Social leasing of heat pumps: Bridging the affordability gap for energy-efficient housing

As Europe seeks to meet its climate and energy goals, transitioning to energy-efficient homes has become a critical step. However, for many households, the upfront costs of installing clean technologies like heat pumps remain a significant barrier. This is especially true for those in social housing, where energy poverty is a growing issue.

With LIFE Street HP Reno, we’re focusing on a street-wide approach to retrofitting homes with heat pumps. But with the growing interest in social leasing for clean technologies, we want to explore how this innovative model could further help make energy-efficient homes affordable for all.

What is social leasing of heat pumps?

Social leasing is an innovative financing model that aims to make energy-efficient technologies accessible to everyone, particularly those in vulnerable financial situations. Under this model, households do not have to pay the full upfront cost for the installation of heat pumps. Instead, they lease the system for a monthly payment, similar to renting. This provides an affordable pathway to upgrading homes, reducing energy bills, and lowering carbon emissions without the financial burden of an initial large payment.

Through social leasing, the upfront installation cost is covered, often with subsidies or government support, and the household pays an affordable monthly fee. This model not only helps households reduce energy costs but also promotes sustainability by accelerating the adoption of renewable heating technologies across communities.

Why is social leasing crucial for social housing?

For social housing tenants, affordability and sustainability often do not go hand-in-hand. Many households in social housing face energy bills that they struggle to pay, despite being in homes that are outdated and energy-inefficient. The installation of heat pumps, which provide sustainable, renewable heating, can help reduce energy costs. However, the high upfront cost of installing these systems can prevent residents from making the switch to greener, more affordable solutions.

Social leasing addresses this challenge by removing the upfront financial barrier and making energy-efficient home upgrades accessible to everyone, regardless of income level.

Proven success? France’s experience with social leasing of electric vehicles

While the focus here is on heat pumps, we can look to France's experience with social leasing of electric vehicles as an example of how effective this model can be. The French government introduced a social leasing programme for electric vehicles, which encouraged nearly 50,000 households to make the switch to electric cars within a few months. The programme was so successful that it had to be stopped quickly due to the unexpectedly high demand, which impacted public finances.

This success demonstrates how social leasing can be a powerful tool in encouraging the adoption of sustainable technologies. By offering a model where the financial barrier is removed, households are more likely to adopt these technologies, leading to immediate savings on energy costs and lower emissions.

LIFE Street HP Reno: Bringing the concept to life

At LIFE Street HP Reno, we understand that achieving widespread adoption of heat pumps and energy-efficient retrofits requires more than just technological innovation. It requires innovative financial models and scalable solutions that can be deployed across entire neighbourhoods, not just individual homes.

In our ongoing efforts, we are working with local authorities, housing associations, and communities to create a replicable model for street-by-street heat pump retrofits. This approach not only reduces energy bills but also creates a pathway for the social leasing model to flourish.

For example, in our pilot projects, we have explored ways to integrate affordable financing options, including concepts similar to social leasing, into the retrofit process. By providing residents with the ability to pay for energy-efficient upgrades over time, we reduce the upfront cost barrier and allow more households to benefit from lower energy bills and a more sustainable home.

This is part of our broader effort to demonstrate that, with the right financing mechanisms in place, we can scale these solutions to meet both the affordability and sustainability needs of social housing tenants.

The role of policy and government support

For social leasing to thrive, strong policy support is essential. Governments must create frameworks that support subsidized or guaranteed leasing models and reduce the financial risk for providers. Public funding and targeted subsidies can help bridge the affordability gap, ensuring that energy-efficient home upgrades are not just for the wealthy or those able to afford hefty upfront payments.

The European Affordable Housing Plan is currently in the consultation phase, with a planned launch later this year. The consultation will help shape the plan, ensuring it addresses the diverse needs of social housing tenants across Europe. This is a key opportunity for social leasing models to gain support at the policy level, helping accelerate the transition to energy-efficient homes.

Looking ahead

The integration of social leasing for heat pumps in social housing can be a game-changer in making homes both affordable and sustainable. At LIFE Street HP Reno, we are committed to showing that this model works in practice — and with the right policy support, it can be scaled to make a real difference across Europe.

As we continue our street-by-street retrofits, we’re exploring the integration of social leasing to ensure that every home, regardless of income, has access to sustainable heating that is both affordable and effective in reducing energy consumption.

To learn more about social leasing and how it can transform the energy efficiency of social housing, read the full publication from EHPA here