aid (RQ 2) was addressed by simulating the rehabilitation and energy upgrading of 11 cases of pre-feasibility studies buildings: six offices and five residential.

These buildings were selected to be as representative as possible of the buildings found throughout the reference area, based on the following criteria:

(i)

Their location in the urban fabric. Their location is such that the upgraded building could easily attract users;

(ii)

Their state of repair, together with the percentage of vacant properties within them. Usually, but not necessarily, a significant number of vacant properties indicates the poor state of maintenance of the building;

(iii)

The availability of the original construction plans and building permits. These data are extremely valuable in order to evaluate construction characteristics and estimate the cost of restoration and energy upgrades with much greater precision compared to the mass evaluation of the buildings carried out in the previous stage A of the research. This criterion was crucial because the absence of these elements led to the exclusion of two-thirds of the buildings initially selected (see annex I).

For the appraisal of the renovation and deep energy retrofitting of the 11 potential projects, a public–private partnership scheme was drawn up, using available state aid and incentive instruments suggested by the European Commission, is presented in Section 5.

3. Context: The Building Stock of the Athens City Center

The Athens city center around Omonia Square (Figure 1) is mainly occupied by old obsolete buildings. This area was the former Central Business District of the city of Athens until the 1980s but still hosts public sector services and low-added value economic activities.

The south-east part of the area is dominated by office buildings and the north-east by residential buildings. Retail stores occupy the ground floor of the buildings in the whole area. The district is considered unsafe and public infrastructure is derelict, while open public areas are lacking or are in bad condition. About 70% of the buildings were erected around six decades ago, while only 9% after 1985 when the new Code for Constructions came into effect and required some insulation measures for the new buildings for the first time. Thus, the building stock is old and in functional obsolescence, unable to support the contemporary demands of occupation. Most of the apartments in residential buildings are poorly maintained, particularly their common areas and facades. Thus, almost the entirety of the building stock requires costly interventions for renovation and energy upgrades.

Vacancy rates were about 24%, 36%, and 27% for residences, offices, and retail, respectively, while 18% of the buildings were entirely empty [60]. These rates are strong indicators of the permanent and deep economic, social, and environmental degradation of the area. To date, the vacancy of commercial buildings has not significantly changed, although during the last years of economic recovery, some apartments were occupied and some old hotels were renovated. As for retail stores, the vacancy rate of retail premises was 24% in September 2023 [61].

Few residential individual units or buildings were converted to short-term rental units in comparison to other areas of the city center. However, the number of these properties is limited and the overall vacancy rate remains high. The conversion and reuse of buildings in the area to date concern mainly those belonging to single institutional owners or a few owners of diverse legal status. Most of the buildings belong to many owners and this is a critical barrier to their renovation and energy upgrade, as analyzed in the next section.

4. The MOBs Issue

The Greek ownership system is a variation of the unitary system, based on the Roman maxim ‘superficies solo credit’ (erections on the land belong to it). Horizontal property (HP) is a separately owned unit, with shared rights with the owners of the other units of the building regarding its common areas, and it is regulated by Law 3741/1929 and the Civil Code (presidential decree Nr 456/1984).

Co-ownership is the joint ownership of an HP. In a MOB consisting of many HPs, each one of them may belong to many co-owners. Because of the co-ownership status of the multiple HPs of a building, the total number of owners very often becomes unwieldy. MO status of the building stock concerns both the number and the legal status of the owners and it is an impediment to any decision making in a MOB.

According to cadastral data, the number of owners per building within the study area can be extremely high (Figure 2 and Figure 3). More specifically, the average number of owners per building is 32.25 persons. Only 16.8% of buildings are owned by one person, 20.2% by 2–8 owners, 24.3% by 9–32, 23.7% by 33–120, and 6.5% by more than 120 owners, while for 8.5% of the buildings, the number of owners is unknown.

The multiple owners and tenants of a building may be persons of extremely heterogeneous cultural identities, financial potential, and, notably, legal status: physical persons, private or public legal persons, private or public entities such as various foundations, municipalities, or the Greek Church, and others (Figure 4). The interests of each may be different or divergent from those of the others or the decision process of some entity may be extremely long and complicated or never concluded, due to its proper asset management regulation. For example, this is particularly the case of properties owned by bequests or by municipalities, when any decisions on the management of municipal property are subject to the provisions of L. 3463/2006 requiring increased majorities at the Municipal Council. In their research in Hong Kong [62], they found that the owner heterogeneity in apartment buildings poses significant but negative impacts on owners’ collective actions.

In addition to the MO issue, multi-tenancy is also an important factor for consideration. There are no data on the number of tenants per building in the area. The number of HPs that are owner-occupied or leased is unknown. With the proliferation of owners and tenants, the owner–tenant dilemma for the energy upgrade of buildings is enlarged from the owners of an HP to all co-owners and tenants of the whole building, making any joint decision to renovate and/or energy upgrade very complicated. The complexity of MOB management further increases when multiple buildings are erected within the same land parcel or share common parts, such as arcades.

State financial support for the energy upgrade of an MOB in Greece requires a joint request of all its owners. However, this is rarely the case and demonstrates the difficulty in achieving the MOB energy upgrading. In the 2021 national energy upgrade program for the buildings, applications for blocks of flats (MOBs) were about 1% of all applications, although a 10% bonus was provided, while 71% of applications concerned HPs (apartments) and 28% detached houses [63]. In the program of 2023, no such bonus was provided [64]. Because of the long-term subsidization of the energy upgrade of HPs, there is an increasing risk of the appearance of the ‘lock-in effect’ [1]. This renders the upgrade of entire buildings difficult, especially their shell and fittings, which are required for their energy upgrade and, eventually, their transformation to nearly zero energy buildings (nZEB). Thus, the owners who have already invested in the insulation and renewable energy sources (RES) of their HPs will be unwilling to be subject to the further burden caused by new interventions but whenever renovation to nZEB is carried out in the entire building, as the latest update of the EPBD indirectly imposes, a significant part of what has already been spent for HPs will have been wasted.

The above analysis makes clear the numerical and spatial dimensions of the multi-tenure phenomenon in the study area. Regulating the decision-making problem of owners is of utmost importance to achieve the goal of energy retrofitting of buildings.

4.1. Legal Entanglements of the Management of MOBs

The main challenge is the renovation of common parts of the buildings, which is particularly important for their transformation in nZEBs; this mainly concerns the shell and the fittings of the building and the installation of renewable energy systems. According to the provisions of L. 3741/1929 (art. 2 and 6) and the relative jurisprudence regarding horizontal ownership, common and indivisible parts of the building are the roof, exterior walls, stairwells, elevators, heating installations, and yards, as well as everything that concerns its safety and stability. The repair and maintenance of common parts are a joint burden. There is no provision for an owners’ association, which can be created informally to manage the common parts of the buildings.

With the co-owner relations regulation, the co-owners regulate their relations, in particular concerning the definition and use of common parts and the case-by-case required majorities for decision making regarding the maintenance, improvement, and use of the common parts of the building. For them, the regulation is equivalent to a law. Its provisions, which are binding for their successors, are those that determine what is permitted or prohibited and under which conditions, excluding other provisions, unless these are specifically provided for agreement by all owners or by law. If there are no particular provisions for the management of the building in the co-owners relations regulation, the law requiring unanimity applies. As yet, there are no legal provisions and administrative processes to support the deep energy renovation of a MOB without the unanimous consent of all co-owners. In case of refusal of consent by some co-owners, legal involvement is fatal. Only by appeal to the Court is it possible to deviate from the principle of unanimity, which is required for important and costly decisions and only under the condition that the interest of all co-owners is guaranteed, as judged on a case-by-case basis [6,65].

Despite the fact that changes in legislation could regulate the question of unanimity, a minority group of owners could still oppose any decision to renovate and energy upgrade the building if disproportionate costs are incurred, if the renovation is deemed not to be cost-effective, or for some other unexpected reason. However, for the energy renovation of MOBs, possible legal solutions to the co-ownership issue have not yet been considered, nor has jurisprudence been produced. Additionally, very long delays, of sometimes many years, in completing legal entanglements is the rule in Greece [66]. The risk of unpredictable interpretations of the laws and the long delays in the decisions of the Courts create deterrent conditions for private investments and increase their risk since long delays in the implementation of investments in the renovation and energy upgrading of ΜOΒs can lead to their failure or cancellation.

An effective legal and financial environment is required for investments in the energy upgrading of the MOBs. The financial aspect of their energy renovation is linked to the real estate market, which is explored in the next section.

5. Can the Real Estate Market Support the Energy Renovation of Buildings? (RQ 2)

In this section, the viability and attractiveness of the renovation and energy upgrading are explored from the point of view of the investors and the owners of the buildings, through 11 possible MOB renovation and energy retrofitting projects located within the study area (Figure 5). In other words, the potential of the real estate market to incorporate the cost of renovation and energy retrofitting of degraded buildings in the deprived study area is investigated, taking into account the state aid provided for this purpose.

5.1. A Public–Private Partnership Scheme

For the purpose of appraising the renovation and energy upgrade of potential projects, a scheme of public–private partnership was drawn up, using available state aid and incentive instruments suggested by the European Commission (Scheme 3). State aid is intended to counter the failure of the market to incorporate the high cost of energy upgrades into real estate values, alleviate the risks, and support decision making. A key assumption in this work is that the use of ‘dual’ state aid is available to fill the eventual funding gap of a project due to the renovation costs, energy retrofitting, and the performance of the local real estate market, according to the regulations in effect.

The Greek National Energy Efficiency Fund (NEEF), founded in 2021 [4], is expected to provide state aid to support energy-saving projects through financial instruments, using revolving funds aimed at improving the financing terms of loans to energy operators, in cooperation with the domestic financial sector, as suggested by the EC. State aid is provided through the use of a financial economic instrument (FEI) that ensures multiplier effects by recycling invested funds through reinvestment after their repayment [26]. Loans provided by the NEEF for energy retrofitting cover a maximum of 50% of investment costs. Alternatively, or additionally, the state could provide guarantees to the banks, or grants, if necessary, but these cases are not investigated in this paper. The participation of financial institutions is at least 30% and the participation of debtors is at least 20%. These ‘standard’ rates are used in the illustrative case studies also for the whole renovation cost, calculated with the use of a purpose-elaborated algorithm and discounted cash flow (DCF) for the investments appraisal [40,59,67] (Section 5.3).

For the renovation of non-residential buildings within urban regeneration areas with proven market failure, states can obtain a special state aid status for the implementation of PPP schemes through the use of FEI. This is the case with the joint European support for sustainable investments in city areas (JESSICA) initiative which operates with funds provided by the European Regional Development Fund (ERDF). The initiative was activated in Greece [68], as in many other European countries, 12 years ago, with the creation of regional urban development funds and is still operating.

The establishment of a special purpose vehicle (SPV) company for the renovation and energy retrofitting of a building is considered (Scheme 3) and it is assumed that a single financial economic instrument (FEI) using NEEF and ERDF funds provides low-interest loans combined with commercial loans.

With the aim to encounter the MO issue of buildings in this PPP scheme, it is assumed that the owners of the HPs of the building will participate in the capital of the SPV through the contribution of their property at its current value (as is) and capital-if available-thus becoming shareholders of the company. It is further assumed that an investor–developer undertakes the deep renovation and energy retrofitting of the building on behalf of the SPV. For the subsidization of the energy upgrade of properties, bank credit is required but some owners may have no access to capital or only to high-cost capital because of low collateral assets value, low expected incomes, or other reasons [69,70]. The developer ensures the required financial leverage, as well as professional management after renovation for a period of time, ensuring fair profit for himself. The developer/investor may become a shareholder of the SPV, with the investment of their own resources. In this way, neither an up-front financial contribution from the owners is required, nor do means need to be used to enforce the collection of payments to the lending banks, which are some of the main challenges [26].

Obviously, it is far from certain that all owners of HPs will agree to collaborate in the SPV; this issue is explored in Section 4 of this paper. As an incentive to their participation in the SPV, state aid would not be allocated to individual projects owned by physical persons but to the SPV where they are shareholders. In this way, objections of some owners of HPs may be overcome. In case they do not participate in the PPP scheme, without their contribution in capital being necessary (and thus with a lower share in the SPV), their properties will remain or be left off the market and their refusal to participate in the project will have negative consequences for the remaining owners of the building. This is also an issue with the legal dimension, pointed out in Section 4.1.

This indicative PPP scheme is in line with the provisions of the EPBD (article 2a, Section 3) supporting the mobilization of investments and access to appropriate mechanisms for (a) the possible aggregation of small projects, thus supporting the creation of economies of scale, (b) the better perception of the risk of energy efficiency projects for investors, as this is considered in conjunction with the local real estate market risk, (c) the use of public funding to leverage additional private sector investment to address energy market and property market failures which are here considered as strongly associated, and finally (d) the avoidance of recourse by the multitude of owners of HPs or small buildings to advisory services to satisfy bureaucratic processes.

5.2. Real Estate Market Data

In terms of the real estate market, according to the annual reports of the Governor of the Bank of Greece, recovery during the period 2018–2022 resulted in a sharp increase in house prices (+39.9%), while the office market showed a very modest increase (12%) in metropolitan Athens. Official figures for the study area are not available, as explained in Section 2.1.3. However, our field research found the rental prices of 76 apartments and 32 offices in 2023. These prices were capitalized to transaction prices with yields of 6% and 8% respectively (yields are high due to the market conditions in this degraded area) by applying the comparative valuation method [59], and found that house price growth was significant but lower than in the metropolitan area, while office prices remained almost unchanged over the past 10 years. On the contrary, the renovation cost of buildings has significantly increased by more than 50%.

According to a JRC Science for Policy Report [42] published by the European Commission, energy efficiency improvements result in an increase in 3–8% in the price of residential assets and an increase in around 3–5% in residential rents compared to similar properties. For commercial buildings, the premium seems to be higher, over 10%, and in some studies, even over 20% of sales price increases compared to similar properties has been reported. Rental prices of commercial buildings have also been positively affected by 2–5%. The results of our field research concerning 25 office units within the district under investigation showed that the expected rent increase in deep energy renovated office buildings is expected to be less than 5% when comparing the rental prices of some renovated office units in the broader area. As far as 28 residential units, their rent increase is about 7%; this is probably due to the high demand for apartments as a consequence of the housing crisis in the city. In contrast, the costs for their deep renovation are high, while the cost for the energy upgrading of the buildings ranges from 34% to 41% of their full renovation cost.

5.3. Appraisal of the Projects of Deep Renovation

Energy project appraisal methods in current use only quantify energy-saving benefits. Such approaches offer a distorted view of complex building renovation projects [67], while they are subject to important uncertainties [71]. When considering the investors’ perspective on the profits of energy efficiency investments, the financial analysis is adequate to evaluate the change in the value of the property to be retrofitted [72]. The market value of a building depends mainly on the attributes and use of the building, its specific location and climate conditions, potential users, and, ultimately, the supply and demand of real estate in each area; it is less affected by the lower running costs due to its energy performance, while the energy cost savings are incorporated into the market value of a building [56,73,74].

In this research, the economic results of the deep renovation of the buildings were modeled using a discounted cash flow (DCF) appraisal model [40,67,74]. The estimated cash flows of the buildings are discounted by the use of the following data:

(i)

The estimated revenue of the building after its energy renovation (expected mean potential gross income) is based on a market survey, for each use of the building, as usually, buildings host residential or office uses together with retail stores. Valuation methods of PGI: use of the direct capitalization method and comparative method [75], adapted to the formation of the final value using coefficients of 30% and 70%, respectively. Data based on local market research, mean asking prices as of September 2023, weighted by building condition, location, and architectural and construction quality. For the expected mean PGI, values are calculated by considering prices of similar properties in the broader area. It refers to the first operating year of the building by its tenants after renovation (2 years later);

(ii)

The deep renovation costs are estimated based on the surveys of the buildings and the official energy upgrading costs for the Athens area (climate zone B) defined by ministerial decision [4], including the costs of required studies and consulting services. The evaluation of the renovation works is calculated with the use of a matrix, according to banking standards and current practice (

Table 4. Example use of the matrix used for the evaluation of the need for the deep renovation of the buildings.

Part of the Building	Participation to the Construction Cost (%)	% of Renovation	% of the Upgrade Works
Body structure	30	20	6
Masonry works	7	50	4
Hydraulic network	5	100	5
Electrical network	5	100	5
Coatings	5	80	4
Dyes	7	80	7
Floors	10	100	6
Frames	8	60	8
Insulation (based on requirements of current thermal insulation regulations)	5	100	5
Roof	2	100	2
Heating–cooling	5	100	5
Elevator	3	100	3
Equipment	8	100	8
Sum			68

). The constructor’s profit margin and the investor’s profit on the total cost are set at 20% each, as it is the current practice in such areas;

(iii)

The financial costs, according to the terms for state aid provision through the financial economic instruments already set by the Greek state, as well as the costs of loans with market terms (Section 5.1), more precisely, the provisions of Regulation EC/1303/2013 (as amended) of the European Parliament and of the Council laying down common provisions on the European Regional Development Fund, as well as the decision regarding the JESSICA Holding Fund [68] for Greece have been applied, especially those concerning eligible expenditures. The duration of the FEI loan and the commercial loan are 15 and 12 years and the rates are set at 2% and 8%, respectively, according to the current regulations (state aid funds) and banking practice.

(iv)

The operating costs of the SPV company, the maintenance costs of the building, and other costs, such as the cost of compensating commercial users who will have to be removed during the works, when they are of significant extent, is included and calculated according to the provisions of L. 4242/2014.

Two of the most common methods are used to evaluate the profitability of the investments in energy renovation of the 11 case-studies of buildings: the internal rate of return (IRR) and the payback period. The IRR method indicates the rate of return when the net present value of the investment is zero. Projects are profitable when the IRR is equal or higher than the rate of return required by the investor. The payback method also indicates the profitability of the investment. It results from the ratio of the investment and the annual savings [76,77].

The payback period is calculated by the use of the amount to be invested, which is equal to the building renovation and the energy efficiency investment and the estimated annual net cash flow, which is equal to the estimated net rent of the building.

$$\mathrm{P}\mathrm{a}\mathrm{y}\mathrm{b}\mathrm{a}\mathrm{c}\mathrm{k} \mathrm{p}\mathrm{e}\mathrm{r}\mathrm{i}\mathrm{o}\mathrm{d}=\frac{\mathrm{T}\mathrm{o}\mathrm{t}\mathrm{a}\mathrm{l} \mathrm{a}\mathrm{m}\mathrm{o}\mathrm{u}\mathrm{n}\mathrm{t} \mathrm{t}\mathrm{o} \mathrm{b}\mathrm{e} \mathrm{i}\mathrm{n}\mathrm{v}\mathrm{e}\mathrm{s}\mathrm{t}\mathrm{e}\mathrm{d}}{\mathrm{E}\mathrm{s}\mathrm{t}\mathrm{i}\mathrm{m}\mathrm{a}\mathrm{t}\mathrm{e}\mathrm{d} \mathrm{n}\mathrm{e}\mathrm{t} \mathrm{a}\mathrm{n}\mathrm{n}\mathrm{u}\mathrm{a}\mathrm{l} \mathrm{c}\mathrm{a}\mathrm{s}\mathrm{h} \mathrm{f}\mathrm{l}\mathrm{o}\mathrm{w}}$$

The DCF calculations refer to a 20-year period and are based on the net present value equation where the cash flows are net rental income:

$$\mathrm{N}\mathrm{P}\mathrm{V}={\mathrm{C}\mathrm{F}}_{\mathrm{o}}+\frac{{\mathrm{C}\mathrm{F}}_1}{{(1+\mathrm{d})}^1}+\dots \frac{{\mathrm{C}\mathrm{F}}_{\mathrm{n}}}{{(1+\mathrm{d})}^{\mathrm{n}}}{=\mathrm{C}\mathrm{F}}_{\mathrm{o}}+{\sum }_{\mathrm{t}=1}^{\mathrm{n}}\frac{{\mathrm{C}\mathrm{F}}_{\mathrm{t}}}{{(1+\mathrm{d})}^{\mathrm{t}}}$$

CFs indicate cash flows in different years, NPV is the net present value of the investment, and d is the discount rate (which is equal to IRR, when NPV is zero). Property yields are used as discount rates for on-site energy investments and property yields reliably reflect the risks of onsite energy investments [76].

According to the results of the indicative preliminary feasibility studies for poorly maintained old office buildings, the very weak performance of the local office market does not support their renovation and energy retrofitting, with the exception of a well-maintained building (

Table 5. Characteristics of the buildings’ case studies and results of the economic analysis for their renovation and energy retrofitting. Primary data source: Greek Cadastre, own research.

Case Study Number (See Figure 6)	Building Use	Total Gross Floor Area (m²)	Year of Building License Issuance	Rate of Renovation (%) State of Maintenance	Ownership Status (%)				Vacancy Rate (%) (2014 Q2)		Renovation and Energy Retrofit Total Costs (€/m²) (2023 Q3)	% of the Energy Retrofit Costs
					Physical Persons	Legal Persons	Public Sector Entities	Number of Owners	Ground Floor	Upper Ground Floors
		1	2	3	4	5	6	7	8	9	10	11
1	Office	3401	1962	51.2	58.4	24.0	17.6	125	33.3	75.00	1052	34
2		5821	1961	43.0	97.2	1.7	1.1	178	0.0	66.00	935	38
3		1829	1978	38.5	86.5	13.5	0.0	37	50.0	21.93	495	57
4		4160	1959	54.4	98.5	0.0	1.5	195	85.7	54.08	985	36
5		3265	1964	53.5	77.8	3.4	18.8	117	20.0	48.81	876	41
5a		Case of converting the office building into a residential building									990	n/a
6		2850	1970	50.0	0.0	100	0.0	2	75.0	100.0	893	40
6a		Case of converting the office building into a residential building									1034	n/a
7	Residential	2824	1951	49.4	95.6	4.4	0.0	23	25.0	25.00	755	35
8		3815	1959	43.4	98.2	0.0	1.8	55	80.0	47.00	763	35
9		1895	1965	50.8	100.0	0.0	0.0	30	0.0	22.00	619	43
10		1419	1963	48.8	91.6	2.8	5.6	36	0.0	24.50	660	40
11		2046	1966	50.5	100.0	0.0	0.0	41	100.0	40.00	660	40

, case 3). Despite the assumed use of ‘dual’ state aid for their renovation and energy upgrade, both from ERDF and NEEF funds, current market conditions are unable to make the projects attractive for investments, mainly due to the very weak demand for office spaces in the area and the city.

The pre-tax internal rates of return (IRR) are very low and the payback periods are long, up to 17 years (

Table 6. Results of the financial analysis of deep renovation of the buildings-case studies.

Case Study Number (See Figure 6)	Building Use	Total Gross Floor Area (m²)	Year of Building License Issuance	Rate of Renovation (%)	Expected Mean PGI (€/m²/month), after Renovation, (Pretax)			IRR (%) (Pretax)	Payback Period
					Retail	Offices	Flats
		1	2	3	4	5	6	7	8
1	Office	3401	1962	51.2	16.5	7.5	-	9.0	15
2		5821	1961	43.0	23.6	8.5	-	5.7	17
3		1829	1978	38.5	12.7	5.4	-	12.0	11
4		4160	1959	54.4	11.3	8	-	9.1	15
5		3265	1964	53.5	15.8	5.5	-	7.4	15
5a		Conversion to residential building			15.8	-	9.3	9.0	14
6		2850	1970	50.0	11.3	-	6.0	6.5	16
6a		Conversion to residential building			11.3	-	10.5	10.1	13
7	Residential	2824	1951	49.4	17.4	-	8.4	12.6	12
8		3815	1959	43.4	10.6	-	8.4	12.3	13
9		1895	1965	50.8	13.9	-	8.6	13.9	11
10		1419	1963	48.8	8.9	-	6.3	11.3	13
11		2046	1966	50.5	11.2	-	8.4	12.1	13

, case studies 1–6). Very often, renovation and energy upgrade costs for many office buildings within the study area exceed their actual market value. Some of the office buildings could be demolished and replaced with new ones but such a decision is complex [78] and out of the scope of this paper. Conversely, current market conditions allow the deep energy renovation of housing projects, assuming the use of the ‘standard’ state aid for energy efficiency upgrade of the buildings provided by the NEEF for energy renovation only. However, the renovation of housing buildings is not eligible for additional state aid support, except for social housing units and under specific conditions [79]. The energy upgrade of residential buildings ranges from 35% to 43% of their full renovation cost. Thus, based on the PPP model used, it follows that the complete renovation of residential buildings can be more attractive to the market than for office buildings.

The current strong housing demand and rental values make the renovated and energy-upgraded flats marketable, even when they are poorly maintained and part of a degraded building. A fully renovated and energy-efficient office building located in a deprived area is not attractive to those potential users who could afford the rent that would be required to amortize the cost of an upgrade project of the property. High housing demand could favor the conversion of office buildings into energy-efficient residential buildings, as evidenced by the acceptable IRRs that can be achieved (Table 6, case studies 5a and 6a), despite high costs and limited state aid. Such conversions of the use of buildings can be seen as an appropriate response to the region’s long-term property market crisis and the city’s recent housing crisis. In conclusion, based on the above findings, we claim that state aid is not always able to contribute to the energy upgrade of old buildings through market mechanisms, even when additional incentives are available for their deep renovation.

In order to activate the real estate market and make the buildings attractive to their potential users and also consequently to the market for the energy upgrading of the buildings, a change in use may be necessary. This change in use can be administratively possible and attractive to the real estate market when it is part of an integrated urban planning approach that would reshape the area and respond to social, economic, and political requirements and aspirations.

In conclusion, the results of the case studies showed that, in the case of office spaces, deep renovation is not efficient because there is no demand for their use, even when very strong state aid is applied.

The lack of demand could be due to two possible factors that were considered: either that the office market is in decline or that the area is degraded and businesses do not want to locate within it. The small increase in office space prices over the last decade across Athens suggests that demand is generally anemic. The very low rental prices of premises in the area also reveals that even this small demand is not directed to the area, despite its central location in the capital of the country, possibly due to its degradation. Consequently, there is no scope for implementing energy renovation measures for office buildings in the area.

The case studies of residential buildings showed that the market situation is more favorable, allowing deep renovation even when only the incentives for the energy upgrading of residential buildings are used. The high demand for housing ensures relatively high rental prices for their owners, although the payback period of the renovation is long. Consequently, the implementation of incentives for energy upgrading of residential buildings could bring results. However, we do not know if there is a real demand in the area for the use of incentives for energy renovations because no data are available. Possibly, due to the high demand, owners of the apartments do not wish to renovate them, since they enjoy relatively high rents in relation to the quality of their housing, which they would have to be deprived of for several years, in order to pay off their investment in deep renovation.

A lack of demand for office space can favor the conversion of office buildings into residential buildings, as the case study has shown. But if the area continues to be degraded, it is questionable as to whether it will be able to attract more residents.

6. Can Urban Regeneration Enhance the Real Estate Market and Regulate the Multi-Ownership Issue?

Previous analysis in Section 5 suggests that in the degraded area of study in Athens, as proven by the high renovation costs of the large majority of the buildings (Figure 6), as shown in Table 5 (columns 10 and 11) for the eleven case-studies, the percentage of energy upgrading is only a part of the total cost of building renovation and this indicates the deterioration in the building stock. The renovation and energy upgrade of MOBs is subject to the functioning of the real estate market and vice-versa. The energy upgrade of an independent property (HP) or even an entire distressed building located within a degraded area is not attractive because investments in energy upgrading cannot generate significant capital gains, as surplus value is generated by the economic return from the use of the property. Buildings are elements of the urban environment not only in terms of energy consumption and emissions but also in terms of their interactions with the urban environment. In deprived areas, negative externalities due to the poor state of the urban environment lead to low values of real estate, which acts as a deterrent to demand [80]. In our area of study, the failure of the property market leads to the failure of the market for the energy upgrade of buildings, even though state aid measures are applied. Market failure is a key argument for promoting urban regeneration [81,82].

To achieve the sustainability of the investments and multiplier economic, social, and environmental effects, the drivers for building renovation should not only aim at energy saving and emission reduction but also the overall improvement in the built environment, especially required in degraded areas [83]. As proven by case studies 5 and 6 (Section 5), for the market-efficient renovation of the buildings, a change in the use is often required and, eventually, a change in land uses in the area of intervention. Both investments and upgrades of the built environment can be achieved through urban regeneration. Upgrading areas through urban regeneration reduces risks and makes them attractive for investments, thereby reducing the returns required by investors and improving the feasibility of projects [84,85] compared to the prime market; thus, investor interest is stimulated, resulting in increased competition and a shortening of yields [85].

Thus, attracting users and investors for a building located in a degraded area where there is a concentration of degraded buildings with high renovation cost, as in the Athens area under investigation (Figure 6), not only requires renovating and making it energy efficient but also improving the area in which the building is located. According to studies, in urban regeneration areas, rental growth is similar

According to Roberts and Sykes [81] ‘urban regeneration is a comprehensive and integrated vision and action which leads to the resolution of urban problems and which seeks to bring about a lasting improvement in the economic, physical, social and environmental condition of an area that has been subject to change’. Thus, an urban regeneration program includes many and specialized studies for actions, the appropriate and timely implementation of which is sought to improve the area in accordance with the goals that have been set and agreed upon by the administration and all stakeholders. Therefore, in this research, it is not possible to predict the increase in the values of the buildings in advance, due to the expected efficient operation of the market in the area that should be improved.

Research suggests approaching energy planning on a larger scale than that of a building and applying measures, including those of urban planning, and proposes the integration of energy technologies with urban plans [86,87,88]. Rose and others [89] recognize that ‘there is a need for comprehensive approaches for district-scale renovation, not only in the implementation of technical solutions but also regarding business and financing models, as well as regarding the process management’ and point out the necessity for the elaboration of business models and innovative financing schemes from the beginning of the planning process. Energy renovations at the urban district scale may create significant advantages over the traditional approach of focusing on individual buildings, such as scale economies and reduced costs. The increased volume of construction turnover can generate interest in renovations for large contractors, who usually focus on new construction [90].

By adopting an integrated approach and avoiding sectoral approaches, such as only subsidizing energy savings, significant changes can be achieved in the built urban space. This can lead not only to energy efficiency but also to livable and sustainable cities by eventually upgrading open public spaces with aesthetic and functional improvements and reducing thermal island effects. Thus, integrated urban regeneration may favor energy savings that can be achieved both in the urban sector and at the building level [91] (Scheme 4). However, specific and additional public measures and actions are needed in the context of an urban regeneration program to support tenants, to face energy poverty [92], and to mitigate gentrification that may be caused by the expected increase in rents and property values.

At the higher policy level, the Intergovernmental Panel on Climate Change suggests urban regeneration to foster the energy renovation of buildings [1], while according to its recent IPCC report, ‘deep emissions reductions and integrated adaptation actions are advanced by integrated inclusive land use planning and decision-making….’ [93]. The European Commission [2] also suggests group renovations in building clusters and not by individual buildings in order to achieve better financing conditions and economies of scale; regeneration areas are also clusters of buildings with their surrounding public areas. The EU ‘Renovation Wave’ Strategy refers to the need to encounter the energy retrofitting of MOBs. The strategy is implemented simultaneously with the ‘New European Bauhaus’ initiative for shaping living spaces. The framework for the implementation of the European Green Deal strategy [94] was updated with the package of measures ‘Fit for 55’, which are obligatory for the member states. To this end, the Energy Efficiency Directive (EED) [95] and the Energy Performance of Buildings Directive (EPBD) [96] were comprehensively revised and the European Law for the Climate was established [97]. Furthermore, after the start of the war in Ukraine, the Union’s climate and energy targets were readjusted with the announcement of the REPowerEU Plan in May 2022 [98].

The Need to Invoke ‘Public Interest’ to Regulate the MO Issue

With an EU-JRC Technical Report [99], the EU suggests overcoming the MO problem by instituting a clear and comprehensive legal framework in homeownership law regarding the homeowners’ associations, the management rules of jointly-owned building parts, rights and obligations of co-owners, the simplification of majority rules regarding decisions, minimum energy performance requirements, and the ‘greening’ of residential lease contracts. Accordingly, Weatherall, McCarthy, and Bright [50] propose reconceptualizing property law in the context of multi-owner real estate to focus on collective responsibilities rather than individual rights. Others suggest the arrangement of specific stakeholders acting at the local level as ‘coaches’ for the co-owners, their associations, and their trustees, by providing technical and financial support [100]. However, it is under question whether such arrangements could efficiently confront those cases where important upgrades to MOBs are needed. A pertinent question lies in how to deal with a situation where the vast majority of owners are interested in investing in their property but some owners are not willing to participate in an energy upgrade and building renovation program because the payback period is too long or exceeds their life cycle (e.g., elderly) or because they may hold a very small percentage of ownership rights or for any other reason.

Recently, the EU has been moving towards establishing energy issues as matters overriding public interest. A recent regulation [101] provides that ‘The planning, construction and operation of plants and installations for the production of energy from renewable sources, and their connection to the grid, the related grid itself and storage assets shall be presumed as being in the overriding public interest and serving public health and safety when balancing legal interests in the individual case……’. Whenever there is a question of intervention in properties, as the MO issue requires, any approach must be in accordance with the constitutional provisions and laws in each country but European regulations must prevail. As stated in Article 17§1 of the Greek Constitution, ’property is under the protection of the State, but the rights deriving from it cannot be exercised at the expense of the general interest’; thus, any intervention requires the invocation of the public interest, which is a concept open to many different interpretations. Invoking public interest may be an option for imposing new rules on the energy upgrading, renovation, and use of MOBs. Public interest is often a notion applied as a rationale for planning, although it is elusive and sometimes abstract to the point of irrelevance. According to Adams, it ‘lacks a neat and precise formulation, but has acquired a pragmatic and functional definition’. Theoretical approaches have emerged, which see ‘urban planning as a process of mediation between competing interests’ [102]. However, in case of judicial appeal, the Constitutional Court will ultimately be asked to decide between public and private interests. The decision is never easy, nor predictable [103], although in environmental matters, the jurisprudence usually recognizes the primacy of the public interest over private interest [103,104].

Furthermore, according to the Constitution (art. 24§1), the protection of the natural and cultural environment is an obligation of the state and for its preservation, the state has an obligation to take special preventive or repressive measures within the framework of the principle of sustainability. This statement provides room for the qualification of the energy upgrade of the buildings as interventions of general interest. There is still no relevant decision from the Greek courts on energy upgrades in matters of MOBs. This development would affect the decisions of courts and national institutional frameworks. Such provisions, in conjunction with the above-mentioned provision on public interest (17§1), would enable the state to establish the compulsory energy upgrade of buildings for reasons of public benefit, in cases of disagreement of the minority of co-owners, if this does not bring them negative financial consequences. The inability of the majority of the co-owners of the building to use financial incentives due to the behavior of the dissident owner should be a strong argument in the event of a legal dispute.

Because existing MOBs receive legal approval at the time of construction, even if they do not comply with current energy efficiency standards, retroactive application of new regulations to existing buildings causes difficulties in reaching an agreement between stakeholders. Therefore, compulsory measures such as expropriations and mandatory orders should not be ruled out when combined with strong financial incentives to protect the rights and economic interests of the majority of co-owners who are willing to cooperate in the renovation of a building, against the dissenting minority. According to the Greek Constitution (art. 17) and Law 2882/2001 (art. 1 and 7A), intervention or even the expropriation of property rights is possible in favor of a private legal person (i.e., developer), under the condition that this action can be justified for reasons of ‘public interest’. It is a measure used in Greece, when necessary, to prevent land speculation, to overcome the refusal of some owners of small parcels to sell, for important private investment projects, or for other purposes, as well as in other private projects that may promote development (L. 4447/2016).

When the intervention in buildings is part of an urban regeneration program, it falls under a favorable regime, as urban regeneration is considered an act of public interest (24§5). The above constitutional statements may render energy upgrades of the buildings within deprived urban areas as of public interest and render urban regeneration a useful tool to achieve the renovation and energy retrofitting of the building stock, mainly in deprived areas. To be effective, this constitutional provision is concretized with precise regulations provided by the Greek law on urban regeneration (L. 2508/1997). Through an urban regeneration policy, energy retrofitting and the renovation of the buildings could be made possible. According to European regulations, in urban regeneration areas facing diverse environmental, social, and economic issues, the renovation of MOBs may benefit from state aid.

The Greek Ministry of Environment and Energy is responsible both for energy and urban regeneration policies. Energy policy is elaborated by the Ministry adopting the European Commission directives and regulations but it does not have a definite spatial dimension. The ‘Renovation Wave’ strategy and the ‘New European Bauhaus’ are particularly important for European countries and especially Greece, as 55.7% of the existing building stock was built before 1980 without insulation when the first thermal insulation regulation came into force and 1.6% was built after 2010 when the new national Regulation for Energy Efficiency of Buildings (KENAK) came into effect [4]. Nevertheless, there is a diachronic lack of political will or capacity to develop a policy to build or enhance public institutions and authorities at any administrative level, so as to be able to implement integrated energy urban regeneration projects and the existing law on urban regeneration is inefficient and obsolete [105,106]. Thus, to date, the elaboration and implementation of coherent and comprehensive urban and energy policies is highly problematic, while many issues of increasing urban decay have yet to be addressed.

7. Conclusions

The integration of policies and objectives into national institutional frameworks for the energy performance of buildings does not in itself lead to their achievement. The effectiveness of these policies will also be assessed as the sum of the results of the actions and measures implemented at the local level and the multiplier effects they have produced, not only in the energy sector and CO₂ emissions but also in society and the urban environment.

Energy upgrading of MOBs is a complex urban challenge with differentiated dimensions. Decision making for the deep renovation of MOBs may involve multiple co-owners and tenants with heterogeneous preferences and potentially conflicting interests. Therefore, the case of the extensive widespread MO of buildings, as in Athens, may prevent making decisions about deep renovation of whole buildings, thus hindering the functioning of both the real estate market and the energy upgrade market.

Case studies demonstrate that the renovation of office spaces is inefficient, due to both the weak demand for their use in the city, even when strong ‘dual’ state aid is applied, and the degradation of the area. Thus, there is no scope for the renovation of office buildings in the area. The case studies of residential buildings also showed that the housing market allows their deep renovation only with the use of the incentives for their energy upgrading, although the payback period of the investments will be long. Converting office buildings into residential buildings or even upgrading and redeveloping the area as a business center or mixed-use area can be solutions to the problem of efficient building use and their energy upgrade. Consequently, the energy transition of cities may require not only a focus on the deep renovation of buildings but also a holistic approach to the urban environment.

Through the implementation of integrated urban regeneration approaches, significant improvements can be achieved in the urban space and the property market. The deep renovation of whole buildings will create significant surplus values for them, higher than the renovation and energy upgrade of building units (HPs). Also, the upgrade of an area will generate higher surplus values for the buildings than the renovation of the individual buildings and will improve the conditions of the real estate market functioning in the area. However, without unlocking the MO issue, the renovation of entire buildings will remain problematic, as will urban regeneration. This is effective through the institutional framework of urban renewals.

Urban regeneration initiatives can lead to energy savings, both in the urban sector and at the building level [75], and to livable and sustainable cities, by upgrading open public space with aesthetic and functional improvements and reducing thermal island effects. The criteria for defining an urban regeneration area could be more or less flexible to cover a wide range of urban sectors depending on their specific needs.

Urban regeneration initiatives are not mandatory for cities and states, unlike building energy upgrades, but they can organize energy-efficient and sustainable future cities and improve the functioning of the local real estate market by attracting private investment. However, specific and additional public measures and actions are needed in the context of an urban regeneration program to support tenants, to face energy poverty [76], and to mitigate gentrification that may be caused by the expected increase in rents and property values. The targets set for the energy upgrading of buildings can be the vehicle to promote urban regeneration to achieve significant multiplier benefits, combat urban decay, alleviate energy poverty, and remodel the city as the New European Bauhaus initiative targets.

In conclusion, it is argued that the energy upgrading of buildings depends a great deal on the real estate market and, to a great extent, on the multi-ownership issue; therefore, policies to achieve the goals that have been set must be part of coherent and comprehensive urban and energy policies. Urban regeneration could regulate the MO issue of buildings, which in turn would facilitate real estate value creation, thus enabling the energy upgrading of buildings (Scheme 4), and address other interrelated socio-economic and environmental issues specific to the area of intervention.

This paper ultimately advocates the integration of energy planning with spatial planning.

Originality and Limits of the Study

The study investigated issues of energy upgrading of buildings on the scale of the urban sector that have not been implemented as no available studies of similar cases have been realized to my knowledge. This is potentially both a weakness and a strength of the study. At the same time, questions are raised that cannot be answered in the context of this study and that are opportunities and a need for further research.

The novelty of this work lies mainly in the following issues:

• It presents for the first time, as far as I know, a problem for the investigation of the issue of energy upgrading of MOBs, based on the simultaneous consideration of the ΜO status of buildings and the inefficient functioning of the real estate market in degraded urban areas, where there is a great need to address economic and social problems;
• It promotes the perception that addressing the issue of MO can cause not only the deep renovation of MOBs but also the energy transition and reorganization of cities through the implementation of urban regeneration programs, when the institutional framework supports addressing the issue of multi-ownership, as in the case of Greece at least.
  The main limitations of the study are:
• The study is subject to the legal framework applicable in Greece in relation to the management of buildings and urban planning;
• The data of the real estate market and the cost of deep renovation of the buildings used are subject to unpredictable continuous changes.