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  • 01/06/2009
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Energy-efficiency improvements to homes may be the way forward while the market remains in the doldrums, suggests Matt Smith

A leaflet came through my letterbox recently, advertising solar panel installation. It made me reflect on how the current challenges facing the UK housing market have rather blown out of the water any debate about the need for greener housing – at least for the time being. However, over the coming years, greener housing could be a huge opportunity for thousands of new capital projects that will require homeowners to find financing and provide opportunities for brokers who source development finance. Greener housing will have less to do with niche mortgages, as green renovations become a significant driver of mainstream borrowing.

According to government sources, over 40% of the UK’s carbon dioxide emissions come from the energy we use every day – at home and when we travel. Our commitment under the Kyoto Protocol obliges us in the UK to reduce our emissions of six major greenhouse gases by 12.5% from 2008-2012 (this target was set in 1990). Furthermore, the Climate Change Bill commits us to reductions in CO2 emissions of at least 26% by 2020 and a long-term goal of an 80% reduction by 2050 has been set by the Government.

But apart from our ethical responsibility to the planet, the key question remains: why will anyone bother to make their homes more environmentally friendly? There is no sense of urgency. And yet there is a real economic opportunity. Homeowners may want to improve things, but unless they can feel or understand the value of change, it will remain a low priority.

Of course, we can all easily do a little to be more efficient in how we generate heat, keep it in the building and consume power, and add value to our homes in the process. But when it comes to selling a house, energy efficiency is becoming a high priority. Energy-efficient housing makes sense. Whether you are buying, selling or just improving your home, energy-saving changes can affect the value of a property in the long term, as well as lower bills in the short term.

A survey conducted by the Energy Saving Trust shows that people will pay an average of around £3350 more for a home that has a good energy-efficiency rating, compared to one that is not environmentally friendly. The focus is changing, with Energy Performance Certificates highlighting the importance of efficiency.

Of course, new builds are less of a problem, because standards are met in construction. The real opportunity is in Britain’s existing housing stock. There is a huge untapped potential for solid lending on good capital projects. So can housing finance specialists like brokers add this type of financing to their portfolio and help source this capital requirement for homeowners through additional borrowing or remortgages? A concerted focus on incentives could unleash a swathe of activity. What we need is a solution that allows additional borrowing for these measures at rates and criteria that allow borrowers and lenders to capitalise on the increased value of the property after the work.

While we look for a feeling of warmth and cosiness in a new home, energy costs continue to rise. Simple incentives will spur people to make their homes greener, but currently those kind of capital projects are being blocked by a lack of access to funds, and a lack of incentives to get the projects underway right now.

This has two ramifications. One is that people will not undertake the work while they see no return quickly enough and so they will not extend current mortgages to pay for these projects. A simple step might be to abolish a portion of Stamp Duty on all homes that meet the standard. It would create a demand for borrowing that improves the asset, increases the owners’ equity and the lenders’ security and start economic investment that, as far as I can see, is sorely needed. n

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