How should we be going about retrofitting the UK’s housing? This was the subject of an Industry and Parliament Trust breakfast meeting on 16th January 2024. The discussion was chaired by Derek Thomas MP, with guest speakers Becci Taylor, Director of Arup, and Professor Matthew Paterson, University of Manchester.

The problem

The problem of decarbonising the UK’s housing is well known. Housing generates about 16% of the UK’s greenhouse gas emissions directly, as well as a significant amount indirectly. Decarbonising housing entails two distinct elements – improving energy efficiency within housing and shifting the energy source away from natural gas. The poor energy performance of the UK’s housing stock is well known, and not only generates significant CO₂ emissions but also a range of other problems, notably to do with energy insecurity and poverty, and health effects of damp, mould, and poor air quality. Solving the retrofit problem thus can achieve multiple social benefits.

Existing responses and their logic

Successive governments have developed policies since the 1970s that have made modest dents in addressing one or other aspect of these problems. But net zero shifts the goalposts considerably: aiming at achieving net zero emissions entails a full decarbonisation of household energy consumption, and thus going from policies designed for incremental improvements, to a wholesale retrofitting of the UK’s housing stock.

This challenges the underlying rationale of previous policies. Those policies have been premised on the principle that there is a mixed responsibility and benefit for improving housing energy performance. The public benefits from energy conservation, air pollution reductions, and so on, but the house occupiers benefit from lower energy bills, warmer and drier houses, for example. Costs should be split accordingly.

The problems of individual subsidies

This logic is reflected in policies focused on subsidies to householders for specific improvements (insulation, solar energy, boiler upgrades and now heat pump subsidies, notably). Net zero goal tips the scales towards the public benefits side. Indeed, with heat pumps – key to eliminating natural gas – the private benefits of these compared to gas boilers are hard to identify.

These policies are arguably not fit for purpose for the net zero challenge for various reasons.

• The uptake has always been quite low. In almost all these schemes, householders have to have upfront capital to complement the government grant. Large numbers of householders do not have any such capital: 47% of UK households have less than £3000 in disposable savings to put towards investing in retrofitting their house. These policies thus provide benefits disproportionately to the richer half of the population. This problem has become compounded as economic inequalities in the UK have widened significantly in recent decades. If we need to retrofit all houses, then we can’t rely on these mechanisms to achieve that.
• There is a stronger obstacle known widely as the ‘landlord/tenant’ problem. Absent radical shifts in regulation of rental accommodation, neither landlord nor tenant ever has an incentive to retrofit a property, and the tenant usually is not allowed to even if it makes economic sense to them. There have been efforts to regulate private rental accommodation to require energy upgrades, but these have usually been weak and have recently been weakened.
• These schemes usually require householders to develop considerable amounts of often highly technical knowledge to work out how to retrofit their homes, arguably an unreasonable expectation for most of the population, contributing to the low uptake. There has been effort poured into developing energy advice systems, but is it reasonable to expect individuals to have or develop all this knowledge?

Towards a more systematic approach

These problems, as well as how net zero changes the balance of about public and private benefits, argue for a much more systematic, coordinated, strategic approach to housing retrofit. This is not designed as a series of individual grants or subsidies, but as a government-led set of investments to upgrade the UK’s housing. There is good evidence that this can be delivered most effectively at the municipal/local level rather than nationally. The question of whether the UK has the institutional capacity to deliver such a sweeping shift in approach is not completely obvious, as is that of which of the agencies that exist might be best placed to take on such a broad coordinating role.

Words by Professor Matthew Paterson, Director of The Sustainable Consumption Institute, University of Manchester