While Kier Starmer and Ed Miliband have been on the global stage promoting UK PLC as a green powerhouse at COP30, back at home, the government has been throwing green policies out the back door. In doing so, they’re at risk of missing an enormous opportunity which could see a whole new sector flourish and shift the housing market for the better, writes Patrick Usborne, of Cambridge-based Perpendicular Architecture.
Since their election success, the government have begun to make short-term reactive rather than long-term proactive decisions.
Political pressure from Kemi Badenoch and recently Nigel Farage is leading to widespread panic, unsure whether to fight for climate policies or flee from them.
During Rachel Reeve’s Autumn Budget speech, she announced an additional £1.5billion for the Warm Homes Plan yet simultaneously axing the Energy Company Obligation (ECO) 4 Scheme from April. The Great British Insulation Scheme (GBIS) will also be phased out at the same time.
The ECO4 Scheme has been providing energy-efficiency upgrades to those most in need. Households with an annual family income of below £30,000 per year, those with health issues, living in certain deprived areas in the UK, or a home Energy Performance Certificate (EPC) of D or below have seen their energy bills slashed, helping them out of fuel poverty. All while supporting the growth of a new retrofit economy.
Since its launch in early 2013, around 4.4 million measures have been installed in 2.6 million households through the ECO Scheme, with nearly a million measures since the ECO4 Scheme launched in April 2022 according to the quarterly Household Energy Efficiency report.
Despite an additional £1.5billion for the Warm Homes Plan being welcome it is unclear what this money is planned for, and whether it will provide a transition fund for the phasing out of ECO4.
The detail is needed urgently to ensure those most in need continue to receive funding and prevent good companies who have relied on the ECO Scheme from departing the sector. Ultimately, businesses need long-term clarity and consistency.
The Warm Homes Plan launched this year includes a plethora of programmes from £7,500 grants to swap to Air Source Heat Pumps (ASHP), through to support for lower income households and tenants. However, the Warm Homes Plan needs to provide more for those most in need rather than provide broad, across-the-board relief, including for those who can afford to keep their homes warm.
Earlier in November it was widely reported that the National Audit Office (NAO) identified that 98% of the 23,000 homes that had external wall insulation installed under two separate schemes (ECO4 and GBIS) were flawed.
Although some of this is down to paperwork failure rather than poor workmanship, it does highlight the lack of training and quality assurance in the industry from project management through to installation. Arguably, most damaging is the lack of trust from the consumer in a system that is meant to make their lives better and more affordable.
In theory, now is the time to get things right with the Warm Homes Plan. However, in practice, retrofitting homes is incredibly complex as every home differs with a multitude of different materials and installation methods to use.
It becomes very hard for the homeowner to understand what might best suit their home from the advice they receive. Non-breathable products are still widely available and cheaper than bio-based breathable alternatives.
Fitted incorrectly, non-breathable materials can play havoc with the existing structure leading to mould and rotting timbers. There needs to be much more awareness and industry training to fully understand the options available.
The findings from the NAO haven’t helped. Public awareness and trust in the system is paramount. Within the UK construction sector, builders tend to have an attitude of ‘get-rich-quick’, with little interest in undertaking training to ensure the right solution for the right property.
What the UK desperately needs is a long-term retrofit strategy that creates stability, clarity, and confidence to enable UK businesses to invest and grow in the services they provide. Success will only become possible with a wholesale change from grass-roots awareness at the local level, to top-down holistic and comprehensive policy implementation from central government.
Fortunately, the Chancellor doesn’t need to look very far for inspiration. The Irish have been doing this for 13 years through a carbon tax; creating a simple one-stop-shop through the Sustainable Energy Authority of Ireland (SEAI) which administers the grants, organises the design, and manages the installation through a network of approved providers.
A quarter of the carbon tax is given back to those who need it most, approximately €30.000 per home with the remaining bill provided for by the resident. As the grants aren’t at 100%, residents have a vested interest in ensuring installation is done well.
And because the SEAI is here to stay, businesses now have the confidence to invest; train a new generation into the sector; and provide a far better quality of service with 10% of installations inspected by the SEAI.
Germany and France have similar schemes where there is a far deeper awareness and appreciation of creating warm homes. I’ve often found this as an ingrained issue when advising UK clients.
Despite only suggesting breathable, bio-based materials, they’re concerned insulation will rot roof timbers, or that ASHP are too noisy.
Irish TV programmes such as ‘Heat My Home’ have helped educate and inspire homeowners in how to warm their homes and spark a whole retrofitting industry worth €325million in 2023, up from €99million in 2021 according to Barry Quinlan, of the Department of the Environment, Climate and Communications.
Back home, what could the Chancellor do better? There are different levers at the Treasury’s disposal beyond the broad-brush ‘sticking plaster’ approach provided by the Warm Homes Plan. Stamp Duty could be one of these.
Considering all homes require an EPC rating at the point of sale, it would be very straightforward to link the performance of the home with how much Stamp Duty is paid, incentivising the seller to retrofit their homes to increase their sale price as an EPC A rated home would demand a premium.
Whichever levers are chosen, a revolution is needed to instigate systemic change. The Irish approach has triggered a seismic shift in the wider housing sector with EPC A homes demanding a 10-15% sale premium compared with EPC C rated homes (In Ireland their equivalent rating is Building Energy Rating, BER).
With build costs only 5-8% higher to achieve the top rating, there’s a clear incentive which has led to 99% of new homes achieving EPC A rating since 2020. Depending on the size and location of the property, the same premium is true for those retrofitting their existing homes.
By far the most effective way for the Warm Homes Plan to succeed and turbo charge the UK’s retrofit industry, is a comprehensive joined-up approach which incentivises homeowners and landlords. The government must stop giving away money blindfolded. With clear vision, the government can bring together the right levers to help not just those most in need but stimulate the whole housing market. The biggest barrier preventing the Government from doing the right thing is simple, a lack of imagination.
Patrick is founding director of Cambridge-based Perpendicular Architecture, an architectural and consultancy practice advising local government, housing associations, and SME developers how to build better.
To ensure a balanced and informed opinion, he spoke with the following industry colleagues: Florence Collier from Humblebee; Ed Andrews from InstaGroup; Matthew Tulley from The Cambridge Retrofit Hub, and Tom Cox from Decent Energy.
