An important step towards Net Zero

Article originally published in The Intermediary May 2024 – page 41

Six months ago Rishi Sunak announced a significant roll-back on the government’s net zero policy, pushing carbon reduction targets back out by years in some cases. Backtracking was widely acknowledged as a move designed to appeal to core Conservative voters ahead of an imminent general election.

Analysis from the London School of Economics and Grantham Research Institute on Climate Change and the Environment said rather than encouraging investment into green infrastructure and projects, it was “exactly the kind of policy uncertainty that puts business investment at risk and undermines the UK’s ability to capture opportunities of green industry”.

The Institute for Government said at the time: “Economically, yet another change in climate policy also risks making the UK even less attractive to global investors.” There were two big announcements relevant to the property market.

Firstly, the date for banning the installation of new domestic gas boilers was moved to 2035 and new exemptions were introduced and the maximum grant available through the Boiler Upgrade Scheme was raised to £7,500. Secondly, the plan to raise minimum energy efficiency requirements to EPC band C by 2025 for new tenancies and 2028 for all tenancies was cancelled entirely “on the basis of excessive costs for landlords,” said the Royal Institution of Chartered Surveyors (RICS).

Maintaining momentum

Perhaps naively, the government assumed that lifting the 2025 deadline to retrofit privately rented homes would save those landlords tens of thousands of pounds. 2025 is now less than a year off and as anyone familiar with property renovation, construction or refurbishment is acutely aware of, building work takes months and months to complete. The fact is that the majority of private landlords have either already invested in upgrading their rented properties or they have set aside the capital to fund the required retrofitting.

Speak to those in the industry, and momentum has not lost pace. In March, RICS published its first residential retrofit standard in response to growing demand for retrofit services in the UK.

It is designed to support consumers carrying out retrofit upgrades to a residential property, ensuring they receive advice from skilled, regulated professionals, and protects the public interest by upholding high standards in a growing market.

The professional standard sets out a series of concise mandatory and recommended requirements effective from 31 October 2024. It also provides long-awaited and much-needed benchmarks that guide RICS members in delivering residential retrofit services tailored to their clients’ evolving needs.

Given we are expecting a general election later this year, it may be that climate change and net zero policy is in for yet another shift. What that could mean for the property sector is unclear – the left has also been inconsistent on its net zero delivery plans, u-turning on its own pledge to pump an extra £28billion a year into carbon reduction in February, cutting that spending promise down to £5billion.

The Climate Change Committee estimates that residential retrofits need to increase to a rate of 500,000 per year by 2025 and to one million per year by 2030 to meet the government’s overall net-zero target. This is enshrined in law, meaning that whichever party is in power the need to deliver is a legal requirement. It’s heartening therefore that there is now clear evidence the industry is preparing to deliver – despite the political (and potentially temporary) rollback.

What this says is that there will be issues and bumps along the retrofitting road to net zero – but did any of us really expect anything different?  High energy prices, the proposals for the Future Homes and Buildings Standard and pressure to decarbonise mean that investment in retrofit is surely as a sensible bet. What is important is not perfect policy or that politically motivated promises are kept but that the industry remains committed to the net zero agenda.

Companies, mortgage lenders, homeowners, landlords, renters, insurers – all these stakeholders have a vested interest in improving the energy efficiency of Britain’s residential housing stock. Who is responsible for what is the next key step in this journey – and what supplementary funding schemes are on offer. But The RICS guidance is an important step forward in driving these next stages.

Our own Energy solutions support the assessment, installation and reporting of energy efficiency measures under various Government schemes, and we support lenders who need to meet regulatory and Governmental requirements for the assessment of their Scope 3 emissions.

We recognise not everyone is and can move at the same pace but the resources and data to deliver meaningful action is now available – not least because there is a moral, ethical and environmental imperative for everyone to act. And even amid short-term political posturing, there is a strong commercial incentive to do so.