MortgagesMar 13 2023

Housing industry needs to be wary of greenwashing, says UK Finance

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Housing industry needs to be wary of greenwashing, says UK Finance
Residential semi-detached houses with gardens in the Slade Green district of Greater London, UK, on Monday, Feb. 27, 2023 (Jason Alden/Bloomberg)

Caution is needed in the UK’s approach to reaching net zero emissions in housing stock to avoid greenwashing, mortgage trade body UK Finance has said.

Speaking at the organisation's annual mortgage lunch in London on Friday (March 10), chief executive David Postings said policymakers need to be careful in their approach to reaching net zero in the housing sector to avoid greening balance sheets only.

Postings made reference to the government’s efforts to improve building fire safety regulations after the Grenfell tragedy and said  the speed at which new regulations were brought in greatly impacted overall mortgage security of those in affected buildings.

“We must work with policy makers to avoid the same thing happening at scale as we attempt to transition the housing stock to net zero,” Postings said.

He noted that UK Finance has advocated for tax changes and incentives to encourage greening of the housing stock and help the most vulnerable to make the transition, but said he has concerns about the potential of greenwashing. 

“I worry that the easy policy option - pushing lenders to go green at a pace that essentially just greens balance sheets and not the housing stock might prove hard to resist optically,” Postings said.

“This approach could have the unintended consequence of either creating energy inefficient properties that are un-mortgageable or penalising those homeowners who cannot make the change easily, through the imposition of higher interest rates or local eco-taxes."

"Both will result in the creation of a new cohort of property prisoners; something that as lenders you would not wish to happen,” he added.

Postings warned that those in the industry need to remain vigilant and “stress the need to provide incentives that promote the feeling of security and inclusivity”.

“The alternative undermines people’s confidence in housing,” he said. 

The government has committed to a goal of being net zero by 2050.

With about 20 per cent of emissions coming from buildings, reducing emissions in housing stock will play a vital role in this.

Research suggests that the majority of borrowers do not understand green mortgage products, and calls have been made in recent months for brokers to help better educate consumers.

The number of green mortgage products on the market has greatly increased in the past year, with over 500 available at the beginning of this year. 

However as the ‘green’ status of a mortgage product is self-determined, the meaning of these products greatly varies. 

Common features generally include offering a lower interest rate for properties with a better energy efficiency rating.