UK Finance proposes ‘strategic reset’ to achieve net zero housing stock

Net Zero Homes: Time for a reset, says heating homes accounts for 14% of our total carbon emissions, costing UK homeowners an estimated £300billion to achieve the required Energy Performance Certificate ratings on their own by the government. The government has previously outlined strategies to decarbonize the housing sector, and the lending industry is keen to work with them to develop more detailed plans on finance, timelines, capacity and ability to deliver.

UK Finance’s report sets out a series of recommendations that work broadly within the key objectives and measurement system set out in the government’s Net Zero strategy. These recommendations aim to launch the Net Zero homes agenda in a systematic way that does not disadvantage the most vulnerable consumers, degrade properties or generate unnecessary costs.

The banking and financial sector plays and will continue to play a key role in the transition to Net Zero homes, but the goals cannot be achieved without the cooperation of the public and private sectors. 35% of homes in the UK are owner-occupied and mortgage-free, so the lending industry cannot reach all homeowners on its own.

UK Finance calls on the government to:

Prioritize public funding for the renovation of social housing. The funding is expected to be used to expand the Social Housing Decarbonization Fund, given its success. Priority should be given to the most suitable social housing for the installation of heat pumps, and renovation should also focus on social housing areas with high rates of energy poverty, in order to help reduce residents’ energy bills .

Provide government subsidies to vulnerable populations. These should cover the full up-front costs of energy efficiency improvements and low-carbon heating systems. For households with greater ability to pay for the renovation, a smaller initial grant should be offered with the option to top it up with an interest-free loan or a low-interest loan to cover the remaining cost.

Amend the Stamp Duty Property Tax (SDLT) to incorporate the energy demand and carbon emissions of the property. Stamp duty refunds are expected to become available if energy efficiency improvements are completed within two years of the purchase of the property. SDLT changes are expected to occur after 2025.

Modify energy performance certificates so that they are fit for purpose. EPCs are an outdated way of representing energy efficiency, and there is a significant lag in updating the EPC database. Energy efficiency improvements should be reflected in the EPC ratings at the date of installation.

Implement minimum energy efficiency requirements. A minimum rating should be introduced for owner-occupied housing, required for the sale or re-mortgage of a property. This should be phased in between 2030 and 2050. Requirements should include exceptions for vulnerable populations who might otherwise become prisoners of property.

David Postings, Managing Director of UK Finance, said: “Climate change is the number one public policy priority for this and future generations. The challenge we face means that we can no longer simply consider our options, but must instead see strong action. In housing, that means tackling the impact of heating the UK’s 28 million homes.

“Our new report sets out a range of recommendations to help achieve net zero in the UK’s housing stock, from supporting the vulnerable with the costs of energy efficiency improvements to providing grants and grants to improve the skills of artisans.

“The banking and financial sector plays and will continue to play a key role in facilitating the transition to net zero. The transition must be done in a fair way and leave no one behind, which is why we believe that to make real progress, everyone must work together, led by clear, decisive and united government action.