Scotland's Sustainable Housing Strategy

6. Financial Market Transformation

The outcome we want to see:

There is a market premium on warm, high quality, low carbon homes with lower running costs because these attributes are valued by lenders, consumers and surveyors.

6.1 Consultation position

Energy efficient homes should be warmer and cheaper to run because of lower energy bills and may even attract feed-in tariff income. However, this is not currently reflected in more favourable lending terms or higher property values ¹⁰ . This is due to two inter-linked factors -the current systems, practices and regulatory frameworks for valuing properties and advancing loan finance, and the knock-on effects these have on the priority consumers place on having a sustainable, energy efficient home.

Our vision is to see a housing market where sustainability, for both new and existing housing, is positively valued by consumers and attracts a financial premium. This is needed to drive the market for the action needed to achieve our emission reduction and fuel poverty goals and improve the quality of our homes. Whenever householders or landlords are making choices about improving their homes, we want the default option to be a sustainable one.

The kind of change we want to see will take time to achieve, however we need to start now.

6.2 Consultation responses

We sought views on the ability of the market to reflect and value energy efficiency. Respondents pointed out that valuations reflected consumer priorities and energy efficiency was not a top priority for consumers when purchasing a home. However, others argued that better information about the cost-benefits of improving energy efficiency and improved training for professionals could influence valuations.

A consistent theme in responses was the need to provide clear straightforward information for home owners and landlords about energy efficiency and its benefits. It was also stressed that information is required on the need to maintain and repair properties, how to obtain good advice on property maintenance and how to appoint appropriate contractors for repair and maintenance work. There was particular support for greater use of Energy Performance Certificates ( EPCs) and their potential role to influence household behaviour and encourage greater take up of energy efficiency measures. The consultation report notes that many of the recommendations for better EPC information should be satisfied by recent amendments to the Energy Performance of Buildings regulations.

The current economic climate and state of the housing market were seen as important contextual factors, creating concerns about the availability of investment and funding needed to support change and the potential for a damaging impact on the housing market if higher condition and/or energy standards were enforced.

6.3 Actions

To successfully transform the market for sustainable housing it is clear that we must look at it in conjunction with wider behaviour change policies. We must show the people of Scotland the real benefits of improving the energy efficiency of their homes. These benefits can be seen in reduced energy bills and improved home comfort which will also help us combat climate change through reduced carbon emissions. The actions we have developed under this theme will help us achieve a nationwide consensus on the benefits of more sustainable housing which will also help transform the housing market.

• Building on advice received from the former Financial Services Authority, we will actively engage with lenders, consumers and surveyors to evaluate the opportunity of including a valuation premium on energy efficiency measures. There is considerable international evidence ¹¹ emerging that green homes are increasingly attractive to homebuyers, and evidence from the UK that people are concerned about energy bills and thinking about saving energy in the home ¹² . We will work with stakeholders to review evidence on energy performance, market conditions and how to accelerate the potential for sustainability to be reflected in valuations.
• The 2020 Built Environment sub group will work with the Glasgow Solicitors Property Centre and Glasgow University on tracking home buyers appetite towards energy efficiency.
• We will ensure that the review into Home Reports, scheduled to coincide with 5 years of their operation in December 2013, considers their role in supporting behaviour change to encourage home owners to value the sustainability, both in terms of condition and energy efficiency, of their houses.
• We will work with stakeholders to develop guidance to homeowners on what to think about when considering investment in their homes.
• We will work with Historic Scotland on their pilot for a Traditional Building Health Check, which will look at an opt-in programme which provides a maintenance log book for homeowners.
• We will continue to fund and expand the Energy Saving Trust's Home Energy Advice Centres to deliver impartial independent advice on Green Deal and the Energy Company Obligation helping households make decisions on the benefits and cost effectiveness of energy efficiency improvements in their homes. The following figures for 2012/13 exceed the targets we had set:
  • 312,051 customer advice contacts
  • 847 Small and Medium Enterprises receiving in depth energy reviews by consultants.
  • 1.26M lifetime tonnes CO2 and 5.3 TWh lifetime energy
  • 44,300 tonnes of CO2 and 186,000 MWh saved annually
• Through our sponsorship of the Energy Saving Trust we will continue to fund the Green Homes Network. The Network currently boasts over 600 members who have volunteered to share their experiences of energy efficiency upgrades in their homes. We will also look to expand the Network's membership and to include video case studies for Green Deal / ECO measures such as solid wall insulation on the Green Homes Network webpage ¹³ .
• We will encourage the uptake of Green Deal in Scotland through the Green Deal cashback scheme which will offer grants totalling £14.5 million for the installation of measures.
• We will build on the work set out in Low Carbon Scotland: A Behaviours Framework ¹⁴ which includes a user guide and a series of workshops on the Individual, Social and Material ( ISM) tool.
• We will continue to provide advice on how to make homes warmer and more energy efficient through the Greener Scotland website ¹⁵ .
• We will work with Skills Development Scotland and other partners to deliver training supported by the Low Carbon Skills Fund, helping small and medium sized employers train their staff to become certified Green Deal assessors and installers.