Homes make up nearly one fifth of our carbon emissions, and rising. As the government announces its 'green revolution', the RIBA is calling for a National Retrofit Strategy, with taxable incentives for homeowners at its core
In 2019, the residential sector pumped out 19% of the UK’s total carbon emissions – up from 15% in 2008, an increase that exposes the failure to tackle emissions from our housing stock. With 85% of our homes expected still to be in use by 2050, and around 19 million requiring retrofitting, we need a clear roadmap of how we are going to reduce these emissions. Improving the energy efficiency of our housing stock will require serious investment, a large proportion of which must come from government. However, incentivising those in the ‘able to pay’ market will also be key to unlocking a home retrofitting revolution.
The RIBA’s latest report, Greener Homes – decarbonising the housing stock, recommends that the government bring forward a National Retrofit Strategy – a long term policy and investment programme for upgrading the energy efficiency of our housing stock. It’s clear that the government’s ad hoc energy efficiency funding and policies, which have been the norm to date, will not bring about the radical changes we need.
Such a strategy would need to be based on substantial and sustained government funding. The RIBA is calling for the £9.2 billion pledged for domestic retrofit in the Conservative manifesto to be brought forward over the next five years – upfront spending is key.
This would in turn need to be backed by adequate green financing options. The Green Deal was largely ineffective due to high interest rates and homeowners not being convinced about improving energy efficiency based on savings alone. Done properly, as countries such as Germany show, green finance can have a big impact. In 2016 alone, the German system of combining public subsidies and low interest loans led to 276,000 energy renovations, dwarfing the 14,000 cumulative total supported by the Green Deal.
The €1.7 billion spent by the German government on green finance unlocked another €8.4 billion of private investment. Additionally, that €1.7 billion was almost entirely recouped in VAT receipts of €1.6 billion over the same period.
Adequate finance from both government and the private sector is just one key element of the proposed strategy; we also need to motivate households who are ‘able to pay’. The government already has the tools to do this; for example through taxation. Stamp Duty Land Tax could be altered to help embed energy efficiency in the housing market. Greener Homes suggests a sliding scale of stamp duty payments, where the most efficient homes pay much less tax than the least. This might make potential buyers might think twice about where they decide to spend their money.
The revised tax could be capped at £25,000 to avoid large and potentially punitive increases on expensive homes and could also have a time-limited rebate period, to encourage homeowners to make their own energy efficient improvements.
Evidence shows that people are more likely to pursue energy efficiency improvements at certain trigger points or moments of change, such as moving home, since they are already prepared for disruption at these times. In 2017-18, there were 1.1 million residential transactions, so reforming stamp duty could be especially effective.
Further, council, inheritance and capital gains taxes should also be revised to encourage energy efficiency. Since far fewer homes are subject to inheritance and capital gains tax than stamp duty, amending these taxes would not be as effective as stamp duty reform. But embedding energy efficiency across the tax system would send a strong message that the government is serious about meeting net zero and energy efficiency improvements.
The tax reforms recommended in the Greener Homes report are designed to be revenue neutral for the Treasury, which should strengthen their appeal at this time of significant economic uncertainty. Conversely, the Treasury estimates that a reduction in VAT on construction work would cost approximately £6 billion per year, with no guarantee that it would deliver more efficient homes.
Architects have the knowledge and expertise to ensure retrofitting is done properly. This means ensuring a whole house retrofit approach and making the right changes at the right time and in the right order. The RIBA is clear that architects have the knowledge and expertise to provide this guidance and it will continue to lobby on their behalf.
A retrofitting programme of this scale is unprecedented. But a National Retrofit Strategy will not only help the environment, it will help to drive the green economic recovery from Covid-19. If the government can get homeowners on board it will increase consumer spending, create jobs, upskill workers, help create healthier homes and mitigate climate risks.
The UK has some of the most energy inefficient housing in Europe. We must make improving energy efficiency a priority.
Read the full report here.