Millions of homes across the UK could be upgraded if loans for investment in clean technologies, insulation, and other green home improvements could be linked to properties instead of individuals, a new report has found.
The Green Finance Institute has calculated property-linked finance could unlock between £52bn and £70bn of private capital to upgrade of 2.1 million homes with Energy Performance Certificate (EPC) ratings of D or below.
The solution, popular in the US and Australia but not currently available in the UK, enables finance provided for solar panels, heat pumps, and insulation to be linked to the property, rather than the property owner. The payment obligation for the loan then transfers to the new owner if the property is sold, meaning that new buyers benefit from a more energy efficient, likely more valuable property, in return for continuing to make regular payments.
The transfer of payments to the new property owner overcomes a key challenge faced by energy efficiency upgrade projects: the long payback period for home energy upgrade investments.
“Property-linked finance could be transformational for upgrading the UK’s housing stock at scale to be more energy efficient, more affordable to run, and greener,” said Alastair Mumford, programme director at the MCS Foundation. “Enabling a flexible property-linked finance offering could help millions of homeowners to benefit from retrofitting their homes while helping the UK meet net zero goals.”
The Green Finance Institute has this morning published a report setting out how property-linked finance could be launched effectively in the UK to help decarbonise the built environment and make homes and offices more affordable to heat and comfortable to occupy.
It includes a set of design principles for property-linked finance in the UK, arguing that any solution needs to be scalable across the UK, flexible and adaptable to different building tenures, geographies, and capital providers, and deliverable in the current legislative landscape and customer-centric.
In the US, trade body PACENation calculates property-linked finance has enabled $13bn of private investment across commercial and residential properties, while making more than 325,000 homes and buildings more energy efficient and created more than 202,000 skilled job years.
Emma Harvey-Smith, programme director at the Green Finance Institute, said the organisation planned to work with the finance and retrofit-sectors to bring forward a “scalable and customer-centric” model for property-linked finance to support the UK’s net zero target. “Introducing property-linked finance to the UK market could channel billions into improving the energy efficiency of the UK’s homes and buildings,” she said.
In related news, the Microgeneration Certification Scheme – the standards organisation for small-scale renewable energy and heat technologies – announced yesterday that it has certified its 4,000 contractor.
The MCS said it had chalked up a string of new records in 2023, with more contractors joining the quality assurance scheme this year than the previous six years combined.
More than 1,700 new contractors had been certified in the past 11 months, it said, as demand for solar PV installations from homeowners has soared.
“MCS is extremely proud to have certified more than 4,000 contractors,” said Ian Rippin, CEO of MCS. “It is extremely encouraging to see our certified contractor base continuing to grow at pace in support of the ever-growing demand for small-scale renewable technologies. Our mission is to give people confidence in home-grown energy, and this enormous growth in our contractor base shows that UK consumers have more and more confidence every day.”
The news also comes as the World Business Council for Sustainable Development and engineering firm Arup have called for an internationally-agreed definition for net zero buildings.
In a new report, the partners said a definition would help spur more robust green building policies and industry standards.
They said that to be classed as net zero, a building must have reduced its energy demand sufficiently to be consistent with the transition to 100 per cent renewable energy for the market in which it operates; be capable of operating on 100 per cent renewable energy sources for electricity and heating and cooling; and purchase 100 per cent renewable energy through a tariff that is demonstrably additional to national renewable obligations.
In emerging markets where sourcing renewable energy is not always feasible, the building should purchase carbon offsets to a recognised international standard in the short-term, the partners said.
“We are on the cusp of a large-scale transition to net zero emissions in the property sector,” said Stephen Hill, sustainability and performance expert at Arup. “But the target is not yet clearly in sight. We need clarity in the sector if we are to unlock the change that is desperately needed across the entire supply chain.”
The report warns that despite a UN goal for buildings competed after 2030 to be net zero at an operational level, there is not a single policy around the world requiring buildings to produce net zero emissions now or in the future.
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