Standardise green mortgages to capture private sector investment, says UKSIF

The UK housing sector could miss out on £31bn in private sector investment

More green mortgages, funding to help decarbonise social housing, and minimum energy efficiency requirements for private rented homes could all help to kick-start private investment in the UK’s housing stock, according to the UK Sustainable Investment and Finance Association.

Sixty-three per cent of UK real estate businesses have or intend to move their investment abroad to a market more supportive of their sustainability objectives, concludes a report published by UKSIF, which estimates that such decisions could cost the UK up to £31bn in private sector investments. The report fails to detail which markets these could be, but earlier this month, EU policymakers backed the union’s Energy Performance of Buildings Directive, which calls for new buildings to be zero emission from 2030 and to make the whole EU building sector climate neutral by 2050.

“Forty-seven per cent of real estate businesses would increase their investments in the UK’s green housing sector if the Financial Conduct Authority provided a standard definition for green mortgages, which would offer clarity for customers,” says UKSIF.

Awareness of green mortgages, which are designed to encourage homeowners to invest in improving their homes’ energy efficiency, is low. Research by the Mortgage Advice Bureau, which was cited by UKSIF in its report, discloses that 63 per cent of brokers say their clients have not heard of green mortgages.

The UKSIF report also notes that funding is the biggest hurdle for social housing providers wanting to retrofit and decarbonise their housing stock. The association recommends introducing tax deductions for private investors to provide the social housing sector with the funding it needs to decarbonise.

Mandating an EPC rating of C by 2035 for private rented homes would also help to spur private investment, claims the report. Currently, private rental homes must have a lower minimum energy efficiency rating of at least E before they can be let.

“Successive governments’ wavering on decarbonising the UK’s housing stock has hampered private investment into one of the UK’s highest-emitting sectors,” says UKSIF chief executive James Alexander. “There is huge demand from real estate companies and investors alike to invest in the UK, but policy reform and government measures to close the skills gap are critical if the UK is to avoid falling behind other countries in the race for capital.”

You can read the full report here.