How The Government’s Green Policies Affect Housing Market

26 September 2023 – Prime Minister Rishi Sunak has announced changes to the government’s green policies that many have described as a watering down of the UK’s commitments. How will these changes affect the property market?

The UK government is legally bound to achieve net-zero by 2050, after Theresa May made it law in 2019. To achieve this target, the government has set out various measures as part of its green policies.

These include a proposed ban on the sale of petrol and diesel cars, gas and oil boilers and the need for rental properties to have an EPC rating of C or higher.

But now, Rishi Sunak has announced changes to the government’s green policies, with many targets pushed back. Some of the changes will have an impact on the housing market.

Phase Out Of Gas And Oil Boilers Still Stands

In previous green policies announcements, the government introduced a ban on gas and oil boilers in an effort to transition the heating of homes to heat pumps and other low-emissions systems.

The government planned that from 2035 no new gas boilers can be installed any more. This has not been affected by the changes to the government’s green policies.

However, about 20% of properties will be exempt from this ban, because a move to a heat pump or other low-emission system is seen as too challenging. No details have been given about how this exemption will be implemented.

Oil and liquefied petroleum gas (LPG) boilers, which are mostly used in rural areas of the UK where access to gas is not readily available, were supposed to be phased out by 2026 under the old plans.

But this ban has now been pushed back to 2035. At the same time, the Prime Minister has increased the grant to help people install heat pumps in England and Wales. The available support grant has risen from £5,000 to £7,500.

The reason given by the government for the postponing of the targets is to give households more time to prepare for these costly changes. Regarding the exemption to the ban for two out of 10 properties, No. 10 said that these properties are just not suitable for low-emissions heating alternatives.

However, this directly contradicts the government-funded Electrification Heat Project, who said that all housing types are suitable for heat pumps.

The mixed messaging, on one hand pushing back targets and on the other increasing the grant to install heat pumps, is likely to confuse many homeowners.

But what homeowners should be aware of is that low-emissions heating systems will become more sought-after by buyers in the future. Already, many buyers are looking for properties with energy efficiency measures in place.

Scrapping Of Energy Efficiency Target For Rental Properties

Another of the government’s green policies that has caused many private landlords a headache has been scrapped. No. 10 planned to introduce a policy that only allowed properties to be rented out that had an Energy Performance Certificate (EPC) rating of C or above.

This policy was planned to come into force in 2025 for new tenancies and 2028 for existing ones. However, both have now been scrapped. While this will delight some landlords, others will be furious.

According to research by Shawbrook Bank, many landlords have already made the necessary improvements to their rental properties in preparation for the policy to take effect in 2025.

Of the 80% of landlords that said they were already prepared for the changes, almost a third said they have already made the necessary improvements.

Landlords that have already made changes have spent between £500 and £20,000 in the last year, with an average mean spend of £25,148 per landlord. In London, this average spend increases to £37,164.

This means that millions of pounds have already been spent by landlords in preparation for the 2025 deadline. Many of those landlords will not be happy about the government’s green policies U-turn.

However, climate change is a challenge that faces all of us and improving the energy efficiency of their rental properties will not be a waste of money for landlords. Even if the expected change won’t come into effect in 2025 as expected.

Rules might not be changing as soon as 2025, but professional landlords with modern, energy efficient stock will be in the best position to attract tenants, as well as reduce potential voids, and importantly, be prepared for future legislative change.

Emma Cox, Managing Director of Real Estate at Shawbrook Bank

So whether the government’s green policies are watered down or not, energy efficient properties on the rental or sales market will become more and more attractive to buyers and tenants.

Not only because they are conscious of climate change, but also because energy efficient houses are cheaper to run. So it pays for landlords and homeowners to invest in their properties for the future.