Equity loan scheme - call for evidence: consultation

Chapter 2 Equity Loan Pilot Background

2.1 In January 2017, the Scottish Government launched an area-based Equity Loan Pilot to assist homeowners with the costs of carrying out energy efficiency installations and essential repairs to their properties. The pilot is run in eight local authority areas: Perth & Kinross, Stirling, Dundee, Glasgow City, Inverclyde, Renfrewshire, Argyll and Bute and the Western Isles. The pilot is managed by the Energy Saving Trust (EST) with Care and Repair officers^[2] sub-contracted to promote the loan and provide support to borrowers.

2.2 The Equity Loan Pilot allows eligible homeowners (including private landlords with up to two properties) to borrow up to £40,000 from the Scottish Government against the value of their property for eligible works (energy efficiency measures, heat loss reduction measures, decarbonisation of heat sources and repairs) and repay when they sell their home or transfer ownership. The amount repaid to the Scottish Government is the lesser amount of:

a. the Scottish Government's agreed equity share of the property's sale price, or

b. the loan amount if it had been a commercial loan at 2.5% APR for the duration of the agreement.

2.3 The loan is currently available for properties in Council Tax bands A to C or for properties in all Council Tax bands where the owner is in receipt of qualifying benefits. Owners must retain a minimum of 30% equity stake in the property and energy efficiency / decarbonisation improvements must make up 55% or more of the total loan value with the remainder available for eligible maintenance works.^[3]

2.4 Between January 2017 and April 2021, a total of £1.98 million in loans have been provided, with a further £640,000 in progress. All enquirers are taken through a full advice service journey by EST which includes assessing the most appropriate source of support for their individual circumstances.

2.5 Informal feedback received to date from EST, Care and Repair and clients is largely positive about the benefits. The pilot provides a unique borrowing route to funding for those where access to a typical Scottish Government energy efficiency loan (where regular loan repayments are required) or a commercial loan may not be a preferable or an available option, therefore enabling home energy improvements and repairs that would not otherwise have been undertaken.

2.6 It is noted that the pilot enables older homeowners, those who receive disability benefits and services, and those who may be seen as vulnerable consumers who may have minimal liquid assets, an opportunity to release equity to carry out required energy efficiency and maintenance improvements allowing them to remain living independently in their home and their community for as long as possible.

2.7 As set out in the draft Heat in Buildings Strategy, the Scottish Government's support programmes for domestic energy efficiency will continue to be delivered over the next five years of the Parliamentary term. The Equity Loan Pilot is currently providing support to a group of homeowners for whom other existing support mechanisms may not be viable.

Questions

1. What is your view on the use of equity in people's homes in order to support the decarbonisation of buildings and the improvement of energy efficiency as a means to improve wellbeing and support independent living? Please explain your answer.

2. If you have direct experience of the Equity Loan Pilot, please provide views or evidence of the impact of the loan product and support provided.

3. Do you have views on the eligibility and scope of the pilot as it exists now? Please explain your views.