The government recently announced a £2-billion Green Homes Grant to help homeowners and landlords improve the energy-efficiency of their properties. Homeowners and landlords will from the end of September be able to apply for vouchers up to the value of £5,000 (£10,000 for low-income households) to be used towards upgrades that improve energy efficiency.
Chancellor Rishi Sunak argued that the scheme will help make 650,000 homes energy efficient, whilst saving each household an average £300 a year on bills. You might compare the measures to the carbon-cutting equivalent of taking 270,000 cars of the road. The scheme will also be a job creator, supporting 140,000 green jobs.
During the announcement, the grant was accompanied with an additional £1 billion of funding to improve the energy efficiency of public-sector buildings, along with a further £50 million to pilot ‘the right approach to decarbonise social housing’, with Sunak claiming that the government wants a ‘green recovery with concern for our environment at its heart’.
This funding will serve in part to push Britain towards its legally binding target to become carbon neutral by 2050. But will it go far enough?
No mention of this target was addressed during the announcement and only time will tell how much investment successive governments will commit towards this objective. Compared to our peers in Europe, the U.K. has committed significantly less towards a green recovery – France is offering £13.5 billion, and Germany a sizable £36 billion into carbon-cutting initiatives.
According to the International Energy Agency, 39% of global carbon-related emissions are attributed to buildings – 11% on constructions and 28% on operation (heating, cooling and lighting). The U.K. construction sector alone uses 400 million tons of material a year, much of which is environmentally damaging. I would argue then that there is a big emphasis on the real estate sector to adapt to meet changing environmental demands.
Green investment in property might not be on the radar for many people outside of specialist industries, but it is likely to bring about deep changes to how homes are built and sold in the decades to come. This change may happen quicker than expected. The public consensus is pushing towards a more environmentally friendly future with a recent YouGov poll taken in November last year finding that 56% of the U.K. public want total decarbonisation by 2030 – two decades ahead of the government’s pledge of 2050.
Investment in sustainable assets and development
With the public in their majority expecting rapid changes by 2030, more and more companies are starting to adapt their engagement to prepare for a zero-carbon future. In real estate this is very much expanding from the ground up. Just recently the Legal & General Group, one of the U.K.’s leading financial services brands, announced that they would be making all of their housing stock carbon-neutral by 2030.
Housebuilders in the U.K. are also following suit, with some even starting to specialize in sustainable-led developments: BoKlok UK, a sustainable homes joint venture between Skanska and IKEA, has acquired planning approval in Bristol for its first housing development. While ilke Homes, a developer of sustainable and affordable modular housing that is gaining trend in the U.K. has partnered with Network Rail to build sustainable modular homes in Nottinghamshire, in a deal brokered by commercial real estate giant JLL.
There may be some concerns over how the coronavirus might impact on all of this in the foreseeable future. But as read in the Financial Times, Isabelle Scemama, Global Head of Alternatives at Axa Investment Managers, confidently believes that despite the incumbent economic challenges and the likelihood of a global recession due to COVID, interest in environmentally friendly, zero-carbon buildings will remain strong, claiming that ‘reducing the carbon footprint of a real estate portfolio is one of the best ways to contribute positively to the environment’.
The future of property is sustainability
The volume of sustainable homes in the U.K. is still fairly limited – according to UK Green Building Council research there were approximately 107,000 sustainable homes in the country as of early 2018 that met level 4 of the Code of Sustainable Homes to be considered sustainable. There is still a long way to go, and for now the Code is only voluntary for developers, but this number has risen in the years since and will no doubt continue to rise over the coming decades as housebuilders move towards more sustainable developments.
A big push towards more sustainable homes either through new-builds or conversions is expected to from buyers and tenants themselves. For homeowners and tenants there are clear benefits to living in a sustainable home, not the least because eco homes cut average energy bills by 30%. Aside from more efficient use of energy and water, other benefits include less maintenance, a healthier environment and perhaps the big one for homeowners: higher house prices due to demand.
This evolution of sustainable-led homes will really change the way consumers and the wider industry engage with property, and as more eco homes emerge on the market, the demand will necessarily increase for estate and lettings agencies to facilitate and deliver for this market.
However, at present that are no agencies specialising or even pushing a sustainable homes portfolio, though I am sure we will eventually see agencies specializing exclusively in sustainable eco properties as the volume of sustainable properties available increases. Maybe even at some point soon we will see agencies come up with something like their ‘Green Collection’ consisting solely of houses for sale that conform to higher benchmarks within the government’s Code of Sustainable Homes. Some will argue that although the initial pick up will be slow, it the overall shift is bound to be inevitable. The U.K. has a legal obligation to become carbon-neutral by 2050, and just as a ban on sale of petrol and diesel cars is coming in effect from 2035, we should expect similar changes to the property industry in the decades to come. Indeed, as the public becomes more vocal on environmental concerns, along with a growing volume of sustainable homes that are built and brought to market, agencies will have to adapt to make the most of a new market.
This article was originally published on LinkedIn.