British rigid Urethane Foam Manufacturers' Association

Policy Exchange report has the stamp of common-sense needed to engage homeowners on energy efficiency

Financial incentives which make practical sense to homeowners are the bottom line for homeowners, and the welcome new report by the influential think tank Policy Exchange contains some sensible thinking which could catalyse a new revitalised focus on promoting energy efficiency of homes.

The report urges Government to look at energy efficiency not as a separate issue but to integrate it within the housing market and house prices in order to effectively engage consumers. It makes two main recommendations, firstly that Stamp Duty is linked to energy performance such that it would be reduced on the purchase of a more efficient home but increase on buying a less efficient one. This would make it cash neutral from the Government’s point of view.

However the report also recommends that a rebate on Stamp Duty would be offered on a home undergoing energy efficiency improvements such as fitting insulation, within 12 months of purchase. This would give a homeowner an immediate payback for upgrades, which could see it adopted widely helping to address the major problem of the UK’s existing housing stock which is some of the least efficient in Europe.

The more complex part of the report’s recommendations on incentives is the suggestion to look at reforming mortgage affordability tests to better reflect a house’s energy performance, and encourage lenders to offer energy efficiency mortgages i.e. including the cost of upgrades. This would help to incentivise sellers to enhance properties’ energy efficiency because mortgages would be more likely to be granted helping a sale progress, and secondly cost of upgrades would be less onerous short-term.

The insulation industry has been calling for financial levers of this sort to be used to help homeowners make the decision to invest in improvements for a long time, in particular focusing on measures to use Stamp Duty or Council Tax. It is heartening to see a major think tank coming on board at a crucial time to repopulate the currently barren landscape in terms of useful incentives. The bottom line for the industry and the UK is that this kind of change in mindset is needed if we are to make a major dent in the challenge of our existing housing stock in particular, which is the cause of so much fuel poverty and places us way down the European league table.

Simple measures such as this are a way to not only make sense to homeowners, but to also make a major step towards achieving our 2050 80% target in carbon emissions. The report’s authors propose that 270,000 households per year could be encouraged to make energy efficiency improvements, and these are the kind of numbers we need if we are going to get anywhere near our goals. Success in the light of our huge housing demand and ongoing austerity is only likely if common-sense incentives which engage with consumers and which are also cost neutral to the public purse are delivered.