Building back greener

The future of housing centres on sustainability and new builds are leading the way, says Nicola Goldie, Head of National Accounts at Virgin Money.

There’s no escaping the reality of climate change and the need to act now.

August’s IPCC report was unequivocal about the causes and impact of climate change. It said that “climate change is widespread, rapid and intensifying and some trends are now irreversible”.

But the report offered hope too: “Strong and sustained reductions in emissions of carbon dioxide and other greenhouse gases could quickly make air quality better, and in 20 to 30 years global temperatures could stabilise.”

That requires immediate and drastic action, and we already know the housing market has a huge role to play, accounting for at least 15% of UK carbon emissions.

The industry needs to act quickly and decisively along with government to reduce its impact on climate change. And we need to educate consumers on the benefits of choosing energy efficient new homes or investing in retrofitting their existing homes to make them more efficient.

What’s already happening?

Energy Performance Certificate (EPC) ratings are a straightforward way to measure and compare the energy efficiency of existing properties, with the most energy efficient homes rated A through to G for the least.

Six in 10 homes are below an EPC level C standard, highlighting the scale of the challenge.

But we are witnessing a step change in the industry’s commitment to building a sustainable housing market. This is more straightforward to achieve in the new build sector, where buildings regulations can ensure minimum energy efficiency levels. And it’s working.

There's been an increase in the supply of energy efficient homes over the past year, according to the Ministry of Housing, Communities & Local Government. It said that in the 12 months to June 2021, 251,000 EPCs were lodged for new build homes, an increase of 16% on the previous year.

From April to June 2021, 85% of these new properties were given an A or B rating.

In addition, government’s Future Homes Standard will be introduced in 2025 to complement building regulations. It aims to ensure that new homes produce at least 75% lower CO2 emissions compared with those built to current standards.

The construction process is also a huge contributor to carbon emissions alongside the energy required to run the property once built. Modern methods of construction and off-site manufacturing can improve the efficiency of homebuilding and is a growing sector, helping to make construction more sustainable.

What is an energy efficient home?

EPCs are a consumer-friendly version of government-approved Standard Assessment Procedure (SAPs) for energy efficiency rating domestic dwellings. SAPs are required for new builds or conversions and used to assess compliance with building regulations.

You may also come across Predicted Energy Assessments (PEAs), which are used for new builds before they have been completed. These are available from builders and developers where a lender requires evidence.

Energy efficient homes include good quality insulation and double glazing as standard, as well as features including solar panels, energy efficient boilers, air source or ground source heat pumps. Some new homes even include built-in electric car chargers.

Sustainable solutions

We know we can build sustainable new homes but we can’t all live in one, so we need to find a way to improve the quality of existing housing stock too.

Encouraging consumers to retrofit existing homes to boost energy efficiency, either with government grants or funding or more generous mortgages, is one way. Therefore, any green homebuilding programme needs to be matched by a plan to retrofit existing homes.

The government can encourage and support builders, homeowners and landlords to reduce carbon emissions through awareness campaigns, financial incentives and initiatives.

It can also require them to do so through rules, regulations and potentially higher bills. We’re likely to see a combination of the two over the next decade.

Government rules on minimum EPC ratings for the social and private rented sectors is one example of how it is using enforcement to reduce carbon emissions, for example.

It’s also possible that that as a greener economy develops costs will fall and the popularity of green home improvements will rise.

Green mortgages

The mortgage market is playing its part too, with lower rates or cashback on offer to borrowers purchasing an energy efficient home or making home improvements to their existing property. This may also extend to more generous lending criteria available to those buying homes with a high EPC rating.

Reaching the net zero target will require behavioural changes for customers, as well as within the housing and energy markets. Educating consumers on the benefits of energy efficient homes needs to happen alongside this.

That’s why now is the right time for intermediaries to learn more about these benefits, green mortgage finance and the changes that are coming down the line for the housing market in the coming decades.

Date published: 01/09/2021