As lenders, policymakers, and the Government continue brainstorming ways to encourage more homeowners to retrofit, we’re hearing of some interesting ideas floating around.
The Energy Security and Net Zero Committee recently held a one-off session on Retrofitting Homes for Net Zero, where Joanne Wheeler, co-head of policy and places at the UK Green Building Council, argued that we need to reach a point where homeowners are motivated to retrofit because it adds value to their homes.
She highlighted the £15bn spent annually on new kitchens, explaining that homeowners invest in them not only because they look nice but also because they believe it adds value when selling. While this may not be the best comparison - since a new kitchen might add a premium but homeowners rarely recoup the full cost - her underlying point feels valid. There needs to be a similar mindset for retrofitting, where buyers actively seek out energy-efficient properties.
She told the Committee; “At the moment, they’re thinking, ‘If I put a heat pump in, is anybody going to care? Is it going to add value to my home?’ We need to start factoring a value consideration into the owner-occupier sector.”
While upgraded properties can sell for more, there aren’t, at the moment, enough of them on the market to establish a clear trend. Rightmove’s figures show that homes with Energy Performance Certificate (EPC) ratings of A, B, or C tend to fetch higher prices. However, it can be difficult to determine whether this is solely due to energy-efficient upgrades or because the house is generally newer and benefits from broader improvements.
Our job as surveyors is to follow the market, not direct it. Retrofitting might attract eco-conscious buyers, but we’re not yet at a stage where it’s a given that it will add measurable value. It’s a bit like when central heating and double glazing first became popular. In the early days, people installed them hoping they’d immediately boost property values. But it wasn’t until buyers started expecting warm, draft-free homes that these features began commanding a premium.
Features like heat pumps or biomass boilers still feel unfamiliar to some buyers. As relatively new technologies, they require time for many to become familiar with. Stories in the press highlighting issues or failures with energy efficiency installations also haven’t helped build confidence.
A Stamp Duty rebate
One potential way to financially motivate homeowners is through a Warm Homes Stamp Duty (SD) Rebate, an idea put forward by Joanne during the debate. The idea is the SD paid would be nudged up or down depending on the efficiency of the home. If the buyers upgraded the home within a certain period after moving in, they could claim the rebate.
I can see how it could work - if buyers knew upfront what improvements were needed and how they could recoup some of the costs, it might act as an incentive to carry out the work.
Given that both the Government and local councils are already strapped for cash however, it seems unlikely at the moment they would offer tax breaks on either Stamp Duty or Council Tax. The current Government also doesn't appear to have much appetite for eco-conscious initiatives.
It recently announced it would be scrapping the previous Government’s proposal to ban gas boilers from 2035. Energy Secretary, Ed Miliband, has stated he’s reluctant to force homeowners into buying heat pumps without more affordable alternatives being available.
It also unveiled plans to introduce what’s been dubbed the ‘boiler tax’ this April. By April 2026, the Government wants heat pump sales to account for at least 6% of the combined sales of gas boilers and heat pumps. Companies will face a £500 fine for every missed heat pump below that target.
Critics have commented that this target isn’t particularly ambitious, as heat pump sales are already close to 6%. It’s estimated the fines will total around £14 million annually, which, when spread over the 1.8 million gas boilers sold each year, amounts to just £8 per boiler.
The ‘can’t pay’ market
The other big issue, which will need to be addressed is affordability. People often talk about the ‘able-to-pay market,’ implying some homeowners will fund retrofitting themselves. But let’s be honest, not many have a spare few thousand pounds available for energy upgrades, even with the help of schemes.
One idea mentioned during the Committee discussion was Property Linked Finance (PLF). The concept is that the loan for retrofitting stays with the property, not the person. So, when you sell the house, the new owner takes on the repayments.
It’s somewhat reminiscent of the Green Deal, which ended in 2015. This was the UK scheme that offered loans for energy-efficient home improvements, repaid through electricity bills. It also mirrors the concept of some solar panel lease agreements, which have posed challenges for mortgage lenders as they can sometimes limit modifications or make properties more difficult to sell.
The idea behind a scheme such as PLF would be to attract large-scale private investment to fund the necessary work - something The Green Finance Institute, along with Lloyds and NatWest, are already exploring.
While this approach could provide the funding to carry out retrofitting, it remains to be seen what it might do to the property’s value. A more energy-efficient home might cost less to run, but if the new homeowner inherits loan repayments, their overall expenses could still increase.
Coming back to Joanne’s point about linking retrofitting to property value though, I think this will ultimately be the way forward and act as a motivator - whether it’s homeowners seeing savings on their heating bills, receiving some form of SD rebate, or increasing the value of their home.
I think we’ll see big changes in how we view energy efficiency over the next ten years. As more positive stories circulate it will encourage more homeowners to install energy-saving measures. Energy efficiency might not be the most exciting selling point for a home right now, but I do think that will change.
