With the COP27 Conference currently taking place in Egypt at the moment, it seems absolutely the right time for UK Finance to be making its own intervention in this area, particularly in terms of lobbying for policies that will cut down the emissions that emanate from UK housing.
I think it’s widely been acknowledged for some time that the EPC may not be the most robust tool when reviewing the energy efficiency of a home, or indeed what could be done to improve it.
The fact UK Finance has recently come out and said this, should hopefully put government under sufficient pressure to update and revamp the EPC, so that we can turn – what is unfortunately the only tool we have in this area – into a far better one for delivering the improvements we need to see in the UK housing stock.
One of the figures to come out of this recent interjection from the lender trade body suggested UK homes are the least energy-efficient in Europe and that the heating of our homes represents 14% of our total carbon emissions.
Those are a couple of damning statistics and few would argue against some of the proposals put forward by UK Finance to secure some considerable improvement in this area. The main ones being:
- Revamping the EPC and ensuring any energy efficiency improvements are reflected in real time, on the date of installation.
- The introduction of a minimum rating for owner-occupation houses before they can be sold or remortgaged.
- Public funding prioritisation for retrofitting social housing.
- Providing government grants to vulnerable populations to cover the upfront cost of energy efficiency improvements and low carbon heating systems.
As we know it is private rental sector landlords who are currently at the front of the queue in terms of government’s focus on energy efficiency, although as we’re all aware the measures that we have been talking about for some time – namely improving the EPC ratings of tenanted properties by 2025/28 – haven’t actually made it onto the statute book.
Understandably, given the current economic situation that landlords are grappling with – namely the increased cost of running buy-to-lets, rising mortgage rates and grappling with the cost of living crisis for them and their tenants – there is likely to be a lot of pushback against anything which adds further cost to their property portfolio right now.
That said, no one can really deny the need for action in this area, although whether landlords should be the guinea pigs once again for government intervention in this area, is a truly moot point.
Indeed, you might argue that intervention of this kind should focus much more on all dwellings which do not currently have the highest EPC ratings, not just those that happen to be in the PRS. Of course, at this point, we do have to return to the argument about whether we can truly get the progress we need here just using the EPC in its current format, and whether there is the government appetite, or indeed, funding to deliver the considerable improvement that is needed.
The UK Finance suggestion of a minimum rating for owner-occupation properties before they can be sold or remortgaged is an interesting one, and it says this should be introduced between 2030 and 2050. Given the apocalyptic predictions emanating out of COP27 you would probably suggest this is introduced sooner rather than later, however as the trade body does acknowledge, there could be a serious issue for those that can’t afford to improve their properties up to these minimum standards, and as a result, could become ‘property prisoners’.
For the lending industry’s part in this, I think we would all acknowledge it’s been rather piecemeal. Accusations of ‘greenwashing’ have been levelled and I would be the first to admit that offering better rates to those already owning or buying properties with EPC ratings between A-C does not seem like the best use of resources.
That said, we have needed to start somewhere and, were the EPC to be a much more flexible tool, updated regularly and showing improvements immediately, the lending industry might be in a far better position to offer products which incentivise those owners who do carry out the work that delivers the improvements that we all wish to see.
Overall, this is going to need further government support, intervention and ongoing action. While this might not be the best time to be adding costs to owners, whether landlord or otherwise, there will be few who don’t think this is a process worth pursuing, particularly given the high cost of energy right now, and the assumption that this isn’t coming down anytime soon.
Government will need to lead in this area but, if they do, I suspect the industry will have an open door policy to helping improve the efficiency and cutting down on the emissions that emanate from our homes. As always however, when it comes to such an important subject, the clock is ticking. We need that joined-up strategy now.
Steve Cox is chief commercial officer at Fleet Mortgages
