This is a description of a set of policies adopted in the science fictional Great Retrofit world, created as an output of the Science Fiction Economics Residency 2024.
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The Great Retrofit (policy) – The Great Retrofit world
The Framework Programme for an Improved and Higher-efficiency Residential Building Stock towards an Eco-friendly and Solidar City (Accordo di Programma di Riqualificazione ed Efficientamento dell’Edilizia Residenziale per una Città Ecologica e Solidale), known as the Great Retrofit, was a public policy implemented in the Sicilian city of Messina from 2034 to 2044. It adopted the strategic objective to increase the resource efficiency of the city’s building stock, mostly by improving its thermal insulation. Its stated quantitative goal was to intervene on 60,000 housing units, accounting for about 60% of Messina’s building stock, within ten years of launch; the goal was largely achieved. Responsible for the policy was the Municipality of Messina, but various other public authorities and private entities contributed to it.
History
Inspiration
The idea for a “moonshot” on the efficiency of residential buildings was first proposed in a paper by physicist Gaetano Giunta and economists Mariana Mazzucato, Joffa Applegate and Fabrizio Barca in 2025. The co-authors combined two ideas: that of an innovation-oriented mission economy striving to achieve a well-defined, verifiable, time-limited objective (called by this literature a “moonshot” in tribute to the Apollo Program of the 1960s), and the idea that such a mission would contribute to a Green New Deal, a societal arrangement combining the abatement in greenhouse gases (GHG) emissions, the protection and restoration of the natural environment, and robust social justice programmes. The choice of the building stock as the target of the intervention was justified on the grounds that residential buildings were the largest source of GHG emissions in Messina. Furthermore, the paper observed that creating a large market for green building provided an incentive for the local construction to sector to become more knowledge-intensive (by researching more effective, cheaper materials for insulation, better techniques for rainwater captation, water re-use, and so on), and more circular (some waste materials can be upcycled into good insulants).
Launch
The Framework programme was signed in October 2033. (verify or eliminate: framework programmes in Italy are signed between regions and the government. No a priori reason why you could not used as a planning tool, adding an MOU with the City of Messina and private-sector actors, but need to check). Signatory for the city was Mayor Anita Magno.
Components
The Great Retrofit was not a singular policy, but rather a mix of different regulatory actions and interventions by different agents.
Demand-side policies supporting building renovation
An array of measures was launched to incentivize residents to engage in the renovation of their homes.
- A tax rebate on home remodeling, when it led to increased resource efficiency of the property. This existed in most countries of the European Union, in line with the Green Deal.
- A financial mechanism to make the tax rebates tradeable. Priu and other remodelling companies took care of the retrofitting works, invoicing building residents as they went; the act of invoicing for an efficiency-increasing remodelling intervention generated a tax credit, which was tradeable only once (that is, no secondary market for tax credits was allowed. Their securitization was equally disallowed). b). This had a precedent in the Italian experience of the so-called Super Ecobonus. Ethical banks stepped in to purchase, at a small discount, the tax credits.
- The difference between the cost of the intervention and the tax credit was borne by the property owners. The envisaged financial flow went like this: residents would apply for the tax credit on the basis of a technical proposal made by a renovation company. Once their application was cleared, they used their own resources for the first tranche of the renovation works. The invoices from the construction company gave rise to the tax credit, which was then sold at a small discount, typically to a bank. The proceedings from the sale went to finance the successive tranches of the renovation work.
- A fund, with contributions from the Italian Ministry of Economic Development and a coalition of ethical banks was created to assist residents who would have liked to make their homes more efficient, but did not have enough liquidity to front the initial tranche. The fund advanced the difference, and paid itself back, at a small interest, by withholding a part of the savings on the energy bills caused by the remodelling.
- Additionally, low-income residents in need were supported with grants. The last two interventions were designed to prioritize low-income families. This was critical, as the policy makers had determined that the the oldest, most dilapidated buildings where those where the largest efficiency gains (and largest drop in emissions per square meter renovated) would be made. These buildings were also where the people with the least capacity to mobilize finance lived; prioritizing them had positive redistributive effects.
- To prevent adverse redistributive effects, owners of condominiums that were rented out were prohibited from raising the rent (beyond indexation to inflation) for a period of seven years after the end of the renovation. This did not destroy the incentive to renovate, as owners made a substantial capital gain due to the renovation of their property.
Demand-side policies supporting new housing cooperatives
Learning from the experience of U Scogghiu, the municipality and the Foundation launched a program to support groups of residents who wished to live together, cooperating closely for an efficient use of resources. On the demand side, this amounted to earmarking for cohousing projects some buildings and sites that had been donated, or long-term conferred to the Foundation. A new legal entity, the Messina Community Land Trust, was set up as the legal owner of these sites and empowered to long-term lease them for up to 99 years for a nominal rent. MCLT’s statutes prohibited it to sell them, though, in an effort to slow down speculation and keep housing prices affordable. This move derisked substantially these groups, as they could count on large, cheap sites in which to anchor cohousing projects.
Supply-side policies supporting building renovation
Joint efforts by the Foundation and its ethical finance partners to capitalize Priu, so that it could invest in capacity. R&D funding was diverted to some academic spinoffs with the mission to innovate on building and retrofitting techniques that would yield more resource efficiency. Most of this research explored ways to recycle waste streams from other industries as construction material, contributing to make the Sicilian economy more circular.
Supply-side policies supporting new housing cooperatives
The U Scogghiu cooperative was encouraged and supported to start a new organization, The School of Living Together (Scuola del Vivere Insieme), to train newly established cohousing groups in participatory decision-making, building management, efficient resource management and urban agriculture, as well as the basic legal, fiscal and financial aspects of running a cohousing.
Simulation model
Thanks to @zazizoma for producing a simulation of how the policy operated over time. The model is simplified: for example, it assumes that all buildings are identical, whereas in a real-world situation (and certainly in real-world Messina) the bulk of the benefits can be reaped by targeting the most dilapidated buildings. Nevertheless, the dynamic of renovation is accelerated in the model. It can be downloaded from here.