Is a major investment needed?
A vast majority of mortgaged homes in the UK can achieve an energy performance certificate (EPC) rating of ‘C’ with minimal investment, new analysis by climate tech company Kamma has revealed.
The study highlights the relative ease of meeting new environmental targets for most UK homes, despite recent government shifts on net zero targets. Prime Minister Rishi Sunak’s decision to reconsider net zero goals has left the property sector uncertain about minimum energy efficiency standards (MEES) regulations.
However, Kamma’s analysis, which examined 200,000 mortgaged homes currently below EPC ‘C’ standard, shows that the investment needed to reach an EPC ‘C’ rating is less than 5% of the property value for 84% of homes. This means only 16.5% of homeowners face a more expensive path to an EPC ‘C’ rating, which is positive news for tackling high energy bills and carbon emissions.
Over half of the 83.5% could reach EPC ‘C’ at a retrofit cost of less than £5,000, and 18% of properties would need under £750 in improvements – enabling the majority of homeowners to enjoy the benefits of energy-efficient homes, including reduced bills, increased comfort, lower emissions, and potentially higher property values.
“Out-of-date retrofit cost estimates are holding back progress across the whole property industry,” said Orla Shields (pictured), chief executive of Kamma. “Most lenders and homeowners rely on retrofit recommendations, installation cost estimates, and energy bill saving estimates from the property’s EPC certificate, but EPCs use cost baselines that are over a decade out of date.
“Better data on property carbon emissions overcomes the perceived cost barrier, increases action, and unlocks the benefits of retrofit for homeowners and lenders alike.”
Shields said these findings challenge the narrative that a home retrofit is prohibitively expensive for most UK homes. Headlines often suggest average retrofit costs ranging from £35,000 to £80,000, deterring homeowners and slowing down retrofits and property decarbonisation.
The link between property value and retrofitting is promising for mortgage lenders as well. Increased property values improve loan-to-value ratios, reduce risk, and could lower capital provisions. Encouraging retrofits also lowers affordability risks and helps lenders progress towards net zero targets while opening new lending opportunities through products like retrofit loans or equity release for retrofit.
“It’s not just homeowners that stand to benefit from retrofitting,” Shields added. “Insulating homes reduces bills and insulates lenders from the increased risks associated with lending on underperforming homes. Changing regulations and changing buyer preferences both provide good reasons to act. With better data, better choices can be made.”
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