The report calls for a “strategic reset” in the way all actors, particularly government, deal with the number one policy issue facing future generations. The recommendations tackle the climate change challenge, but critically provide solutions to rising energy bills and their effect on the cost of living.

UK homes remain the least energy efficient in Europe, with heating of homes representing 14 per cent of our total carbon emissions. We estimate it will cost UK homeowners around £300 billion to reach the government’s required Energy Performance Certificate ratings alone. The government has previously set out strategies to decarbonise the housing sector, and the lending industry is keen to work with them to develop more detailed plans on   funding, timelines, capacity, and capability to deliver.

UK Finance’s report sets out a series of recommendations which broadly work within the key targets and measurement system laid down in the government’s Net Zero Strategy. These recommendations seek to fire up the Net Zero Homes agenda in a systematic way which does not disadvantage more vulnerable consumers, blight properties and bake in unnecessary costs.  

The banking and finance sector is playing, and will continue to play, a key part in the transition to Net Zero homes but the targets cannot be achieved without cooperation across public and private sectors. 35 per cent of homes in the UK are owner-occupied and mortgage-free, and so the lending industry cannot reach all homeowners alone. UK Finance is calling on the government to:

• Prioritise public funding to retrofit social housing. Funding should be used to expand the Social Housing Decarbonisation Fund, given its success. Prioritisation should be given to social housing most appropriate for heat pump installation, and retrofitting should also be focused on social housing areas with high rates of fuel poverty, to help reduce energy bills for residents. 
   
• Provide government grants to vulnerable populations. These should cover the full upfront cost of energy efficiency improvements and low carbon heating systems. For households with a greater ability to pay for retrofitting, a smaller upfront grant should be offered with the option to supplement this with an interest-free loan or low-interest rate loan to cover the remaining cost. 
   
• Amend Stamp Duty Land Tax (SDLT) to incorporate the property’s energy demand and carbon emissions. Stamp Duty rebates should become available if energy efficiency improvements are completed within two years of property purchase. The amendments to SDLT should be made after 2025. 
   
• Amend Energy Performance Certificates (EPC) so they are fit for purpose. EPCs are an outdated way of representing energy efficiency, and there is a significant time-lag in updating the EPC database. Energy efficiency improvements must be reflected in EPC ratings on the date of installation. 
   
• Implement minimum energy efficiency requirements. A minimum rating should be introduced for owner-occupied housing, required for the sale or re-mortgage of a property. This should be phased in between 2030 and 2050. The requirements should include exceptions for vulnerable populations who could otherwise become property prisoners. 

David Postings, Chief Executive of UK Finance, said:

Climate change is the number one public policy priority facing this and future generations. The challenge we face means we can no longer just consider our options, but instead need to see strong action. In housing this means addressing the impact of heating the UK’s 28 million homes. 

“Our new report sets out a range of recommendations to help deliver net zero in the UK’s housing stock, ranging from supporting vulnerable people with the costs of energy efficiency improvements to providing grants and subsidies to upskill tradespeople.

“The banking and finance sector is playing, and will continue to play, a key part in facilitating the transition to net zero. The transition must be done in a fair way that that does not leave anyone behind, which is why we believe that in order to make real progress everyone must work together, led by clear, decisive and supportive government action.