Yet, in June 2022 the Climate Change Committee (CCC) suggested there are key gaps in the net zero strategy, and called for a focus on delivery, including in the housing sector. Almost a year on from that report, it’s time to look at what progress we have made.
New challenges
The pathway towards net zero presents all sorts of challenges for the housing market. Mortgage lenders have already been mandated to ensure that the average energy performance level of their portfolio is at least EPC Band C by 31st December 2030.
Yet, major questions remain unanswered. Can all properties be improved, and at what cost? Are potential purchasers taking into account energy bills and running costs when looking to purchase a property? What impact could climate change measures have on property values? Will there be a direct relationship between energy efficiency and property values? More clarity from government is sorely needed for these key questions to be answered.
Despite these broader challenges, our sector is making good progress in innovating sustainable housing and green mortgages. We have seen positive signs, for example, with both the Future Homes Standard and the Future Homes Hub showing the government’s ambition in this area.
The Future Homes Hub aims to encourage collaboration in the housing sector, bringing together the partnerships that are needed to deliver on the government’s climate plans by building more sustainably. At the same time, the Future Homes Standard will make it mandatory for developers to build homes from 2025 that produce at least 75 per cent less emissions than under current regulations.
Achieving this will rely on developers integrating more technology into homes, from smart heating controls to solar panels, but this will need careful consideration. New home providers will need to think about providing warranties on this technology to guarantee its longevity, for example.
Elephant in the room
The progress towards creating more sustainable new housing is welcome, but we cannot forget that a large part of decarbonisation will mean retrofitting existing housing stock.
Bringing older properties up to a new standard will be a major challenge. The UK’s properties average an EPC rating of D, and the CCC estimates that bringing this stock up to new standards by 2050 would cost a staggering £360bn.
There will certainly be benefits for customers in upgrading these homes. Not only will improving insulation or fitting double glazing help reduce CO2 emissions, but it will also cut energy bills – something that resonates with buyers at time when gas and electric prices have skyrocketed.
In fact, data from Santander suggests that buyers now place an average premium of 9.4 per cent on homes that have been upgraded.
However, the challenge of retrofitting existing stock will be made almost impossible if we don’t tackle the spectre of poor workmanship. There have already been cases where heat source pumps have been fitted to poorly insulated properties or solar panels installed on roofs that cannot structurally support their weight.
In addition, homeowners may decide that the return on making energy efficiency improvements is simply not worth it. That leaves the risk of creating a two-tier market where energy efficient homes demand a considerable premium, while the most inefficient homes struggle to sell.
From developing green mortgages to establishing government initiatives such as the Future Homes Standard, the housing and mortgage markets have taken positive steps on the path to net zero. However, more clarity from government, and more innovation in our market will be needed if we are to make the most important strides towards a carbon neutral future.
