The chancellor had many competing priorities to deal with ahead of his Budget earlier this month.
It was always easy to focus on the immediate challenges and look to deal with the longer-term issues later. There is a risk, however, that if we do not act fast enough to decarbonise our ageing housing stock, we will not hit our net zero targets.
This is vitally important when we consider that 14 per cent of the UK’s carbon emissions come from our 28mn homes. The scale of the work needed to improve our properties is huge – to meet the government’s 2050 net zero target will require a home to be upgraded every two minutes.
The government is clearly taking the issue seriously, with the creation of a dedicated Department for Energy Security and Net Zero. We welcome leadership from government ministers including Lord Callanan, who has been actively engaged with the banking and finance industry’s work in this space.
The government has further recognised the role of the industry in supporting the transition, through the appointment of Dame Alison Rose as co-chair of the Energy Efficiency Taskforce — which I am delighted to have been asked to join.
Transitioning to net zero is a priority for the lending industry. Back in 2006, mortgage lenders started offering a range of products to incentivise homeowners to improve the energy efficiency of their homes. And the sector is increasing the capital available for this challenge, including through new green mortgage offers.
However, around 35 per cent of homes in the UK are mortgage-free, and therefore lenders have limited influence on these properties. To make progress here we need co-ordinated action from across the government, regulators and industry.
The upfront installation costs of energy efficiency improvements are a barrier for almost half of the publicThe key thing is ensuring that the transition of our housing stock does not leave people behind.
The upfront installation costs of energy efficiency improvements are a barrier for almost half of the public. Some cannot afford to make the necessary upgrades, but this does not mean that progress should halt. A robust response from the government is needed to fund those that need the support most.
We recently issued a report on this topic with several key policy recommendations. We believe the government should improve energy efficiency in social housing and support vulnerable people with the cost of improvements through grants.
This will have a dual benefit: first, to meet net zero targets, but also to drive down the costs of increasing energy bills for those who can least afford them.
Stamp duty could also be utilised to increase demand for energy-efficient homes and encourage homeowners to retrofit. For example, stamp duty could be amended to incorporate a property’s energy demand and carbon emissions, or rebates could be made available for homebuyers who make green improvements within two years of buying their home.
The lack of skilled people needed to undertake this work is currently a problem. Grants and subsidies should therefore be offered to upskill new and existing tradespeople.
Suppliers should be included in a publicly available list to help people find trusted traders — and be part of a wider government-backed Retrofit Advisory Service to provide independent information and advice. This would ease the burden of research on consumers and provide confidence to homeowners who want to do the right thing to green their homes.
Temporary concession for landlords
There is also a huge amount of work to be done in the private rented sector, and landlords need support to ensure their tenants can enjoy greener, warmer homes and lower energy bills too.
An idea we have suggested is introducing a temporary concession into the tax system to allow landlords to offset the cost of energy efficiency improvements against their tax bill. This would help them work towards achieving a minimum energy performance certificate rating of C in their rental properties as proposed by the government in its heat and buildings strategy consultation.
Greening our housing stock is not going to be easy and will take time, but collectively I believe these recommendations would enhance the energy efficiency of our homes, as well as supporting the development of new jobs and new skills.
The lending industry is playing a key part and is supporting customers to transition to net zero. Alongside this we need further support from the government and real collective action to ensure we help everyone on the journey to net zero.
David Postings is chief executive of UK Finance
