A new model for retrofit – Rebate to Renovate
With retrofit lagging woefully behind what we need to reach our net zero target, Severn Wye chief executive Sandy Ruthven explains how the Rebate to Renovate scheme could let the market do some of the heavy lifting.
I’ve said it many times but I’ll say it again: we need to retrofit our homes.
Retrofitting our homes is essential to hit net zero (all forecasts require a 30% improvement in energy efficiency in homes and businesses). And it’s vital that we reduce people’s fuel bills in the long run – especially for those who are fuel poor and struggling the most.
But retrofitting all of the UK’s leaky homes would cost in excess of £300bn – a figure all of society (not just government) must get behind if we are to have any chance of success. So, my belief is that government should focus its resources on the fuel poor and we should look to the market to do much of the heavy lifting for the rest of us. When used properly the market is a powerful ally and can turbo charge investment and bring the scale we desperately need to the retrofit sector; look how it has transformed investment in wind and solar power, bringing scale and impact that was unimaginable just a few years ago.
So how do we use the market to scale up retrofit? The best idea I have seen so far is the Rebate to Renovate policy developed by the UK Green Building Council. It proposes offering a rebate on stamp duty to ‘nudge’ householders to choose more energy efficient homes or to invest in energy-efficiency improvements within two years of moving in.
The good news is that many financial and mortgage companies have signed up to support the proposal.
In summary it uses the ‘trigger point’ of a house purchase, when people are excited about their new home and open to borrowing and refurbishment. If your new home is already energy efficient you will get a rebate on your stamp duty; this will be scaled depending on how good it is but in most cases it would be thousands of pounds. And, importantly, you would be able to secure your rebate up to two years after the house purchase, so if you invest in the energy efficiency of your new home after you move in your stamp duty rebate would go towards the cost.
Such an ‘energy saving stamp duty’ would require home energy efficiency to be measured not by m2 but by the overall energy use of the home. This means bigger (and more expensive) homes would see a rise in stamp duty, making the policy revenue-neutral for the Treasury.
To get an increased rebate then you may have to invest in your home and, as we know, retrofit can be expensive, with the average home retrofit costing £15,000. The good news is that many financial and mortgage companies have signed up to support the proposal. Low-interest loans from financial institutions would be essential to make this work.
Rebate to Renovate would not solve our retrofit deficit on its own. I want to see a return of the Minimum Energy Efficiency Standards for rented homes, proper standards for new builds, more direct government investment in low-income homes and investment in the retrofit industry – but a long-term market mechanism to encourage home energy efficiency has to be a key piece of the puzzle.
So far, retrofit legislation and government policy has been limited and small scale. We are only retrofitting around 30,000 homes each year – nowhere near what we need. The Rebate to Renovate model could see this number rise to 500,000 – far closer to the two million a year we need if we are to achieve net zero by 2050.
If we are going to use the market to scale up retrofit in the UK, Rebate to Renovate offers the best chance I have seen so far.
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You’ll find full details of the proposal on this briefing: https://ukgbc.org/wp-content/uploads/2024/03/Energy-Saving-Stamp-Duty-Incentive.pdf
