In the ever-evolving landscape of the global housing market, the winds of change are blowing towards sustainability. This transformation isn't just a fashionable shift in preferences; it's a powerful response to environmental concerns and a collective commitment to combat climate change.
The UK was an early champion of the net-zero by 2050 goal. However, recent setbacks, including Rishi Sunak rolling back critical deadlines for environmental initiatives like the phasing out of gas boilers, have reinforced the importance of sustainable practices. The journey towards a greener housing market has begun, but there’s still much work to do.
The shifting tide
Homeowners today aren’t just seeking shelter; they're searching for eco-friendly homes that align with their values. In a recent survey by Knight Frank, 72% of respondents supported the net-zero by 2050 goal. Twenty-eight per cent highlighted the critical role of energy costs, while 21% would prefer 'greener' homes, signalling a growing interest in environmentally friendly housing options. In the Nat West 'Greener Homes Attitude Tracker' covering Q2 2023, they reinforced this shift, with 66% of homeowners planning improvements to the environmental sustainability of their property in the next ten years, up from 63% in Q1.
The harsh reality is that the UK currently boasts some of the least energy-efficient homes in Europe. According to recent ONS statistics, as of March 2023, 80% of dwellings with an Energy Performance Certificate (EPC) analysed in both England and Wales used mains gas to fuel their central heating. Renewable energy alone or combined with another type of fuel makes up just over 1% of the fuel used in central heating in England and Wales. Solar energy and other renewable sources have significant potential to help reduce carbon dioxide and other greenhouse emissions by replacing traditional sources of electricity like fossil fuels.
A large part of the solution lies in better insulation, a powerful tool in curbing emissions by reducing the energy needed for heating. The latest available figures from the Department for Energy Security and NetZero in 2022 show our 28.2 million homes account for 17% of the UK's total carbon dioxide emissions. It will be interesting to see how this changes when the latest 2023 figures are released in March. Under new regulations, CO2 emissions from new build homes must be around 30% lower than current standards and emissions from other new buildings.
Cost is still a significant barrier for homeowners, in Nat Wests Greener Homes Survey, homeowners estimate it would take an average of 15 years for the savings in regular energy bills to offset the estimated installation cost of £34,500 for retrofitting a typical UK home. It’s clear we need incentives to support the shift.
The total number of UK homes recorded in 2022
The amount homes contribute to UK total carbon emissions
Of UK homeowners planning environmental improvements
The estimated cost to retrofit a typical UK home
A wake-up call
The consequences of inaction in the housing market aren’t just hypothetical. Without sustainable practices, homes and communities face very real climate-related risks like flooding, storms, and rising sea levels. The potential fallout includes increased damages, huge inflation premiums, or even worse - the inability to insure at all.
Homes lacking energy-efficient features or with a poor Energy Efficiency Rating (EER) will see rising maintenance costs as energy prices soar. Non-compliance with evolving sustainability regulations may result in hefty penalties, increased costs, and reduced property prices.
The Department for Energy Security and Net Zero projected that in 2023, fuel poverty would increase to 14.4 per cent (3.53 million). However, a recent poll from the charity National Energy Action (NEA) predicts more than 6.5 million UK households will be in fuel poverty from January 24. Poorly designed homes can have detrimental effects on occupants' health and well-being, affecting their overall quality of life. The adverse effects of climate change impact vulnerable or economically disadvantaged communities more as they often live in older, poorer-quality buildings.
Political instability in Russia and Ukraine and rising inflation led to a steep rise in oil prices. We’ve seen the future risks to long-term supplies and felt the lack of control over prices when we rely on traditional energy supplies.
And let's not forget the biodiversity impacts. Urbanisation and unsustainable development contribute to habitat destruction and deforestation. The amount of carbon dioxide captured by the UK’s forests has fallen by millions of tonnes and is set to remain at historically low rates for over a decade, because of delays in replacing old forest stocks, according to recent 2022 figures. Not considering environmental factors in housing may lead to further loss of vital green spaces and wildlife.
The drivers for positive change
Homebuyers are now actively seeking sustainable features beyond environmental concerns, enticed by the prospect of long-term cost savings on utilities and a commitment to responsible living. Nat Wests Greener Homes Attitude Tracker found that 40% of prospective homebuyers looking to purchase a property in the next ten years stated that a property’s EPC rating was a very important factor.
Standards like the Future Homes and Buildings Standard and The Heat and Buildings Strategy underscore the government's commitment to positive change and decarbonising homes. Recent UK energy statistics show that renewable energy is responsible for over 47% of the UK's electricity generation. Progress is being made, but we shouldn't become complacent.
The emergence of community-driven initiatives, like local green building councils and eco-conscious neighbourhood associations, is playing a pivotal role in fostering awareness and encouraging sustainable practices at the grassroots level.
Solutions for a greener tomorrow
The path to a greener housing market involves retrofitting existing homes for enhanced energy efficiency, potentially reducing global CO2 emissions by 20% by 2050, as the International Energy Agency estimates. The World Green Building Council suggests that constructing new homes with higher energy performance standards, like solar panels instead of relying on fossil fuels, could save up to eighty-four gigatons of CO2 by 2050.
Financial incentives, like green mortgages and building grants, make sustainable practices financially attractive for homeowners. The rise of off-grid tiny homes, which have achieved considerable popularity in Australia and Canada, could also significantly reduce carbon footprints in the UK. However, lenders and regulators must evolve to support greater adoption.
The architects of change
Financial institutions, including banks, building societies and specialist lenders, are key players in this transformation journey. Embracing sustainability ensures compliance with regulatory requirements and that their products meet increasing customer demand, giving them a competitive advantage.
We’ve seen a rise in sustainable finance, green mortgages, and green rewards from lenders like Barclays, Royal Bank of Scotland, AIB, Lloyds Banking Group, NatWest, Progressive Building Society, and Ecology Building Society. This highlights customer demand and a commitment to offering favourable terms and incentives for eco-friendly properties.
Top ten ways lenders can support a sustainable housing future
Offer green mortgage products: Introduce mortgage options with favourable terms for eco-friendly home
Environmental metrics integration: Include Energy Performance Certificate (EPC) ratings in mortgage assessments to incentivise energy-efficient property investment
Financial Incentives: Offer cashback or discounted rates for green home improvements or energy-efficient property purchase
Collaboration with green investment funds: Partner with green funds to support environmentally responsible projects
Sustainable finance products: Launch finance products for green building projects, encouraging eco-friendly investment
Community engagement: Collaborate with local green councils for grassroots awareness and sustainable practices, like local recycling or community gardens
Flexible repayment structures: Offer flexible repayment options tied to energy cost savings from green features
Educational programs: Develop programmes to educate customers, stakeholders and colleagues on green housing benefits
Green building certification: Help homeowners to obtain green certifications for their properties
Government collaborations: Work with government initiatives and providers like the Energy Savings Trust to supporting sustainable housing for a collective impact.
For starters, the government must commit to their carbon reduction policies and avoid further deadline rollbacks on essential initiatives.
They should consider financial incentives for homeowners to invest in energy-efficient upgrades, like low-interest green loans or grants, and streamline regulations to make retrofitting more accessible. They should also look at funding more initiatives for home builders and social housing as they did with the introduction of the 'Social Housing Decarbonisation Fund and Home Upgrade Grant', collectively worth £1.4 billion.
There needs to be a focus on developing clear policies that encourage green building practices, align regulations with long-term sustainability goals, and provide support for industry adaptation through transitional periods.
The government must increase funding for research and development in green technologies, foster innovation through public-private partnerships and support expert knowledge transfer.
A beacon of hope
The rise of sustainability in the UK housing market is not just a trend; it's a fundamental reshaping of how we conceive and build homes. Beyond its environmental impact, the shift towards sustainability holds economic and financial implications.
As the demand for sustainable living spaces grows, mortgage providers and lenders play a pivotal role in supporting and shaping the future of green housing. A collaborative approach that combines financial incentives, regulatory support, public awareness, and technological innovation is essential to accelerate the decarbonisation of homes and promote widespread adoption of green housing practices in the UK.
The future beckons, and it lies in sustainable practices becoming the norm, setting the stage for a brighter future for the world's environment and all its inhabitants.