The introduction of Energy Performance of Buildings Directive (EPBD) IV brings major changes to the way energy labels are determined and valued. In this blog, we examine the potential impact on the WWS-points system and the Dutch rental housing market.

The effect of energy labels in the WWS

As of July 1, 2024, the energy label carries more weight in the Dutch Housing Valuation System (Woningwaarderingsstelsel, WWS), the calculation method used to determine the permitted rent level of a property, and therefore whether it falls within the regulated or free market segment.

It quickly became clear that a property’s energy label can have a major impact on the total number of points. From 187 points onwards, a property can be rented in the free market sector. An A+++++ energy label accounts for 58 to 62 points, depending on the size of the dwelling, while a G label results in a deduction of 15 points. This is not surprising, as a better energy label generally corresponds to lower energy bills and increased comfort.

The next step: EPBD IV

As part of the Paris Agreement, all real estate must reach a net-zero energy standard by 2050. This remains ambitious, but clearly beneficial: improved air quality, reduced energy price volatility, less energy poverty, and an overall higher standard of living. The Netherlands is relatively progressive in this regard.

Last year, Minister Keijzer, now an independent member of the Dutch House of Representatives, outlined minimum energy label requirements for rental homes on the path toward 2050, following the 2022 announcement to phase out the lowest energy labels. All rental properties with labels E, F, or G must be upgraded by their owners to at least label D by 2029.

As of May this year, this is complemented by the Dutch implementation of the EPBD IV. This legislation, adopted in 2024, includes, among other things, a reclassification of energy labels. To make energy labels more comparable across Europe, label A will in future indicate net-zero energy buildings, with A0 reserved for energy-positive properties. All other buildings will be redistributed across labels B through G. As a result, this law could have a significant impact on current energy labels. The calculation methodology will also be revised.

What happens if ‘B’ is no longer ‘B’?

In the absence of detailed guidance from the Dutch government, we look to the European directive itself and to other countries such as Ireland, where national implementation has already been published. An initial estimate we made based on the average European distribution illustrates the scale of the change: properties currently rated A could drop to a C or D, depending on where thresholds are set.

For residential properties, early discussions with the Ministry of the Interior have indicated that efforts are being made to limit the impact by capping the downgrade at a maximum of two label classes.

This raises important questions. How will all these regulations come together? What happens if energy label B no longer corresponds to what it used to be? If an owner invests in improving a property’s energy label from E to C, but under the new methodology it is reassessed as an E again, was the investment worthwhile?

In the coming years, significant changes are expected. Savills estimate, below, of how energy labels for residential real estate may shift help prepare as effectively as possible for these developments.