Lagging Behind

Energy efficiency in low-viability properties

Category: Future of our cities and towns, Clean growth and the low-carbon economy

Author: Zayn Qureshi | 21/10/2021

Lagging Behind

Ahead of COP 26, government departments have been commissioned across Whitehall to inform the cross-government Net Zero Strategy that, amongst other things, will detail plans for decarbonisation across key sectors of the economy. One of the most significant challenges in reaching net zero is the need to retrofit the nation’s housing stock and increase energy efficiency. Lagging Behind puts this challenge into regional perspective, examining the requirements for central and local government to achieve retrofitting targets in areas where the financial viability for retrofit is extremely low.

Retrofitting, and the prices involved in doing so, remain the same regardless of geography. However, what does not is the value of property. Putting this into perspective, the same energy efficiencies demanded by the transition to a Net Zero economy, including wall insulations and heat pump fittings, will need to be undertaken to an equal extent in a terrace house located in Barking with an average cost of £400,647 as one in Burnley with an average price of £77,293. Given the costs of retrofitting being in the tens of thousands, if the challenge of how to effectively support retrofit properties in low value areas is not met, a divide risks being created.

Download the executive summary.

Key points

The national retrofit challenge

In the context of local government funding cuts which combine with lower wage levels and associated material factors to impact retrofit viability in authorities across many parts of the North, local authorities must use existing strategic powers to work together on developing retrofit frameworks from the bottom up. Collaborative working at the subregional level will be particularly important in delivering meaningful results, especially given the complexity and costs involved depending on a variety of factors such as type of tenure.

This issue of regional variability in house prices and dwelling stock warrants serious consideration. In some local authorities, particularly in the North and Midlands, the estimated cost of retrofit is over 15 percent of the property value – as opposed to as low as two percent in many Southern districts. The challenge of incentivising homeowners and landlords to retrofit their properties will be made more difficult if the costs involved prove to be too much, especially in areas with low property values. Without a tailored and localised approach that considers the varying housing economics of each locality, a one size fits all approach to the funding of retrofitting threatens to deepen regional inequality and counter efforts to level up.

What can local government do?

In the context of local government funding cuts which combine with lower wage levels and associated material factors to impact retrofit viability in
authorities across many parts of the North, local authorities must use existing strategic powers to work together on developing retrofit frameworks from the bottom up. In particularly challenging areas, where property values are low and incentives under-funded, neighbouring authorities should work to establish subregional one stop shops as a joint venture, with the shop sitting independently of each constituent authority.

What does the national government need to do?

The Plan for Growth outlines plans for bringing forward 600,000 heat pump installations per year by 2028 whilst simultaneously creating an incentive framework for low carbon heating. But concern has been expressed that it lacks clear direction or methods to measure its success, with many ambitious but disparate policies. The Heat and Building Strategy has gone some way to remedy this and bring policies together – however a regionalised approach to funding retrofit is still needed.

Recommendations

Recommendations for local government

In particularly challenging areas, where property values are low and
incentives underfunded, neighbouring authorities should work to establish subregional ‘one stop shops’ as a joint venture sitting independently of each constituent authority.
- Developing ‘one stop shops’ to engage with landlords to find suitable methods to facilitate retrofit at pace has been recommended by stakeholders such as the Local Government Association.
- Through an independent and formal subregional structure, local authorities would also be able to act on retrofitting at an aggregated scale.
- Setting up one stop shops as joint ventures would allow authorities to collect and analyse aggregated data regarding housing stock requiring retrofit and designing bespoke solutions on how to accomplish this.
- One stop shops would allow local authorities to better understand the personal circumstances of landlords in the area and better tailor engagement and awareness raising on retrofitting.
In keeping with the government’s skills and further education agenda, as laid out in the Skills for Jobs white paper, local authorities working collaboratively at a subregional level should develop local retrofit jobs strategies.
- Developing robust strategies that detail the local retrofit context around skills and supply chain opportunities would go on to inform the green skills aspect of wider Local Skills Improvement Plans, announced as part of the Skills for Jobs white paper.
- There are a number of tools available for local authorities to use in helping develop these strategies. These tools should be a starting point for neighbouring authorities with the highest proportion of low value properties to develop actionable retrofit frameworks that would entail one stop shops as well as skills and jobs strategies.

Recommendations for central government

In order to properly address the retrofit challenge, the Heat and Buildings Strategy must be amended to:
- Provide details of a localised funding mechanism for retrofit to help authorities in areas with low-viability housing achieve targets.
- Provide clearer incentives and long-term clarity on timelines to
  ensure retrofitting can be achieved in the private rental sector.
- The strategy must be coordinated with the planning reforms and
  part of a joined-up approach to the nation’s housing stock.
The Social Housing Decarbonisation Fund Demonstrator is a fund aimed at supporting social landlords in retrofitting social housing at scale.
- To ensure broad take-up and to begin reaping the benefits of cumulative emissions savings towards the net zero target, the full £3.8bn of funding pledged should be brought forward and frontloaded. This would also help deliver cost savings through enabling acting at scale.