Our home is arguably our biggest financial asset. So, once we start to live in it shouldn’t we make sure that the money we have invested is working as hard as possible for us? So, what about our mortgages: is what the finance sector offer as a package an accurate reflection of how our homes perform?
Which is why, CEW is working hard to develop/strengthen the links between an energy efficient home and economic return. We’re all familiar with the idea that using less heat and power in our homes will generate savings on energy costs, but the financial impact goes further than just our household bills. An energy efficient home could be worth more than a less efficient home and could attract a higher loan to value rate – something that should be reflected in our mortgages.
This is what is behind the launch of the LENDERs project. Sponsored by Nationwide Building Society it will investigate the increased use of the Energy Performance Certificate (EPC), required on every home for sale. Launched last week to coincide with the UN Conference on Climate Change in Paris (COP 21), the LENDERs project is backed by the Principality Building Society, BRE, UK Green Building Council, Zero Carbon Hub (England), Energy Saving Trust, Arup and University College London (UCL) as well as CEW to research into how to build a stronger link between energy costs, affordability and mortgage borrowing.
The building blocks for the project stem from when CEW commissioned Reading University to analyse data from energy performance certificates (EPC) from Welsh housing stock together with information on the sale prices of these homes to examine if there was a price effect from EPC ratings on house prices in Wales. The research concluded that there is a positive association between price per square metre and energy performance rating, with houses in bands A and B commanding a price premium 13.1% greater than those in band D. Interestingly the relative price effects were highest for terraced dwellings. It is worth noting that the ways in which EPC ratings affect house prices may be varied, for example homes with a good EPC rating may be of a higher quality with better fixtures and fittings, they may also receive non-energy rated benefits for example double glazing may provide improvements in home security and reductions in noise pollution. Work is continuing to develop this research.
The LENDERS research will test the use of EPC data in estimating energy costs on individual homes and look at the potential to incorporate that estimate into the mortgage affordability calculation. In turn, this may help encourage buyers towards choosing homes with lower energy bills, and increase their willingness to invest in improving energy efficiency of their own homes and then the ones they actual buy.
This is radical step by our whole built environment industry and wider stakeholders to encourage people to look harder at the homes they want to buy and live in. We all need to look beyond just kerb appeal and the interior decor. We need to consider how a home performs at its core level – keep us warm in the winter and cool in the summer. As an industry we need to ask a series of questions. How efficient are our homes that we manage, maintain and provide for consumers; how can we educate the homeowners to take more responsibility; and then how can we stress the overall connection between performance and value?
In our role within the wider team on the project CEW has been drawing heavily on the research and expertise within the Welsh Low Zero Carbon Hub and working closely with BRE. Not only is the research going to challenge the public and mortgage lenders, it will prove that this kind of work has long term benefits for all of us – commercial developers, house builders, contractors and homeowners. It clearly points to the value of research and pilot projects championed by the WLZCH and a positive return on Welsh Government funding.
