This executive summary lays out highlights from the report Accelerating energy retrofits: reducing barriers in Canada’s private rental housing, written by Max Bell School Master of Public Policy students Abigail Jackson, Nicole Simineri, and Simon Topp as part of the 2023 Policy Lab.
Access the summary and presentation below, and read their full report here.
Affordable housing and climate change present two of the most pressing and complicated policy issues facing Canada today. As Canada’s population increases and the demand for rental housing surges, rent increases are creating significant challenges for those seeking affordable housing. At the same time, rental housing is deeply intertwined with Canada’s commitment to reach net-zero emissions by 2050, given that buildings account for a significant source of emissions in the country. Yet efforts to make rental housing more energy efficient can create additional price pressures in the housing market, which can exacerbate the risks already posed to Canada’s existing affordable housing stock. To reconcile these two interrelated challenges, the Canada Mortgage and Housing Corporation (CMHC) asked the following question: What non-financial tools can the federal government implement to de-risk energy and resiliency retrofits while maintaining the affordability of Canada’s private rental housing stock?
This report provides three policy recommendations that take a whole-of-government approach to answer this question with a focus on energy retrofits due their greater capacity for emissions reductions. The term “retrofit” throughout this report thus refers to energy retrofits. All three recommendations seek to reduce and remove barriers to enable the owners of Canada’s private rental housing stock to install retrofits more easily, cheaply, and quickly than currently possible. When paired with existing market incentives, such as the national price on carbon and the various financial incentives to promote retrofits offered by CMHC and other government entities, these policy recommendations are designed to spur the growth of the retrofit industry in Canada while lowering costs for building owners and facilitating long-term housing affordability in the country. Outlined in this executive summary are three policy recommendations, the key issues they address, and some considerations for the future as these policies are implemented.
Policy Recommendation #1: Establish a National Database
This report recommends that Natural Resources Canada (NRCan), with the support of CMHC, create a national database that collects, consolidates, and makes publicly available data on building energy use, characteristics, operations, and equipment. By aggregating data from across the country in an accessible format, a national database will create opportunities for leveraging building data to reduce emissions by enabling low-cost statistical modeling that can predict energy savings more cheaply, quickly, and accurately for actors across the retrofit industry. This national database would also integrate information and resources on energy policies, government programs, and retrofit coordination services that are crafted to meet the needs of individual users based on their zip codes and building profiles. In turn, this national database will reduce barriers to retrofits that would make the installation of retrofits easier, cheaper, and faster across the building industry and thereby increase the uptake of retrofits in private rental housing.
Key Issues Addressed
Absence of National Building Performance Data: Canada lacks a national database for building energy performance. Consequently, although retrofit costs may be clear upfront, potential energy savings are not, creating a major barrier to retrofits since building owners are often unable to fully gauge the costs and benefits of investing in them. A national database mitigates this by making energy savings predictable and accessible to actors across the retrofit industry through cheaper, quicker, and more accurate modeling.
Lack of Information: Landlords of all sizes have many competing priorities and often lack the time and/or resources to learn about government initiatives or to hire staff to do so. Consequently, there is a general lack of knowledge about retrofit programs among many landlords and especially smaller landlords who often maintain full-time jobs. The national database addresses this by compiling all retrofit information in one location and channeling relevant information directly to users, thereby increasing accessibility for all.
Distrust and Disproportionate Effort: Landlords generally distrust government, and this is compounded by the assumption that government programs require significant effort for little gain. A national database that creates a standardized process for landlords to upload information and directs them to relevant policies, programs, and resources mitigates this by making applying for government subsidies and accessing information easier. This will also foster a culture of transparency and support to build the trust between government and landlords that is needed for efforts to reduce building emissions to succeed.
Lack of Support for Green Initiatives: A lack of national building performance data obstructs green initiatives at all levels of government by hindering access to information for actors across the retrofit industry. By aggregating national building performance information, a national database supports the development and implementation of green initiatives such as energy labels, retrofit codes, and minimum efficiency thresholds at the federal, provincial, and municipal levels by making the required data accessible and enabling monitoring of the nation’s progress toward reaching its net-zero goals.
Data Ownership: Data ownership is a challenge that is further complicated by Canadian federalism since provinces and municipalities often have data ownership regulations in place. Contributing to a national database in Canada would therefore need to be voluntary for public and private entities alike. This would alleviate data ownership concerns by granting provinces, municipalities, and the companies that are based within them the option of choosing to participate in the national database, with promotions to encourage contributions by embedding the use of the national database into government programs and initiatives.
Digital Privacy: Digital privacy is another major hurdle that can be addressed by anonymizing data and embedding options within already existing databases that allow users to provide their informed consent prior to providing their data. There is also an opportunity to update the terms and conditions of other databases such as Energy Star Portfolio Manager to include an option for users to consent to sharing the information they submit to a national database. Additionally, CMHC can use and update the housing agreements it has with provinces and territories to encourage them to contribute to the national database.
Technology Development and Maintenance: This database will need to be developed as well as maintained to ensure its continued relevance and utility. NRCan already has in-house expertise with developing and maintaining online tools that it can leverage, and CMHC can provide support through its research teams, funding channels, policy experts, and network of connections to contribute to this process.
Policy Recommendation #2: Develop a National Training Curriculum
This report recommends that Employment and Social Development Canada (ESDC), with the support of CMHC and NRCan, develop a training curriculum that can be adopted nationwide through Canada’s trade schools. The training would be developed in consultation with the government, trade schools, and retrofit industry leaders with a focus on educating workers on how to install retrofit technologies. Participating schools would receive funding packages to incentivize and facilitate the adoption of the curriculum. To promote the curriculum’s success, the government should coordinate with construction firms to ensure workers have a channel from schools into the workforce. Through this training curriculum, the training of workers and the adoption of new retrofit technologies will be de-risked and the pool of trained workers will be increased so that firms can better meet the demand for retrofits. In turn, this would reduce costs for retrofit projects by increasing the supply of workers and firms capable of conducting these projects.
Key Issues Addressed
Skilled Workforce Attrition: Workers in construction are leaving the industry faster than they are being replaced. This labor shortage is fueled by the absence of pathways from school to trades, causing fewer Canadians to choose trades careers. Moreover, workers are not being replaced by immigrants since the immigration system targets white-collar workers, and those immigrants trained in trades who are able to enter Canada often struggle to have their credentials recognized. The training curriculum mitigates this by providing an accessible pathway for workers to obtain the training and recognition to enter the workforce.
Barriers to Market Entry: Landlords generally prefer to do business with a few trusted firms. For landlords, this increases the time it takes to complete an energy retrofit, and for contractors this makes it difficult to break into the market. The training curriculum would increase the overall training level of the workforce and signal that workers have the necessary skills to install retrofits according to industry and government standards. This, in turn, will raise the general trust level of contractors and allow more firms to enter the retrofit market. This will further raise the supply of trained workers and thereby reduce costs.
Rise in Raw Material Prices: The shortage of labor is compounded by a shortage of raw materials that is further exacerbating the costs of all types of construction work, including property maintenance and retrofit installation. As costs increase, so does the risk that landlords assume when installing retrofits. The training curriculum offsets these rising costs by increasing both the number of workers available as well as the pool of workers who can install retrofits as efficiently as possible, thereby reducing overall costs.
Technological Adoption: Construction firms often hesitate to train their workers on the installation of a new technology or invest in obtaining the required raw materials until it is proven that the new technology works, will not be made obsolete, and will be widely adopted well into the future. This further restricts the number of workers qualified to install certain retrofits and hinders the development of the green labor market. The training curriculum would de-risk new technologies among firms by distributing information on the latest trends, teaching efficient and proper installation techniques, and reducing worker error.
Maintaining Relevance: ESDC will need to regularly review and update the training curriculum to ensure it is up to date with the latest developments in the retrofit industry. These reviews can be informed by feedback from industry stakeholders, changes in regulations or codes, advances in technology, new installation and safety practices, and emerging industry-specific needs, and continued partnerships between the federal government, trade schools, and retrofit industry leaders will support this maintenance.
Long-term Funding: Long-term funding is needed for the funding packages that incentivize and facilitate adoption of the curriculum. ESDC can do this by establishing a dedicated funding mechanism specifically for the training curriculum. Fostering partnerships between trade schools and industry leaders for the development and maintenance of the curriculum will support this by allowing for collaboration that may increase funding opportunities. Throughout, promoting public awareness about the benefits of the training curriculum will help secure political and public backing that can contribute to sustained funding.
Recommendation #3: Support Community-Led Coordination Services
CMHC should coordinate with NRCan to establish a multidisciplinary Retrofit Commission that will provide national support for retrofit coordination services. By tapping into their existing partnerships and convening capacities, CMHC and NRCan can bring together representatives from all provinces and territories as well as retrofit industry leaders, housing specialists, municipal housing groups, and landlord and tenant associations across both the public and private sectors. In turn, this Commission should develop a toolkit to provide standards and guidance for carrying out coordinated retrofit projects. Key components of the toolkit would include methods for conducting community outreach, guiding principles on housing affordability, networks for sharing information about energy efficiency opportunities, best practices for engaging with and between landlords and tenants, and processes for accessing financial solutions. In turn, empowering actors across the retrofit industry and especially community groups who most need support to pursue retrofit projects can encourage a greater number and diversity of building owners to pursue retrofits while developing public awareness about energy efficiency to increase retrofit uptake over time.
Key Issues Addressed
Complex Retrofit Landscape: The retrofit market is highly complex, creating significant barriers for landlords and especially small landlords. Consequently, even those who are interested in retrofits may only get as far as completing an energy audit before realizing that they are unable to move further in the process. This makes a centralized coordinator who can serve as a streamlined source of information an essential support mechanism to enable landlords to move forward in the retrofit process, and a coordinator that is based in a local community can add an additional layer of trust and credibility to the process.
Limited Coordination Services: Retrofit coordination services lack access to funding and support. Existing programs for coordination services exclude many building owners who do not fall into targeted groups and especially small landlords who rent secondary suites and single-detached homes, and who most need support to pursue retrofits. Rather than starting from scratch, local communities through the toolkit can implement localized coordination initiatives with confidence, with the support of the federal government as well as the network of other community groups across the country who are also using the toolkit.
Lack of Government Coordination: Although there are various partnership networks and communication channels between different federal departments, and between the federal government and provincial and municipal governments, more coordination is needed among the entities most responsible for promoting housing energy efficiency. This includes CMHC for its role in housing, NRCan for its role in energy efficiency, and provincial and municipal governments for their jurisdiction over housing regulations, and the Retrofit Commission would mitigate this by serving as a regular forum for government coordination.
Local Variations: This toolkit can work hand-in-hand with the Canada Green Buildings Strategy that the federal government is currently developing to establish high-level direction for on-the-ground community retrofits. Local variations across the country make flexibility and adaptability vital for retrofit coordination services, and this toolkit provides high-level cohesiveness that supports these variations while providing national leadership and creating the space for information sharing and collaboration across the country.
Capacity of Local Communities: Community-led retrofit coordination models have great potential to accelerate retrofits, but local communities must have the capacity to carry out retrofit projects. This makes it imperative that the coordination of the retrofit market is accelerated and access to financial solutions is streamlined. The toolkit supports this by providing guidance that facilitates access to the information that actors across the retrofit industry and especially community groups need to coordinate retrofit projects.
Maintaining Relevance: The toolkit must be regularly updated to reflect developments across the retrofit industry. Accompanying the toolkit with systems and forums for information sharing that bring together local groups and other stakeholders would serve as a forum to solicit feedback from community groups that could feed into reviews and updates to the toolkit to ensure it is well-attuned to the needs of diverse communities and maintains its utility while enhancing coordination among public and private actors alike.
Policy interventions are most effective when they are multifaceted, complimentary, and well-integrated. As such, the policy recommendations in this report are not siloed but, rather, represent a holistic and cohesive package that works together to create synergies in Canada’s retrofit market. For example, the national database will identify areas of need to be reflected in the training curriculum. In turn, the training curriculum will increase the pool of trained workers, who will be connected to coordination service providers through the toolkit to aggregate projects. The new data streams produced through the increased uptake of retrofits will then be channeled into the national database to further facilitate resource access and forecast industry trends. Together, these integrated policy recommendations feed into and off of each other in an ongoing feedback loop that positively impacts diverse actors across the retrofit industry by reducing barriers to retrofits and thereby making retrofits easier, cheaper, and faster to install while supporting the whole-of-government approach that is needed for Canada to reach its net-zero goals.