We are living through a time when almost every headline describes crises: housing, cost of living, energy and environmental, to name a few.
The poor energy efficiency of UK homes touches on all of these. The trouble is, it is hidden in plain sight. Most people do not know about the problem, let alone how to solve it.
In Britain, we have the oldest and leakiest housing in Europe. A typical home here cools three times faster than those elsewhere, such as in Norway and Germany. It is not just a problem of thermal comfort. Improving the energy efficiency of our homes is becoming environmentally, socially, legally and commercially urgent, and technology will play a vital part.
Environmental problem
First, the low energy efficiency of our homes is a problem for the environment. Fourteen per cent of UK greenhouse gases come from homes and up to 40 per cent of carbon emissions come from real estate more broadly.
Reducing “operational emissions” (what we emit from use) through retrofitting homes could go a long way towards our national, legally binding goal of net zero 2050.
Social problem
Energy inefficiency creates social problems. Less-efficient properties mean higher bills and increasing numbers of people are falling into fuel poverty. In 2019-20, 19.2 per cent of the population were in fuel poverty (spending more than 10 per cent of their income on fuel), increasing to 55.8 per cent in 2023, despite government intervention on energy price guarantees to the tune of £25bn at the time of writing.
The social consequences of energy-inefficient housing go beyond squeezing household budgets, from higher NHS costs to children’s education suffering.
Legal problem
Legally, in the private rental market, minimum energy efficiency standards of energy performance certificate E plus already apply. Planned future MEES legislation will increase the standard for properties to be rented out legally to EPC C plus, and require banks to have an average EPC of C plus.
All tenures will be affected by this, directly or indirectly. About 14mn homes in England and Wales currently fall below EPC C.
If, and when, this legislation comes into force (understood to be by 2028), renters will be worst hit: approximately 57 per cent of private rental homes would need upgrading in order to be legally rented out.
An estimated 2.7mn private rental homes will no longer be legal to rent out unless the landlords can upgrade to EPC C plus or spend £10,000 trying, then apply for a high cost exemption. Rents are already skyrocketing due to a supply shortage, and this problem will get worse under planned MEES regulations.
Commercial problem
There are two aspects to the commercial problem facing property owners. First, the upfront cost needed to improve energy efficiency with research based on EPC data suggesting that the average cost to upgrade a home to EPC C is circa £10,000. Across the energy-inefficient homes in England and Wales, upgrading to EPC C could therefore be an under-funded £140bn problem.
Second, there is the impact on value. Research suggests that properties “below EPC C” are worth 3.62 per cent less than properties with an EPC of C. For an average house price of £289,818 at the time of writing, this equates to £10,491.
The value difference between “green” and “brown” properties is likely to grow as more stringent regulations come into force. This is either a threat to national wealth (since residential property is the largest single asset class in the UK) or the value of a lost opportunity: potential wealth that we are not currently capturing.
Summary of the problem
The energy (in)efficiency of existing UK homes is a huge, complex and urgent problem that is increasingly difficult to ignore. The consequences of what we do, or indeed fail to do now are long term, since 98 per cent of homes that will exist in five years’ time are already built and 80 per cent of the housing stock in 2050 is already built.
This is what triggered me to leave my job earlier this year to start a business using technology to help solve the retrofit challenge. The good news is that many aspects of the problem can be helped with technology, data and collaboration. For example:
- Sharing best practice so that property owners and managers know what to do and when, and can begin to budget and scope the right works.
- Connecting property owners with a blend of funding — from grants to loans — and derisking that funding through monitoring and measurement.
- Efficient, effective delivery, which includes training people, for example, to install double glazing, quickly connecting tradespeople to local jobs, and managing and measuring impact.
That said, energy inefficiency is a “hardware” problem, which means that the solution cannot be purely digital. We also desperately need clear, stable policies, smart thinking, wider education campaigns and place-based delivery, to name a few.
The whole problem cannot be solved through software, but technology and data is essential because without it we simply do not have time to upgrade the UK’s homes at the pace needed to achieve net zero: two-pus properties a minute.
Anna Clare Harper is co-founder of Remees
