The UK was the first country to set an ambitious target to bring all greenhouse gas emissions to net zero by 2050.
Other countries have also pledged to do this in an attempt to slow down climate change. Many plans and proposals have been put forward to try to achieve this with property playing an important contributory factor.
Within the UK, households are responsible for 15% of greenhouse gas emissions from fuels such as coal, oil and gas and if you add in electricity, it is 22%. This government data also shows that these emissions have reduced by 16% since 1990, so we may be on the right path but there is still a mountain to climb.
We can measure the energy efficiency of homes via Energy Performance Certificates (EPCs), which came into being in August 2007, and are now a statutory requirement for all properties sold or let. The range is from A (highly energy efficient) to G (poor energy efficiency).
An EPC estimates a property’s energy use, carbon dioxide emissions, heating, lighting and hot water, along with the potential annual costs for each. It includes suggestions on how to improve the energy efficiency rating of the property, the likely cost to install any devices, potential annual savings and what the new EPC rating could be.
EPCs show an Energy Efficiency Rating based (EER) on estimated fuel costs and an Environmental Impact Rating (EIR) based on CO2 emissions. The latest EPC data from the Ministry of Housing, Communities and Local Government is from Q2 2021 and shows a stark difference between old and new build property.
Energy efficiency: new build v existing properties
The problem lies with existing homes where 58% are rated D to G based on EER which means these properties are likely to have higher fuel bills. Meanwhile, 68% are rated D to G on EIR which measures carbon dioxide emissions, and these properties have a more negative impact on the environment.
On a positive note, around eight out of 10 new homes built today have an EPC rating of B and more than 95% are rated between A and C. But that still leaves 4-5% of new builds below the target C rating, which really shouldn’t be happening in today’s new build environment. The government’s Future Homes Standard, to be introduced by 2025, will require new build homes to be fitted with low-carbon heating.
Government aim: properties to be C rated
Another of the government’s plans is the Clean Growth Strategy which aims for as many homes as possible to be upgraded to EPC band C by 2035. But in the private rented sector, the government wants homes to be C rated by 2030 “where practical, cost-effective and affordable”.
However, other government proposals have been put forward for a phasing in of home improvements for new tenancies to be rated C from 2025 and all tenancies from 2028. At the moment landlords are required to have their properties at a minimum of band E.
Clean Heat Grants scheme
So, to help improve the EPC ratings of properties, the government has come up with the Clean Heat Grants scheme which is due to launch in April 2022. It has been reported that grants of £7,000 could be made available for gas boilers to be replaced with environmentally friendly energy sources such as heat pumps.
The scheme will be available for homeowners but it is not yet clear if landlords will be able to apply for these grants. It would make sense for the private rented sector to have access as we know there are responsible landlords out there who want to improve the energy efficiency of their properties. Costs to do this can be prohibitive so any assistance would be helpful for both landlord and tenant.
Landbay’s new green mortgage, which offers discounts on properties with EPCs rated A, B or C, has generated an encouraging number of enquiries particularly for improving the rating to a C level.
Replacing gas boilers with heat pumps will no doubt move the property’s rating up to A or B so we would encourage landlords to weigh up the costs, both financially and environmentally.
It’s good for lenders and brokers to be aware of government schemes like these, and of green mortgages, as they can be brought into the conversation with landlord clients. This is especially beneficial if they are environmentally conscientious.
Paul Brett is managing director, intermediaries, at Landbay
