Discover how blended finance and one-stop-shop models help building professionals combine renovation, affordability and social impact, empowering buyers with limited budgets in the energy transition.
Hans Vermeulen – CEO at Onesto | LinkedIn profile
Joris Piette – COO at Onesto | LinkedIn profile
(Note: Opinions in the articles are of the authors only and do not necessarily reflect the opinion of the European Union)
Across Europe, energy poverty is widening the social divide in the housing market. While the building sector accelerates towards high energy-efficient standards, low-income households remain trapped in inefficient homes or excluded from home ownership altogether.
EU-funded initiatives such as LIFE LEG-UP and LIFE RE-LEAF are developing new blended-finance models and integrated one-stop-shop (OSS) approaches that merge renovation advice, public grants and private mortgage finance into a single pathway for buyers with limited budgets. This article explores how these models enable first-time buyers with limited means to purchase and renovate inefficient dwellings, reducing both their energy bills and vulnerability.
By linking social lending, digital innovation and community-based OSS networks, this article highlights practical lessons on how to make the energy transition inclusive, ensuring that no household is left behind in the transition to comfortable, affordable and energy-efficient homes.
Europe’s renovation wave is losing momentum. Despite strong policy ambitions, the rate of residential renovation remains insufficient to meet climate targets. Construction costs have stabilised but remain well above pre-crisis levels, renovation processes remain complex, and many local markets face contractor shortages and bottlenecks in planning and execution. At the same time, the affordability crisis continues to push first-time budget-constrained buyers towards older, inefficient dwellings.
Figure 1. BPIE (Buildings Performance Institute Europe), Report on the evolution of the European regulatory framework for building efficiency. Source: rev6_SPIPA_EU.pdf
This combination of a slowing renovation market and rising affordability pressure widens a structural gap. The households most in need of energy upgrades are often those least able to access them. They enter the market through the lower-quality segment, face high renovation needs from the moment of purchase, and often lack the liquidity, technical knowledge or support networks they need to act. Without targeted intervention, many risk becoming locked into long-term energy and housing vulnerability or even energy poverty.
This reveals an essential insight: energy poverty is not only a technical problem but also a financial and structural one. Addressing it requires integrated solutions that connect purchase financing, renovation support, local incentives and risk-sharing mechanisms. Today, much attention goes to finding ways to help existing homeowners who lack the resources to renovate their homes — an urgent but complex challenge. Far less attention is given to preventing this situation in the first place, even though it can often be avoided by integrating renovation planning and financing at the moment the home is purchased. LEG-UP seeks precisely to shift this perspective: from dealing with a problem too late, to designing solutions early, when they are most effective.
Over recent years, Onesto has developed this integrated approach step by step:
Figure 2. Access to comfortable housing plays a crucial role in addressing structural poverty. Source: LEG-UP
European renovation policies have traditionally relied on subsidies, tax reductions and soft loans. Although essential, these instruments do not sufficiently address the reality of buyers with limited budgets who purchase inefficient dwellings. These households typically face the following challenges:
For mainstream lenders, these borrower profiles represent risks that are difficult to manage effectively. A combination of high LTV ratios and renovation uncertainty leads many institutions to restrict credit or avoid renovation-intensive mortgages altogether.
Some lenders still limit their role to providing purchase financing without fully accounting for the renovation needs that are essential to making the home safe, energy-efficient and affordable. When low-income buyers are left to navigate this alone, the renovation becomes a genuine risk. This exposes lenders to the long-term danger of ending up with stranded assets and contributes to artificially inflated housing prices. As a result, many households enter overpriced, substandard homes yet lack the means to finance the upgrades required to reduce energy consumption, improve comfort and sustain long-term affordability.
Unlocking private capital for this group, therefore, requires more than affordability measures: it requires structural derisking applied consistently from the moment of purchase.
LIFE LEG-UP is built on the premise that de-risking must address both sides of the challenge, namely:
The most effective approach is a coordinated, multilayer structure in which local, regional, national and EU partners each play a targeted role:
Local governments play a crucial role in ensuring that households can actually access the renovation instruments created at higher policy levels. By supporting and embedding OSSs within local services, municipalities provide low-threshold support and guidance, outreach and administrative assistance, particularly for residents who struggle with digital procedures or complex paperwork. This proximity helps vulnerable households navigate renovation planning and make full use of available support.
At national and regional levels, governments provide the core financial tools needed to make renovation-heavy mortgages feasible. These include income-based schemes, renovation premiums and low-interest renovation loans, which lower the net renovation cost and strengthen households’ financial resilience. When integrated into OSS support workflows, these instruments create an efficient and predictable structure that supports both affordability and risk reduction.
However, relying exclusively on publicly funded schemes is no longer viable in many Member States, where fiscal pressure and rising public debt reduce the capacity to subsidise and finance renovation at scale. In some countries, governments even finance the purchase of low-quality dwellings with public money, yet provide little or no support for the renovation that is urgently needed afterwards. This approach leaves vulnerable households with inefficient, deteriorating homes and represents a poor use of scarce public resources. A more effective and sustainable strategy is therefore required — one that blends public and private financing so that public funds can be used in a targeted, proportional way to unlock private capital at scale.
To unlock private investment at scale, LIFE LEG-UP explores the role of European public financial institutions, such as the European Investment Bank (EIB), in providing upper-layer guarantee mechanisms or co-financing facilities. These mechanisms can:
By combining local guidance, national and regional financial support and European-level guarantees, a blended finance structure emerges that can deliver the scale, affordability and stability needed for an inclusive renovation wave across Europe.
The EU Taxonomy plays an important role in directing capital towards sustainable investments, but its current design offers little benefit to households most at risk of energy poverty. Because new buildings automatically meet high energy-performance standards, they are the easiest type for banks to classify as green. This directs capital towards new construction, while offering almost no incentives to finance the upgrading of older, inefficient dwellings — the segment where low-income buyers overwhelmingly enter the housing market.
The issue is particularly visible in acquisition loans. These cannot be labelled green unless the purchased dwelling is already energy efficient. As a result, the financial system fails to support the moment when most structural energy vulnerability begins: the purchase of a low-quality dwelling by a household with limited means. Even when a renovation is planned, affordable and professionally supported, the Taxonomy does not recognise the value of this trajectory.
A more effective approach would allow banks to classify loans as green when they include a credible and supported renovation pathway and when it can be shown — in a simple and proportionate way — that the renovation has been completed and delivers meaningful energy improvements. This would encourage lenders to integrate renovation planning into purchase financing and provide affordable, tailored credit that helps buyers avoid years of high energy bills, unsafe housing and long-term vulnerability.
By rewarding the transformation of existing dwellings — not only the construction of new ones — an improved Taxonomy would direct capital to where it achieves the highest climate and social return and would help prevent thousands of families from falling into energy poverty immediately after purchasing a home.
For many low-income first-time buyers, the main barrier is not only the poor condition of the dwellings they can afford, but the lack of financial products that make safe and energy-efficient home ownership possible. Traditional mortgage models cover the purchase but leave households without a feasible route to carry out the essential renovation works needed to avoid high energy bills, unhealthy living conditions and long-term financial strain. As a result, many buyers enter the housing market only to become locked into structural energy vulnerability.
To prevent this, vulnerable households must secure affordable access to the financial market, but only under conditions that make renovation genuinely achievable. This requires more than subsidies or isolated support schemes alone. It calls for innovative, integrated structures that link purchase financing, renovation planning and technical guidance into one coherent pathway. Crucially, these structures must be supported by targeted, limited public derisking — enough to make lending viable for this group, without relying on permanent or large-scale public expenditure.
When purchase financing is aligned with a supported renovation pathway, households with constrained budgets can buy a home and complete meaningful energy-efficiency improvements without destabilising their finances. This reduces the risk of falling into energy poverty and creates a safer and more predictable environment for both homeowners and lenders.
LEG-UP builds precisely this type of integrated pathway for vulnerable buyers. It connects tailored mortgage products, phased renovation financing and strong renovation guidance through OSS, ensuring that vulnerable buyers receive the right support at the right time. Instead of treating renovation as a separate step years after purchase, LEG-UP embeds it from day one — the moment when decisions have the greatest impact on long-term affordability.
A key feature of the project is its focus on limited and proportional public derisking. By combining national or regional incentives with European-level guarantees, LEG-UP creates a financing environment in which lenders can responsibly serve households that would otherwise be excluded. Public funds are used strategically, not to replace market finance but to unlock it — ensuring that vulnerable buyers can access affordable credit under conditions that safeguard renovation quality and repayment capacity.
Figure 3. The LEG-UP consortium – Kick-Off meeting in Brussels (consortium partners UCI, Onesto, EnerSave Capital, NTUA)
To enable scaling, LEG-UP is developing a financial structure capable of pooling renovation-linked mortgages, applying standardised renovation trajectories and attracting impact-oriented investors. This approach ensures that support for low-income buyers is not dependent on temporary budgets or fragmented schemes but embedded in a sustainable system that mobilises private capital where it delivers the highest social and climate return.
LEG-UP therefore does more than support individual households; it builds a repeatable, investable model that makes targeted renovation finance affordable, reduces structural vulnerability and prevents energy poverty from the moment a dwelling is purchased.
Experiences from the C-REAL and RE-LEAF projects show that preventing energy poverty begins at the moment households with limited means purchase a dwelling. Building on these insights, LIFE LEG-UP develops an integrated pathway that aligns purchase financing, renovation planning, technical guidance and targeted public de-risking, making energy-efficient home ownership realistically achievable for vulnerable buyers. Its scalable financial structure — combining OSS support, blended finance and EU-level guarantees — enables lenders to offer affordable renovation-linked mortgages while safeguarding renovation quality and repayment capacity. LEG-UP aims to mobilise private capital for social and climate impact, ensuring that low-income households are not left behind in the transition to comfortable, energy-efficient and affordable homes.
