Article written by Céline Lambert.
European Union’s decisions are directly impacting the real estate sector by setting regulations transposed across Member States. Through its ESREI programme and its Sustainable Finance programme, the Observatoire de l’Immobilier Durable monitors and deciphers already existing and future EU regulations to guide the real estate sector in their implementation. Therefore, with the newly elected 720 Members of the European Parliament (MEPs), this article explores the possible future of EU ecological regulations impacting the real estate.
European elections’ system
From the 6th to 9th of June European elections were held in all European Union Member States. EU citizens chose 720 deputies to represent them at the European Parliament – the world’s only directly elected transnational assembly – for 5 years.
The number of MEPs allocated to each Member States depends on its demographic population, by following a degressive proportionality principle and none can have fewer than 6 or more than 96 MEPs. Therefore, while German and French citizens elected 96 and 81 MEPs respectively, smaller States such as Luxembourg and Malta elected 6 MEPs.
Before the election, European candidates were gathered in different political lists in their country. Member States are free to dispatch their seats according to the proportionality principle after a threshold set by them (5% maximum). According to their originally affiliated political party, MEPs elected will now gather and sit in transnational political groups at the European Parliament. Each group must be composed of at least 23 MEPs and from at least a quarter of EU countries.
What are the European Parliament’s competencies?
EU institutions have competencies covering various topics such as monetary policy, internal market, agriculture, environment, transportation, energy, security and health matters (Toute l’europe, 2021). Among the different EU institutions, the European Parliament has different key roles:
- A supervisory role: after voting for the new President and approving the 26 Commissioners of the EU Commission, it supervises their work and other EU bodies’ work.
- A legislative role: MEPs adopt European regulations and decide on the EU budget, alongside the Council of the European Union (European Union).
Source : European Parliament, 2024
What is at stake with the European elections?
Among the previous listed topics, the European Parliament discusses on some important ones that are especially enforced to the real estate sector : renewable energy targets, heating systems, renovation of buildings, extra-financial reporting… On these topics, many European strategies set the pace for national objectives, on one hand. On the other hand, European binding regulations – higher on the hierarchy of laws – must be implemented by Member States at their national level, according to the primacy of European law principle.
In this complex multilevel regulatory framework, the European Sustainable Real Estate Initiative (ESREI) was launched to help the real estate actors in the understanding of European legislations and their impact for ESG practices. ESREI published a European regulatory time available here as well as other studies about those specific topics, such as EPCs.
Even though the EU Parliament impact national objectives and regulations, previous turnout rates showed a lack of visibility and understanding from EU citizens for European elections. Indeed, since 1979, date where MEPs were first elected directly by citizens, the turnout rate always remained lower than for national elections. In 2024, 51% of all EU citizens voted. In France, while more than 70% of voters voted for the presidential elections in 2022 (Toute l’Europe, 2022), only 51,5% voted for the European elections on 9th June. On the contrary, in Germany the turnout was the highest since the German reunification, with 65% of the population voting, compared with 76% for the last Bundestag elections in 2021.
Turnout rates by Member States for the 2024 European elections. Source : 2024 European election results | European Parliament
What came out of the European elections?
After European elections, the overall picture of the European Parliament remains relatively the same as the previous term.
The largest political group remains the European People’s Party (EPP) with 189 seats, representing a quarter of all EU citizens’ vote. The EPP has centre-right political perspectives and includes parties such as Les Republicains of France, CDU/CSU of Germany, the People’s Party (PP) of Spain…
The second party remains the Progressive Alliance of Socialists and Democrats (S&D, centre-left) with 135 seats.
On the other hand, while in 2019 the Greens/EFA group reached its highest score at the EU Parliament with 74 MEPs, in 2024 the group lost 18 seats, and has now 53 seats. That is mostly the result of less representation in Austria and France where extreme right party get the first position. The French Green Party (EELV) obtained 5% compared to 13% in 2019. In Germany, Die Grünen (Greens) scored lower than in 2019 and lost 9 seats. On some countries, the trend differs lightly, as the Socialist People’s Party was the first party in Denmark (with 18,4% of the votes), and is affiliated to the European Green Party (Ouest France, 2024).
Renew Europe group (liberal) also lost 23 seats, notably because the French presidential party (member of Renew Europe) obtained 14,6% and lost 10 seats compared to 2019. In consequence legislative elections were announced in France. In the Slovak Republic, the liberals won against the extreme right party (the presidential party), getting 6 seats on the 15 allocated to the country, against 2 seats for the extreme right (Euractiv, 2024).
The two extreme-right parties (European Conservatives and Reformists Group (ECR), Identity and Democracy Group) won more seats than in 2019 with 73 and 58 seats respectively.
Nonetheless as of today, around 50 others newly elected MEPs did not yet declare their affiliation to one of the European parliament parties.
Provisional repartition of the MEPs for 2024-2029. Source : European Union | European Parliament (europa.eu)
Impact on European regulations
The newly elected Parliament will influence existing and new regulations. Directives already adopted could be reshaped, modified, or cancelled. For instance, some extreme right parties, including the French Party Rassemblement national, want to lighten the requirements of the Corporate Sustainability Reporting Directive (CSRD) (Touteleurope, 2024), a directive that enforces many European companies to report their social and environmental impacts (OID, 2024), along with the Corporate Sustainability Due Diligence Directive (CS3D) recently approved by the EU Council.
The European Green Deal was adopted in 2019 and sets the objective to be the first climate-neutral continent by 2050 and to cut European greenhouse gas emissions by 55% by 2030. At the time, the two extreme right groups (ECR and ID) massively voted against the Green Deal. This strategy has since been developed in different legislations. Among them, the reform of the EU Emissions Trading System covering more economic sectors (buildings…) will allow the financing of a Social Climate Fund to help investments for energy efficiency, renovation of buildings… While a 2023 binding legislation establishes the target of a minimum of 42,5% of renewable energy across Europe, extreme right parties such as Rassemblement National in France proposed to stop the development of solar and wind energy and rather focus on nuclear power for the energy transition (Toute l’Europe, 2024). Furthermore, since 2022, blockage and moving back on specific EU legislations reviewed the first ambitions of the Green Deal. [Edit] For instance, the EU nature restoration law, aiming at restoring degraded ecosystems, was firstly weakened and postponed (France 24, 2023) as MEPs from EPP have made a campaign against it (Euronews, 2024), and ECR and ID also voted against it. But later on, the text was definitely adopted, strengthening Europe’s commitments regarding biodiversity (see the article on the subject here).
Thus, discussions and decisions at the European Parliament will shape the ongoing implementation of the EU Green Deal and Sustainable Finance laws. However, the current situation could lessened the ambitions set by the Green Deal. Yet, before taking part in the legislative process, MEPs will confirm their political group, elect their new President, as well as the new President of the European Commission. This process will take place during the following and the new EU institutions will be officially formed by the end of the summer.
The ESREI programme is now sponsored by AEW, Amundi Asset Management, Axa investment managers, BNP Paribas Real Estate, CBRE, Forvis Mazars, Ivanhoé Cambridge, La Française REM , OFI invest and Pimco Prime Real Estate.
