The Current Problem
A HOUSE OWNER OR BUYER MAKES A LOSS WHEN INSULATION IS CARRIED OUT. THIS DIFFFICULTY IS EXPLAINED AND HOW IT CAME ABOUT
For a house to be put on the market, it needs an EPC (Energy Performance Certificate) rating, proof of ownership, and other information depending on the estate agent. A buyer may need all this and further information to get a mortgage.
Using this information plus the ongoing income of the house buyer and the size of the deposit to be put down on the mortgage, a mortgage advisor will determine what size of mortgage is possible, the period of repayment and the various payment plans that are available to the house buyer.
So how much money can a buyer offer, and why does this result in so few people insulating their properties?
There is a major problem in the UK at the moment: Not enough housing is available. As a result of this shortage, buyers will have to offer the maximum they can afford. After buying there is then no money left for unessential action e.g. energy efficiency work including insulation. Thus an Estate Agent will generally tell the seller not to carry out any expensive work (e.g. insulation) themselves before selling, as it will not increase the value of the property (because the buyer will already be bidding at their limit). As a result of knowing that a property buyer is at their limit professional ‘Valuers’ take no notice of a property’s added insulation in order to tell the Mortgage Company its market value. So you can see why currently a property that changes ownership in the next few years does not bring the new buyer to add insulation or energy efficiency (because when this buyer resells the property their added insulation costs just loses money, as no further buyer can afford it). After the property is sold a seller becomes a buyer of a more desirable property immediately and, climbing the housing ladder, a few years later the buyer becomes a seller. So again many house buyers do not fully insulate.
This circle of buying and selling progresses over time and you can follow this by considering each to be just going back to be start of this page when the property changes hands.
For a Mortgage Company to offer someone a mortgage to buy a property they will need to guarantee that the person can pay them back over a long period. As a result the company asks for a ‘Valuation‘. This is done by a professional and takes into account any necessary changes needed to the property e.g. broken windows, broken roof. The aim of this is to show the mortgage company how much the property would be worth once necessary work had been done. This indicates to the Mortgage Company how much they would certainly regain should the house buyer default on the loan payment.
It must be always remembered by house owners that paying off a mortgage often pays the biggest returns on their savings but spending on improvements to the house that do not increase the value of the property are not worthwhile. This is generally true for energy efficiency for instance.
Are we sure of this? Yes. As retrofitters we are sure that property prices do not rise because of retrofitting for low energy use, PV, heat recovery systems etc. When we personally approached local developers, Estate Agents, and ‘Valuers’ they all made it clear. The work does not increase the money that people have to spend (simply because the buyer has no more) when buying the house so (despite living in a warm house with lower utility bills). The properties are worth no more when changing hands. Double glazing may give some extra value. Often these energy efficiency factors may sell the properties faster.
We also found that this was well known and the UK Government Green Homes Finance Accelerator has taken on groups that have found the same.
For your information. Builder-developers bid against each other for land that can be built on. The lower they keep their building costs, the higher their bid. So they hate the idea of necessarily putting in PV etc in new houses. Only if local or national direction is present will all the bidders have to include these extra costs in their bid. Cutting corners is the best way for them unless regulations say they cannot.
Academic References
Jagarajan R, Abdullah Mohd Asmoni MN, Mohammed AH, Jaafar MN, Lee Yim Mei J, Baba M., Green retrofitting – A review of current status, implementations and challenges, Renewable Sustainable Energy Review, (2017), 67, pp. 1360-1368.
Long T, Young C, Webber P, Gouldson A, Harwatt H. The Impact of Domestic Energy Efficiency Retrofit Schemes on Householder Attitudes and Behaviours. J Environ Plan Manag. 2015;58(10):1853-1876
Zhang, K. Hewage, et al. Research on policy strategies for implementing energy retrofits in the residential buildings. J. Build. Eng., 43 (2021), Article 103161
Brown D, Kivimaa P, Rosenow J and Martiskainen M. Overcoming the systemic challenges of retrofitting residential buildings in the United Kingdom A Herculean task? Retrofitting Buildings in the UK 110-130 Routledge, (2018)
Bobrova, Y., Papachristos, G., Chiu, L.F. A process approach to understand homeowner decisions about low carbon retrofit. Energy Policy 155, 112344, 2021. SSRN: https://ssrn.com/abstract=3840710
Academic and Technical Investigation Required
Assessment survey of why people say they do not insulate.
Report on why people did not take advantage of the Green Deal when it was available.
Academic survey of why current Valuers do not include significance of insulation and discussion with Estate Agents in various parts of UK.
Comparison of these with other parts of Europe.
Report from Valuers group as to what they feel will happen should he changes take place.