Silver lining for asset upgrades | Insight

Housing Minister Lee Rowley confirmed at the Conservative Party conference that former Prime Minister Liz Truss wants to abolish ‘top-down housing targets’, although the Government’s exact housing policies are still unclear now that Rishi Sunak came in first. Despite those comments, however, re-elected Secretary of State for Leveling, Housing and Communities, Michael Gove, made a clear recommitment to the goal in October.

Whether the target of 300,000 new homes is met or not, Ministers need to be more open about how we ensure the delivery of the housing stock we need across the UK.

This is essential for residential properties, but businesses should also be sure that commercial space is also available.

In an environment of net zero, rising energy bills and record interest rates, the government cannot afford to focus solely on new construction. Everything must be done to ensure that new buildings have low emissions, as well as facilities and infrastructure to help communities and businesses adopt more sustainable practices. However, it is essential that the park we build today does not become the renovation project of tomorrow.

With leaky buildings across the UK crying out for energy efficiency upgrades, the biggest challenges for ministers are the millions of ongoing renovation projects across the UK. Indeed, with 80% of the UK’s building stock by 2050 already built, failing to tackle this issue would make it virtually impossible to achieve net zero.

Renovation of barriers

Earlier this year the Building Back Britain Commission flagged the scale of the challenge with our existing buildings. While the government’s aspiration is for as many homes as possible to be in the EPC ‘C’ band by 2035, the reality is that far too many buildings simply do not meet this standard. In the average English local authority, 58% of homes are currently below the EPC ‘C’ band.

A common major barrier to retrofitting such homes is that the cost of decarbonization measures would outweigh the potential price gain, a problem exacerbated by falling house prices following Liz Truss’ mini-budget. Often these buildings are in local communities that have been designated by the government as priority areas for leveling, where properties may be of lower value.

This problem concerns both residential and commercial real estate. No business is happy to incur higher utility costs due to energy leakage from their assets, but even work to reduce ongoing costs requires a strong business case to ensure delivery with confidence.

While owners of inefficient properties could embark on extensive decarbonization upgrades that would lead to lower fuel bills, the reality is that most will find it very difficult without some form of government subsidy.

To break the deadlock, the commission proposed that the government consider providing landowners with 100% government grants funded by public borrowing. The VAT reductions on green measures that came into force in April are welcome, but more needs to be done.

This means a multi-billion pound investment program over the next 10 years to ensure energy efficiency improvements take place in millions of properties that would otherwise be absent. Both residential and commercial building owners should be offered access to such financing, as the challenge of buttressing against rising bills confronts them both.

The challenge of decarbonization

The scale of these calls for investment could raise eyebrows in government, with capital spending cuts and tax hikes expected in the upcoming fall statement.

However, Sunak’s new government should recognize the wider benefits of committing funds for this work to advance the leveling agenda, as well as supporting its commitments made at COP27. Renovation works create job opportunities that allow local people to develop new skills. These are highly transferable and can lead to a range of work needed to decarbonize a community.

Along with the job opportunities created by decarbonization work, by reducing utility bills for residents and businesses, we can help stimulate spending in local economies. For businesses, having the confidence and freedom to invest in growing their operations beyond just “keeping the lights on” can dramatically increase their ability to support small businesses and provide greater opportunities for people. local populations.

With a looming recession amid rampant inflation, this could become even more important. Investing now to modernize our inefficient building stock is the path ministers must follow if we are to make real progress on net zero and the cost of living, as well as leveling up. In this way, it could provide a silver lining to the disruption caused by the coming economic turmoil.

Jason Millett is CEO of Consult at Mace