Making flexible housing financially viable through insights into future scenarios

The demand for affordable housing in the Netherlands is urgent. Flexible housing offers a solution: it can provide swift and efficient living spaces in locations where permanent construction is not immediately feasible. Moreover, it contributes to the transition towards a circular economy. However, financing these housing solutions remains a challenge. To stimulate the development and financing of flexible housing, Invest-NL and PwC have developed a model that assesses the likelihood of various future scenarios for flexible housing. Combined with the circular residual value for each scenario, this represents a significant step towards profitable and circular housing solutions.

Unlike traditional housing, which is often demolished or incurs costly repurposing expenses at the end of its use, flexible housing is designed to be relocated, stored, or dismantled. This flexibility gives it a circular residual value. However, this value is not yet commonly included in business cases, making it difficult to secure financing for these homes.

Circular residual value as a sustainable solution

To address this, Invest-NL collaborated with stakeholders and market specialists to develop a methodology that determines the residual value of these buildings under various scenarios. This allows valuers to incorporate this value into their calculations. The actual residual value depends on the realised scenario: will the buildings remain in use, be relocated, or have their dismantled components sold individually?

New model for predicting future scenarios

The model developed by PwC and Invest-NL estimates the likelihood of three scenarios after the initial operational period: continued use, relocation, or dismantling. Factors such as demographics, liveability, climate risks, and project characteristics are incorporated into the calculations. This approach provides a more realistic understanding of potential residual values, which is crucial for accurately estimating future market value.

For investors and policymakers, the model offers a transparent framework to assess the financial feasibility of flexible housing projects and compare outcomes. By combining the probabilities from the model with the financial residual value, a weighted average residual value is calculated. This strengthens the business case for circular housing solutions.

Making circular solutions financeable

Invest-NL aims to accelerate the transition to a circular economy. This model is a key step in making circular solutions in the construction sector financeable.

As an independent intermediary between financiers, the market, and the government, Invest-NL can play a pivotal role in further research into financial instruments for flexible housing. By applying the model to a hypothetical portfolio of 5,000 homes across 50 locations, we can gain insights into the financial conditions needed to guarantee residual value at scale. This paves the way for new projects and contributes to a future-proof housing market and a circular economy.

Download the report: 'Methodology description: scenario opportunities for flexible housing'

Download the model 'scenariokansen flexwoningen'

Download the one-pager 'Gewogen Restwaarde'