Energy Saving Trust, along with, TrustMark, the Residential Logbook Association (RLBA) and Coventry Building Society has received funding from the Green Home Finance Accelerator (GHFA), part of the UK Government’s Net Zero Innovation Portfolio (NZIP).
The funding will support new research on buy-to-let green finance journeys, looking into energy efficient home improvements in the private rented sector.
The GHFA programme aims to drive innovation in the green lending market and support the establishment of a diverse range of green finance products to incentivise domestic energy performance improvements.
The goal is to design, develop and pilot a range of finance propositions to enable energy efficiency improvements and low carbon heating retrofits in homes across the UK.
Energy efficiency measures and home retrofit technologies are crucial to the UK’s transition to net zero, as are the financial products and services which will facilitate their roll-out. Stimulating private investment alongside government support will be essential, with the green finance market playing a vital role in helping homeowners and landlords decarbonise their homes.
The Minimum Energy Efficiency Standards (MEES) are one part of the UK Government’s strategy to achieve this target by encouraging landlords to invest in energy efficiency improvements for their properties.
Under current MEES regulations, landlords must ensure that their rental properties have a minimum Energy Performance Certificates (EPC) rating of E before granting a new tenancy or renewing an existing tenancy, unless an exemption applies. There are plans to implement a minimum EPC rating of C in the future.
To support this sector, with our partners, we are researching ideas for a new service that will benefit landlords and lenders, using funding received from the GHFA.
For landlords, the service will unlock finance offers with project-specific advice, help with finding installers, and see the introduction of home logbooks with records of the improvements. It will include tailored advice on home energy efficiency improvements through our home energy advice tools. It will also include private rented sector specific advice, designed to help overcome retrofit barriers, especially on consents for blocks of flats.
Inga Jirgensone, head of business development, Energy Saving Trust said: “We want to enable lending suitable for wide range of retrofit projects, from heat pumps through to basic energy efficiency home improvements . The service we’re developing, and plan to pilot, will help overcome barriers to works in the private rented sector, including low- to medium-rise blocks, which represent a challenge for decarbonisation.”
As well as exploring innovative green finance offers, the research will look to integrate TrustMark’s database of registered in-home assessors, retrofit coordinators and installers to enable commissioning of works to trusted third parties. Additionally, it will integrate TrustMark’s data warehouse and installation quality assurance audits to support green finance offers. The audits will help mitigate risk to landlords and lenders from inferior quality installations and remedy situations where customer detriment may be uncovered.
Avinash Rajan, proposition director at TrustMark said: “Retrofit projects require a range of experienced technical skills and quality delivery. Poorly planned and executed retrofits can create a negative financial impact on assets and have the potential to leave customers in detriment. We believe by mitigating these risks this service, which uses TrustMark’s existing assurance solutions for the industry, will enable more lenders to fund projects with confidence.”
The service will also look to implement the use of digital logbooks. These are digital documents about the home, including any information on installed energy efficiency measures that will be captured in TrustMark’s data warehouse. This, combined with data infrastructure to allow sharing records of assessments and plans for measures with third parties, will support the consent process. For example, with existing mortgage lenders or freeholders in blocks of flats.
Nigel Walley, chair at Residents Logbook Association said: “Both the rental market and the retrofit space are key areas that the RLBA have flagged for logbook roll-out. This project brings them together in a ground-breaking way and will provide crucial tools and frameworks for landlords to use to retrofit their properties.”
For lenders, the service will enable easy testing and development of different green finance offers for the private rented sector retrofit market. This is because it will offer a flexible framework of advice, quality assurance, verification and data handling components that can be readily linked to their finance products.
In addition, our proprietary property database, Home Analytics, will help lenders with retrofit planning and green lending product development.
Oliver Dyer, senior manager for mortgage proposition and financial services at Coventry Building Society said: “With 55% of rental properties falling below the proposed future EPC standard *1, the PRS faces an enormous challenge over the coming years to bring over 3 million homes up to the required standard*2. As one of the UK’s largest BTL (buy to let) lenders, we’re delighted to be supporting this project to protect both landlords and tenants’ future interests, helping to facilitate a smooth transition to a more energy efficient rental market.”
Through this work, we’ll develop an initial set of hypotheses of retrofit scenarios, product offers and consumer journeys that can be supported and, most importantly, identify how we can deliver a prototype testing of the journey service in a pilot phase. We’ll share updates on the research in the coming months.
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*1 Hometrack
*2 Zoopla calculations using DLUHC (Department for Levelling Up, Housing and Communities) live tables, Scottish Government and Welsh Government – data to FY 2021