Rishi Sunak has announced that the government will scrap or delay many of its net zero plans, so how could this affect the UK property sector?
In a huge policy turnaround for the Conservative government yesterday (20 September), Prime Minister Rishi Sunak made a speech declaring that many of the schemes and targets previously put forward by Boris Johnson’s government would be either cancelled or introduced at a later date.
While still claiming that the UK will hit its goal of achieving net zero carbon emissions by 2050, his U-turn on a number of the government’s policies has come as a shock to many.
The reasons he set out for scrapping or delaying a number of schemes mainly come down to economics; the cost of replacing boilers and petrol or diesel cars, of installing adequate infrastructure, of significantly upgrading the UK’s housing stock, is too high, he argues.
Much of what’s changed will have a direct or an indirect impact on the property market in some way, which was already making headway towards achieving the country’s net zero targets by improving the energy efficiency of many homes and commercial premises.
Minimum EPCs on rental homes to achieve net zero
There has been a white paper making its way through Parliament for some time now that would have seen minimum energy efficiency standards (MEES) in the private rented sector increased, meaning all rental homes would have had to achieve an energy performance certificate (EPC) rating of C from 2028.
Rishi Sunak scrapped this target in his net zero announcement yesterday, saying the government will “never force any household to do it”. Of course, energy efficiency in homes is hugely important, especially when it comes to reducing energy bills, but forcing owners to make expensive upgrades is “just wrong”, he said.
He claimed he would still “encourage” households to improve their energy efficiency, though, and the government would “continue to subsidise energy efficiency”.
Nathen Emerson, CEO at Propertymark, commented: “Propertymark believe in robust forward provision to ensure the economics of any net zero targets are fully balanced and that investors, homeowners and landlords have support and motivation to initiate the required changes.
“All new targets must be fully backed by legislation that incentivises and encourages people rather than ever penalise them”.
Many landlords and property investors will welcome the news that minimum EPC levels have been scrapped in the rental sector, although it is important to be aware that properties must still provide a high standard of living for tenants.
What’s more, tenants are likely to continue to favour highly rated energy efficient properties because they offer lower bills and a better quality of life, so investors are still likely to see strong tenant demand when they offer newer, better insulated properties, despite the net zero turnaround.
Swapping boilers for heat pumps
Part of the government’s net zero target was to reduce carbon emissions by 68% by 2030 compared with 1990 levels, and one major scheme to achieve this was to replace traditional boilers in people’s homes with more energy efficiency heat pumps.
Its goal was to install 600,000 heat pumps per year by 2028, but figures show that so far the country is falling well below this target. Rishi Sunak addressed this yesterday by setting out an exemption to phase out fossil fuel boilers by 2035.
There will also be heftier grants on offer for those who choose to upgrade, up from £5,000 to £7,500.
“There are no strings attached – the money will never need to be repaid,” said Sunak. “We’ll never force anyone to rip out their existing boiler and replace it with a heat pump,” he said.
Converting petrol and diesel vehicles to electric
The take-up for electric vehicles has soared in recent years as people have become more environmentally conscious than ever – many will also have purchased electric cars to ensure they were ahead of proposed net zero legislation and could access the clean air zones that are increasing across the UK.
In terms of the property market, new-builds and existing homes alike have seen a huge increase in the number of electric vehicle charging points being installed, which has proven a huge selling point in many cases. But now, the ban on selling new petrol and diesel vehicles will not come in until 2035.
“You’ll still be able to buy petrol and diesel cars and vans until 2035. Even after that, you’ll still be able to buy and sell them second-hand,” said Sunak.
Still, the electric vehicle market is showing no signs of slowing down, and this is leading to more competitive pricing as more players enter the sector. Therefore, it seems likely that the number of people buying electric cars will still increase in spite of this announcement, so charging points should still be a selling point.