The momentum for ‘going green’ is still real

Article originally published in The Intermediary October 2023 – page 39

Earlier this year, the newly named Department for Energy Security and Net Zero announced the deadline to improve rented properties’ energy efficiency would be put back to 2028. Weeks later Rishi Sunak announced further delay to accommodate growing burden on landlords’ pockets. The policy, which had been due to take effect in 2025, requires private landlords to upgrade homes to meet a minimum EPC band C for all new and existing tenancies in five years’ time.

The delay is welcome news for landlords who face having to invest thousands of pounds in double or triple glazing, wall and loft insulation and switching heating systems from gas to electricity. The National Residential Landlords Association suggested the original decision to postpone was down to there being too little clarity on what “upgrading” homes looks like. Indeed, the long-awaited response to the government’s September 2020 consultation “Improving the Energy Performance of Privately Rented Homes in England and Wales” remains unpublished.

Ben Beadle, NRLA chief executive, has been vocal on the subject, urging the government to take “a smarter approach with a proper financial package if we want to ensure improvements to the rental housing stock.” As he points out: “The proposals fail to accept the realities of different property and rental values across the country, and that the private rented sector contains some of the most difficult to retrofit homes.”

It’s an interesting time for those involved in the UK’s drive to net zero. After a huge push towards understanding and combatting climate change in the run-up to the UK’s COP26 global conference held in Glasgow in November 2021, momentum has slowed in the face of inflation and rising interest rates, Consumer Duty and a host of other issues.

The war in Ukraine and energy crisis that it precipitated put a very different spin on our reliance on fossil fuels, most of which are supplied by those on the continent. Inflation over 10 per cent for much of 2022 and the start of this year has refocused people’s priorities from the green agenda and back onto the business of affording to keep roofs over their heads. It is increasingly dividing the country’s voters and becoming a party political hot potato.

Some have argued the by-election in Uxbridge earlier this year, triggered by Boris Johnson stepping down, was lost to Labour because voters were up in arms about London’s extending ultra-low emission zone. Tony Blair, former Labour prime minister, said in July that government should be wary of asking the public to do a “huge amount” to support the transition to net zero, recognising this shift in priorities.

The harder right in the Conservative party are reported to be putting increasing pressure on the prime minister Rishi Sunak to row back on some of the more unpopular and expensive green policies. The energy secretary Grant Shapps is for “maxing out” our oil and gas reserves in the North Sea.

To top it all, the UK will be heading to the election polls in less than 18 months’ time – how the green agenda fits into the battleground for Westminster over the coming year is going to be key. The commitment to cut the country’s carbon emissions is written into legislation. And in spite of pushing back energy efficiency measures for private rented sector homes, it is coming.

Not all the same

The UK property market is hugely diverse in age, tenure, construction and is subject to all manner of location variations. A third of it is held by private landlords renting to tenants.

This latest roll-back is sensible, it will give policymakers and landlords time to consider how to make the right improvements based on each of those factors. Having access to granular data to inform these decisions is paramount, and we cannot be complacent about gathering it now. With the evidence of climate change all around us, there are also material risks for the housing market that have little to do with energy efficiency policy measures.

Flood risk, soil shrinkage, extreme heat – these environmental factors all take a toll on British homes – and not all in the same way. Investors and mortgage lenders are acutely aware of the financial implications for asset security and capital value as a result.

The momentum for ‘going green’ is still real and it will become even more so as lenders understand the capital savings that understanding their exposures on back books and originations will change in light of knowing how well properties perform.

So while the mood music of the moment may sound different, the underlying refrain chimes on. Even if the deadlines to meet net zero milestones drift, tackling the resilience of our housing stock must remain a priority for today.