This time last year, former prime minister Liz Truss’s “mini” Budget sent interest rates soaring, thereby compounding the pain the housing market was already feeling due to rising rates. One year later, her predecessor also wants to shake up the housing market – albeit Rishi Sunak’s approach is at least intentional.
In a speech last week, the prime minister moved the deadline for the phase-out of gas boilers in new homes from 2025 to 2035 and scrapped planned energy efficiency targets for rental properties.
This is bad news for the climate and the whole housing market. Sunak presented the phase-out of gas boilers as saving homeowners money. That may be true, but it looks more like the government avoiding hard work. In 2020, it pledged £1.5bn in order to fund the replacement of gas boilers with heat pumps. This was abandoned a year later, with the National Audit Office blaming rushed implementation, delays and a lack of certified tradespeople able to do the work. The government has since replaced that scheme with other, less ambitious ones.
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Meanwhile, heat pumps remain prohibitively expensive and very hard to come by. As such, the question of how gas boilers will eventually be replaced remains open. Homeowners are left none the wiser on whether to save up for a heat pump or to factor the cost of replacing a boiler into their decision to buy a home. By kicking the can down the road, the government seems to be hoping that it can ignore the issue. For homeowners, it does not go away.
How does this impact the UK’s housebuilders? On the one hand, they have past form in lobbying against green policies. On the other hand, some – such as Redrow (RDW) – had already made strides towards phasing out gas boilers in their new homes. With the government backtracking, they now need to consider whether to change course.
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The scrapping of energy efficiency certificate (EPC) requirements for buy-to-let landlords will also impact the housing market. According to the old policy, new tenancies from 2025 would only be possible on properties with an EPC of C or higher. From 2028, this would have applied to existing tenancies, too. Not anymore.
As with housebuilders, buy-to-let landlords will have two different reactions to this. On the one hand, the move saves them money in the short term. On the other hand, the lack of clarity on the direction of travel will be frustrating for those planning long-term – especially for those who have already spent money on improving their rental properties.
It is hard to see how the decision benefits renters, either. The prime minister said that the costs of improving energy efficiency could have been passed onto renters in the form of higher rent. But this ignores the cost that will now certainly be passed on to renters by not improving the energy efficiency of homes – from concrete costs such as higher energy bills to social costs like poorer quality of life.
What housebuilders, landlords and renters need more than anything else is clarity. But with this U-turn and a general election on the horizon, it’s even harder than usual to know what the UK’s housing stock will look like in five years’ time – or what anyone should be doing about it.
By Mitchell Labiak
Source: Investors’ Chronicle