The Italian government recently amended the tax relief known as the Superbonus 110 per cent, an incentive introduced by the second Conte government in 2020 – backed by the Movimento 5 Stelle and the Partito Democratico – to promote the energy renovation of buildings. The idea underpinning this incentive was to facilitate the renovation of houses and apartment blocks, increasing energy efficiency.

It has been almost three years since its introduction, and beyond the objective difficulties caused by the political and fiscal confusion surrounding this relief, it is necessary to take stock of what can currently be considered the largest tax incentive in the sector.

What the superbonus is, in brief

Let us briefly recap how it works: anyone who ventured – and that really is the word for it – to renovate their home can receive 110 per cent of the value of the expenditure. So, for example, if renovation works amount to €100,000, the tax credit generated is €110,000. In order to claim this benefit, homeowners originally had three options:

• the first, and most straightforward, is to collect the relief through tax deductions (the state reimburses owners in the form of deductions from taxes paid in subsequent years);
• the second is the invoice discount, whereby a discount is applied directly by suppliers and contractors, who can then take on the owners' tax credit and recover it subsequently from the state in the form of a tax deduction, or transfer it to other intermediaries to recoup the money immediately;
• the third option is credit transfer, which allows property owners to transfer the tax deduction to banks, institutions or professionals (who applied a percentage: some bought the credit at 90 per cent, some at 95, some at 99).

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L'affare Superbonus vale 71,7 miliardi di sconti fiscali, per un importo medio delle detrazioni alla fine dei lavori che si attesta a 192.756 euro per ogni "asseverazione". Ma il costo, alto per lo Stato, diventa un beneficio per pochi. #ANSA
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♥ 36💬 11 18 feb 2023 · Apri su X →

The superbonus three years on: €72 billion spent

By means of a decree-law, the Meloni government put an end to the third option (though a number of alternative solutions are on the negotiating table), mainly due to the risk of fraud and the excessive cost borne by the state. Indeed, €120 billion has been spent on building bonuses, around 6 percentage points of gross domestic product (GDP), twice the resources deployed to tackle the most severe energy crisis in the past 50 years, and which have produced a budget shortfall of around €50 billion. The superbonus alone is worth €71.8 billion, according to the most up-to-date figures from the National Agency for New Technologies, Energy and Sustainable Economic Development (Enea).

The blocking of credit transfers has caused panic among businesses and individual owners alike: for businesses because, according to data from Unimpresa, the block on credit transfer would bring 90,000 building sites to a standstill, effectively freezing €15 billion in incentives; for individual owners, meanwhile, because it is they who must advance the money without any guarantee of being able to recover it from banks, which have been the main entities purchasing credits from private individuals.

What works were incentivised by the superbonus

As mentioned, beyond the political mistakes that led to this situation (such as placing no limit on eligibility for the bonus and failing to introduce even a minimum level of oversight), after three years it is time to draw up an overall assessment of this building bonus, including its effectiveness as an environmental policy tool. The first figure concerns the number of buildings renovated: a mere 372,000, encompassing single-family homes, two-family homes and apartment blocks. This figure represents just 3.1 per cent of Italy's residential buildings, which total 12.1 million. In short, a high cost to the state for the benefit of very few.

Among the most common works carried out under the superbonus were the installation of solar panels, the replacement of windows and doors (windows and doors bonus), improvements to thermal insulation and the replacement of heating systems with more efficient ones (heat pumps or hybrid boilers). One positive figure relates specifically to photovoltaics: according to Gse data, during 2022 in Italy 137,000 photovoltaic systems benefited from the superbonus, representing 66 per cent of those connected during the year, with a capacity of 1,117 megawatt-hours.

In other words, two out of every three systems were installed thanks to the superbonus. The heat pump market is also growing steadily, thanks to tax relief: in 2021 the increase was 64 per cent, in 2022 37 per cent (source: European Heat Pump Association). Furthermore, according to a study by Nomisma, families living in buildings where works have already been completed could save nearly €1,000 on their energy bills (€964, to be precise) per year.

The emissions balance sheet

Yet the photovoltaic and heat pump figures are not sufficient to justify such high expenditure, given that the implicit cost of emissions reduction, calculated in euros per tonne, in this case exceeded the average: according to an in-depth analysis published by Carlo Amenta in the journal Energia, the cost of reducing CO2 through investments financed by the superbonus (though not necessarily caused by it) is €170–210 per tonne. Without the relief, the reduction cost is around €70, while the historical average is below €20.

Furthermore, according to the report on the state of the green economy by the Fondazione per lo Sviluppo Sostenibile, the incentive enabled consumption to be reduced by only a few tenths of a percentage point. "Unfortunately the impact of the superbonus on energy consumption, in the face of very significant investment, has in reality been very limited – the report states – overall, fewer than 200,000 toe (toe being the acronym for tonnes of oil equivalent, ed.) had been saved by 31 December 2021, less than 0.5 per cent of the sector's energy consumption."

A benefit for the few

In addition to the limited benefits in terms of emissions reduction, the original version of the measure displayed a marked imbalance, primarily favouring wealthier social groups. It is true that from the outset the superbonus was aimed at property owners, with no income limits and excluding the entire category of renters (who were, however, partly involved indirectly through the renovation of apartment blocks). Now, though, with credit transfer no longer available, owners risk facing unforeseen expenses, except for those who will be able to claim such credits as deductions.

But here too, we are talking about very high figures to be "written off" by an ordinary worker: "By eliminating the possibility of the invoice discount and credit transfer, the ability to benefit from the measure is restricted to taxpayers with so-called sufficient tax capacity," explained economist and LaVoce.info contributor Leonzio Rizzo. Indeed, the legislative decree provides that only the deduction (currently 90 per cent of expenditure for the superbonus) may be used, spread over four years. "All those with low incomes who pay little tax would be unable to deduct their expenses and therefore benefit from the incentive."

To give an example, with expenditure of 100,000 euros, in order to deduct the full amount (which, let us remember, must be split over four years of deductions), an employed worker would need to earn at least 69,000 euros. All things considered, only 4 per cent of Italian workers would be able to claim the full deduction, while the remaining 96 per cent would lose a portion of it, in proportion to their income. In short, the less you earn, the less you can deduct: the concept of "tax capacity".

Energy renovation: what Europe says

At European level too, the issue of energy renovation is at the centre of debate: the ITRE Committee (Industry, research and energy committee) has proposed a revision of the Energy performance of buildings directive (EPBD), the directive on the energy performance of buildings, according to which from 2028 all newly constructed buildings will have to be zero-emission (brought forward to 2026 for public buildings).

All new buildings will have to be equipped with solar technologies by 2028, but the requirement applies only "where technically suitable and economically feasible", while residential buildings undergoing renovation have until 2032 to comply and must achieve at least energy performance class E by 2030 and D by 2033. Non-residential and public buildings should reach the same classes by 2027 and 2030 respectively. Listed buildings are excluded from this regulation.

The bill will be put to a vote in the parliamentary assembly during the March plenary session and will become the European Parliament's negotiating position. Members of Parliament will then begin negotiations with the Council to agree on the final form of the bill.

One thing is certain: renovation now costs more

Among the negative aspects, in addition to having encouraged fraud (9 billion euros of the total is said to be represented by proven cases of fraud against the state: a figure to be treated with caution since it does not appear in the data made publicly available by the Guardia di Finanza and the Agenzia delle Entrate) and the proliferation of numerous small and often improvised construction companies to the detriment of workplace safety, the superbonus is also said to have negatively influenced the building materials market, generating an increase in the prices of materials and renovation work.

Last June, the magazine Wired calculated that the average cost of an intervention compared to August 2021 (already in the post-pandemic period, with the superbonus in its early stages) had risen by 22.3 per cent for single-family homes, by 18.8 per cent for apartment blocks and by 13.6 per cent for functionally independent units. At that time, the cost borne by the state had grown by 2.5 billion euros compared to market prices the previous year.

This figure is also interesting for another reason: the cost of an intervention (including labour and materials) has risen across the board, in a generalised way and not only for those who benefited from the superbonus. And now that the superbonus is gone — or at least not in its original form — it is clear how the incentives "concealed" a rise in costs borne by the citizen. There is no guarantee that the construction sector will return to what it was before, so from now on renovation risks costing far more than it did when these incentives did not exist.