Energy efficiency is important for owner occupied homes too

FEATURE

www.elmhurstenergy.co.uk

It is generally accepted that following years of investment, measurement and reporting, social housing is now some of the most energy efficient in the UK

Martyn Reed, Managing Director

More recently, minimum energy efficiency standards have been applied to the private rental sector and although starting slowly, they are already encouraging landlords and tenants to pay close attention to their Energy Performance Certificates (EPCs), with improvements being made.

But what about the owner occupied sector?

When it comes to mortgaged properties, a recent Government consultation proposed new rules to encourage mortgage lenders to help householders improve the energy performance of their homes.

Under the plans outlined by the Department for Business, Energy and Industrial Strategy (BEIS), mortgage lenders will initially be encouraged, and ultimately required, to disclose information on the energy performance of their property portfolios in England and Wales every year, as well as the gross value of their lending for energy saving home improvements. The Government is also consulting on the merits of setting minimum energy targets for mortgage lenders that could help build the market for green finance products to support home energy efficiency.

Elmhurst Energy is already working with two major lenders to help them prepare for the market opportunities and risks of this proposed new regime.

In its response to BEIS we urged mortgage lenders to adopt the latest proposals, but also challenge Government on the underlying objectives.

These proposals contain important ideas that have been mooted for many years, and there is no doubt that mortgage lenders hold the keys to unlocking a lot of investment in more energy efficient properties. As the saying goes, ‘sunlight is the best disinfectant’. By shedding light on the energy performance of mortgaged homes, pressure will be brought to bear to find new ways to improve our housing stock.

As the consultation itself points out, working with lenders as part of a sustainable economic recovery will not only help homeowners to overcome existing barriers to improving the energy efficiency of their homes, but will also create and sustain jobs in the home retrofit supply chain.

The proposal will provide significant benefits to homeowners as well as the environment. It should help to reduce bills, increase comfort, increase property value, as well as support the delivery of our fuel poverty targets and the UK’s fifth Carbon Budget. For Energy Assessors it will also undoubtedly mean more opportunities with increased confidence being placed in energy assessments and Energy Performance Certificates (EPCs).

However, some of the messages are muddled. The Government needs to be clear about whether this proposed policy is about saving cost or carbon, or both.

EPCs are based on a cost metric. They are the ideal tool for developing incentives to reduce energy bills and ensure warmer homes. But if carbon reduction is also a priority - which we absolutely believe it should be then BEIS should be introducing a dual metric for mortgage lenders, whereby they can report on minimum standards on environmental impacts as well as the EPC.

To avoid a risk that mandatory disclosure of the energy performance of their portfolios could potentially cause mortgage lenders to shift their lending away from older, poorer performing homes in favour of a ‘better’ portfolio, Elmhurst is proposing that a ‘weighted average EPC’ should be disclosed taking into account the age bandings of properties. It is also recommending that there is improved access to the Government’s new EPC register to link with lenders’ systems.

Elmhurst believes that mortgage lenders must play their part in facilitating the changes needed to meet our net zero targets. We would be daft to ignore the impact and importance of their relationships with customers at critical trigger points, such as home purchase, renovation or re-mortgage. Our hope is that these proposals will drive forward greater innovation in ‘green mortgages’ and other interventions that improve the energy efficiency and value of our homes and other mortgaged properties.

So what’s left?

The last remaining sector to confront maybe the trickiest, owner occupied properties without a mortgage. Whilst it may be easy to assume that this sector is able to look after itself there are a large number of properties that have not changed hands in over ten years, have no EPC and are currently below the radar. It is difficult to imagine that such a sector will respond to regulatory controls so perhaps a more carrot based approach is appropriate. We don’t know the details but we are aware that all options are being considered, so watch this space.