Want to cut your carbon footprint? Move out of your house

Are Oust likes to use a PowerPoint slide during his presentations with a photo of Manhattan and one of a small cottage in a rural, wooded setting. Which, the Norwegian University of Science and Technology (NTNU) economics professor asks his audience, is more sustainable?

The answer, of course, is Manhattan.

“If everybody lived in a small cottage it would be terrible,” he says. “It wouldn’t be sustainable at all.”

Norway is building for past needs, not for the future.

Countries like Norway have to build housing for what their populations need, not what people think they want, if they to meet their climate and land protection goals, Oust says.  That means less single family homes and more, but smaller, apartments.

Acute problem in Norway

This issue is especially acute in Norway, where the average area of a household’s dwelling, roughly 131 m², is among the highest in all of Europe.

At the core of this dilemma are ageing populations, who often own their own homes and have little incentive to move to something smaller, such as an apartment.

It's bad for the environment. And it has negative welfare consequences.

This is especially true in Norway, because tax policies provide benefits or tax deductions for people who own their own homes.

One reason for this is that the houses that might suit them best are still occupied by older segments of the population.

Biggest demand from people over 60

When Oust looked at the demographics for five of Norway’ s major cities, he projected that 80 per cent of the housing demand from now until 2050 will come from people aged 60 and over, and that to accommodate this need, the country will need to build more housing overall.

We need to build quite a lot more units – 30 per cent more – than what the municipalities have in their own prognosis. But we need to make them into more and smaller units.

And that’s not big single family homes or large apartments, Oust says. But Norway’s current housing rules and regulations make it easiest to build in this way.

“The municipalities, they don't understand that when those who are going to live in these dwellings are older,  the average number of people per dwelling will go down. And it will go dramatically down,” he said.

What’s really needed is more, but smaller units, he said.

“We need to build quite a lot more units – 30 per cent more – than what the municipalities have in their own prognosis,”  he said.

However, because the housing units that are being built are too large, Norway is building almost the right number of square metres.

“But we need to make them into more and smaller units,” he said.

Continuing with current trends means that Norway is building for past needs, not for the future.

“That will make problems for the municipalities in the future. And it will make problems for the households in the future. It's bad for the environment. And it has negative welfare consequences,” he said.

Wealthier buyers subsized by those with less means

This mismatch between what is needed and what is being built has other ramifications, too.

Consider this: Developers don’t have unlimited space to build in urban areas, so if they build bigger apartments, for example, they will naturally have fewer apartments to sell.

That potentially reduces their profits, Oust said.

If developers also build smaller, more affordable housing, it’s not uncommon for the price of the smaller units to be used to subsidize the higher costs of the larger units, he said. Economists call this phenomenon cross-subsidization.

“So basically the smallest apartments need to be more expensive to make the largest apartments sellable,” Oust said. “And of course, people who buy the largest apartments are those who have the most wealth. We force a policy where the people who have less money subsidize people with more money.”

Suburban sprawl eats up land

The current construction trend is also about more than simply carbon footprints.

It’s often not practical or desirable to build big houses in urban centres. So where do those big houses get built? In outlying suburban areas.

Building a new housing complex of single-family homes in these places gobbles up undeveloped land.

In Norway, where only 4 per cent of the land area is arable, this can put pressure on agricultural areas. It also works against Norway's commitment to protecting its natural areas and limiting incursions in undeveloped land.

In a 2024 comprehensive report on development in Norway’s natural areas, the Norwegian Broadcasting Corporation showed that new developments consume the equivalent of 16 football pitches every single day (in Norwegian).

Farther from municipal and county services

Another challenge relates to Norway’s public welfare system, especially when it comes to health care. In small urban neighbourhoods, planners have ensured that basic services are easily accessible by foot or public transport.

But let’s say you’ve bought a larger home for your family, and because of costs, it made most sense to buy just outside an urban area, like Oslo or Trondheim.

Your family grows up and moves out, but given tax incentives and perhaps a little bit of inertia – where are you going to put all your stuff? What about having rooms for when the kids come home to visit? – you stay there.

Oust has thought a lot about this scenario.

“And when you reach maybe 80, something like that, you’re living by yourself in a single-family home, a big home, maybe 200 m², with quite a lot of distance from the nearest institution, and a distance from the nearest store and things like that. You’re starting to have a problem,” he said.

So, let’s say you decide to move to an apartment that’s closer to a grocery store, and to services like a medical clinic or a library. But given the demographic trends, Oust says, you’ll be stuck and won’t be able to sell your oversized house.

“Everybody else is going to be like you,” he said, older and in need of housing that’s smaller and friendlier for older people.

This is not a good thing for the municipality or the county that has an obligation to help care for you as you age, he says.

“It's terrible, because then they need to take care not only of you, they need to take care of your house as well. It's big and it's located in the wrong place,” he said.

Finding ways to downsize

Altering living patterns and expectations involves more than just changing tax incentives or government rules and regulations. It means a radical shift in the way we think about where we live. Social norms in many Western countries reinforce the idea that a single-family home is the ideal.

Reducing the demand for housing floor space by up to 20 per cent could lower emissions from the production of materials by up to 73  per cent in 2050.

Oust and his colleagues are now looking at ways to make denser and more efficient housing solutions more inviting and desirable.

“We are looking at how we can improve living qualities in fewer square metres,” Oust said.

One possibility is to build apartments where some rooms are shared. For example, what if the apartment complex you live in has an extra bedroom for visitors that can be booked?

“Many elderly people want to have a guest room so they can have their children stay with them, because their children live in another city,” Oust said. “So that’s important. But if you can take this bedroom out of the apartment where it would only be used a few times a year, and move to where everybody can use it, it could be used 100 days a year instead of just 10.”

Other options relate to changing the design of the apartments themselves. Raising the ceiling height in smaller spaces can give the feeling of more spaciousness without increasing the square metres of the building, he said.

Another option is designing the apartment building itself to minimize the amount of space needed for non-living areas, such as stairwells or utility rooms.

Social connections, better material reuse

Neighbourhoods are important when people decide where they want to live, said Edgar Hertwich,  a professor in NTNU’s Industrial Ecology Programme.

Hertwich served with Oust on an expert panel convened by the Norwegian Academy of Science and Letters (DNVA) in June that looked at how Norway’s cities could chart a course toward net-zero climate emissions and loss of natural areas.

“People want to stay in the neighbourhoods they have lived in because that’s where they have their social connections. That needs to be taken into account. So the question is can you create homes for the elderly, which is where we have the largest demand, that are more environmentally friendly, smaller, and still in the area where they used to live before,” he said.

Hertwich also points out that Norway could cut its housing-related emissions by better reuse of construction materials.  He was one of four internationally recognized researchers asked by the United Nations in 2020 to look at how resource efficiency, including materials used to build homes, could help cut greenhouse gas emissions.

Among the group's findings was that the more intensive use of homes, design with less materials, improved recycling of construction materials, and other strategies could reduce emissions from the material lifecycle of residential buildings in the G7 countries by up to 40 per cent.

“Norway has an opportunity to reuse building materials at all levels through creating markets. That would make renovation easier,” he said.

However, there are many challenges in making that a reality, he said.

“There is often a mismatch in time and space between where the building materials become available and where they could be used again. So the logistics are important,” he said.

Tax reform

In the end, one of the biggest ways to address the climate impacts from housing comes back to the same answer –smaller spaces, Hertwich said.

For example, the 2020 report found that reducing the demand for housing floor space by up to 20 per cent could lower emissions from the production of materials by up to 73 per cent in 2050.

For people to choose what is better for the environment and socially, the expert panel convened by the Norwegian Academy of Science and Letters in June suggested reforming Norway’s "extremely distorting taxation" of home ownership. The stamp duty (called dokumentavgift in Norwegian) of 2.5% is a fee paid to register new ownership and is an important barrier for the elderly to downsize, the panel said.

Replacing this fee with a property tax, or an income tax on a value called imputed rent would enhance turnover. Imputed rent is an estimated amount that a homeowner would have had to pay if they had rented an equivalent property.

These measures can reduce prices by making more space available, as experience from other countries shows, Hertwich said. Given that new buildings are exempt from stamp duty, this fee is also a barrier to renovation.

“By subsidizing home ownership of the wealthy, the tax system makes homes less affordable for the young,” Hertwich said. “We can help the environment and increase intergenerational equity in one swoop.”

References:
IRP (2020). Resource Efficiency and Climate Change: Material Efficiency Strategies for a Low-Carbon Future. Hertwich, E., Lifset, R., Pauliuk, S., Heeren, N. A report of the International Resource Panel. United Nations Environment Programme, Nairobi, Kenya.

Oust, Are. 2025. Notat fremtidige boligbehovssenarioer. (in Norwegian) Trondheim: NTNU Handelshøyskolen, Senter for bolig- og miljøøkonomi.