The UK is falling behind the rest of Europe when it comes to energy efficient homes. Countries like Germany, France, Sweden, Norway, Italy and the Netherlands have been rolling out multiple programmes and incentives to reduce people’s energy consumption and costs, whether by supporting retrofitting, setting new building standards, or ensuring workers can be trained with the necessary skills.
Meanwhile, the UK’s 28.6 million domestic properties are among the least energy efficient in the continent – losing heat up to three times faster and making people poorer by pushing up their energy bills. In this context, we must find a way to accelerate our transition to net zero buildings; and finance has a key role to play.
Unfortunately, the development of green mortgages – which offer a financial incentive for people to either purchase an energy efficient property or improve the efficiency of their existing home – has been insufficient to date. While the market has grown from four to 60 products between 2019 and 2023, these aren’t influencing the mass behavioural change needed among property owners to renovate or build to higher energy efficiency standards.
This is because the discounts offered are too small to change consumer decision-making and the market is dominated by products only available to properties that already have high energy efficiency ratings or new builds. However, both the construction of energy efficient new builds and the retrofit of existing properties are crucial parts of our net zero by 2050 transition. Indeed, the government has an interim target of cutting the UK’s household energy demand by 15% by 2030.
To hit our essential climate goals and lower people’s energy bills, we need urgent action in four key areas.
1) Streamlining the retrofitting journey
We need to address the current difficulties around the home retrofitting process. As the UK has the oldest housing stock in Western Europe, with 38% of properties built before 1946, retrofitting needs to be tailored to each home – depending on its age, construction materials, maintenance levels and location. This process involves understanding the building’s fabric, creating a bespoke retrofit plan, arranging finance, identifying contractors to carry out the work and monitoring and evaluating the energy performance of the works after completion. Most homeowners will need both independent, expert guidance and financial support. At Ecology, we’re working hard to close the gaps between these elements to create a solution for consumers.
2) Embracing nonstandard materials
Another issue is the difficulties facing anyone wanting to use nonstandard construction materials – like timber frames, hemp-based materials, or straw bales – which can offer many environmental and energy efficiency benefits. Off-site construction, sometimes called modular construction, can deliver extremely high standards of energy efficiency, speed up construction and reduces waste and carbon emissions during the build, is seen as niche and currently not used at scale.
The planning policy framework is holding back progress in this area, especially in England. Different local authorities have varying attitudes towards approving such projects. Many are wary of them.
Although Scotland has just dropped its 2030 target of reducing greenhouse gas emissions by 75%, English authorities still have a lot to learn from the country in terms of green building policies. Scotland not only has higher energy standards for buildings but is also much more supportive of nonstandard construction methods and techniques.
3) Financing nonstandard materials
For both new and self-builds, it remains far too hard for people to finance nonstandard construction projects. In this regard, we have a very immature finance sector. Ecology launched a new mortgage specifically for off-site construction more than a year ago, which still remains unique in the market.
Few financial institutions have the appetite to lend on projects using nonstandard materials. This is partly because they haven’t been commonly used in this country in recent times, which lenders and insurers may see as a risk.
The market may not currently be big enough to attract large, high-street lenders to enter, but, as it grows, consumers can expect greater product choice from lenders and insurers.
There’s a misplaced perception that nonstandard materials and construction techniques mean greater risk, due to a lack of recent evidence around their durability and longevity. However, the irony is that many of them are, in fact, hugely traditional. Most can be found in buildings that are still standing after centuries.
4) Greater cross-sector collaboration
To unleash the UK’s green homes retrofitting and building revolution, we urgently need greater collaboration between banks, building societies, insurers, construction material manufacturers and building contractors to create new project financing options and normalise nonstandard building materials.
At present, the different sectors involved are not working collaboratively. Through greater cooperation, obstacles can be removed and all parties can enjoy the environmental and financial benefits. Our working partnerships with off-site construction manufacturers is one example of collaboration to mutual benefit.
In fact, there is an enormous commercial opportunity in this space. The green transition is inevitable due to upcoming legislation – like the Future Homes Standard, the proposed energy efficiency standard for new builds. Things are not going to stay as they are. Both the construction and finance sectors are set for transformational change. Those that are first to market stand to benefit, both financially and reputationally.
As the UK lags behind the rest of Europe on home energy efficiency, the lack of an overarching government plan to make our homes more sustainable and cut people’s energy bills makes no sense. But in its absence, the finance and construction sectors need to collaborate on finding more ways of driving the transition to net zero buildings by helping people finance the green retrofitting of their homes and normalising nonstandard construction materials. It’s a clear win-win.