Circular residual value of flexible homes: a sustainable solution to an urgent problem

The Netherlands faces a significant and urgent housing challenge, with pressure on the housing market in many Dutch municipalities already high for a long time. This pressure on housing highlights the need to accelerate the construction of new homes. It underscores the importance of a strategically deployable flexible housing stock that can absorb fluctuations in demand and supply. Currently, however, flexible housing units are often difficult to finance due to the temporary nature of a location. Research commissioned by Invest-NL shows that the business case for flexible housing improves when the circular residual value is taken into account.

Flexi-housing offers a solution to the current housing shortage. These are dwellings with a permanent construction quality, but are modularly designed and movable, and typically remain in one location for 10 to 15 years. Currently, the business case for flexi-housing is often not viable, partly because the properties are fully written off after this temporary period. Therefore, realizing these homes requires a new financing approach. By integrating the residual financial value, the business case for a flexible housing location is significantly improved. A standardised working method based on circular principles for financial residual value simultaneously offers opportunities for circular applications and reuse in mainstream housing construction and possibly other sectors.

On behalf of and in collaboration with Invest-NL, Alba Concepts, bbn adviseurs, and Basevalue have prepared a report with a standardised working method for applying circular residual value in the business case for temporary housing. Research agency TNO and the Dutch Green Building Council (DGBC) have reviewed and verified the working method.

The report includes a calculation method based on various scenarios (continued operation, reallocation, and dismantling) and provides further explanation of the applied calculation rules. Additionally, it offers insight into the financial implications of integrating the financial residual value into a financing model, and identifies environmental influences that (indirectly) impact the amount of the final residual value or IRR.

The next step is to structurally implement this calculation methodology into the valuation and financing process for (circular) flexi-housing. First, we will engage in discussions with appraisers, accountants, and financiers to explore whether the calculation method can be adopted as a standard norm.

With this report, Invest-NL assumes a coordinating role in developing the market for flexi-housing in the mid-market segment. By promoting financial feasibility, encouraging collaboration between sector parties, and supporting the transition to a circular economy. Invest-NL also aims to further investigate how, for example, guarantees can accelerate the financing of the circular residual value of flexi-housing. This reduces financial risks for investors and developers and stimulates the development of new projects.