The Intermediary Jan 2023
The Energy Audit Commission (EAC) deployed strong language this month when it called for a national ‘war effort’ mobilisation to reduce household energy bills, cut emissions and reduce imports of fossil fuels. This rallying cry is welcome, at a time when other geopolitical issues risk displacing the environment as a primary concern. We cannot take our foot off the accelerator. Climate change is here to stay and not cyclical in the way that recessions are. Regardless of the economic environment, the drive for energy-efficiency must take priority. And as mortgage lenders we must be in the vanguard.
At the coal face of the UK mortgage industry, we have perhaps been too narrowly focused on Energy Performance Certificate (EPC) legislation in recent years, rather than looking more broadly at the need to decarbonize the country’s housing stock and upgrade sustainability across the property market. Now real impetus is needed to start effecting real change.
Mortgage lenders have a significant role to play on the UK’s journey towards decarbonization. We can influence the industry’s direction of travel through thought leadership, education and raising awareness. At OSB Group, we are also keen to work with third parties and have already started partnering with other businesses such as energy suppliers, retrofit companies and data providers, with the aim of ultimately creating a one-stop shop where brokers and borrowers can turn for help and support when they are thinking about sustainability.
The good news is that growing numbers of consumers appear to be on board with the journey towards net zero carbon. In the second half of 2022, we carried out extensive ‘Landlord Leaders’ research which revealed that buy-to-let investors were far further advanced along the path of upgrading their rental properties that had been previously assumed. Professional landlords with four or more properties proved particularly up to green speed: 40% said they had already made environmentally-friendly upgrades to their property and 35% planned to do so in future.
The 1,000+ buy-to-let landlords we interviewed were also more focused on their social responsibilities than might have been expected, with 72% saying they have or will think more about the tenant experience. This tenant-centric approach dovetails neatly with the embrace of energy-efficiency – and positive investor outcomes. If landlords carry out works to improve the environmental credentials of a property that means happier tenants with improved affordability and fewer voids. And the value of the property may attract a green premium in an environment where consumer sentiment is fast becoming more sustainability-friendly.
Our research results chime with the findings of a You Gov survey published in November 2022 which revealed that 67% of Britons are now worried about climate change and its effects, while the proportion of people willing to invest to make their own homes more energy efficient rose from 41% to 50% between September 2021 and October 2022.
At OSB Group we want to be leaders in this field, and have shaped our lending strategy for 2023 and beyond accordingly. The £50m Landlord Leaders fund we launched in December which subsidises green lending products is one of a raft of measures we will be using to support the evolution of the UK’s housing stock.
Of course, radically upgrading a huge and diverse property landscape is an enormous undertaking. It will take an industry-wide effort to achieve, in co-ordination with government, housebuilders and ancillary markets. But we should not be fazed by this challenge. Nationwide property improvements have been implemented before – think about the introduction of central heating in the 1970s, or inside toilets post-1900! When consumer desire for lower energy bills and more planet-friendly properties combines with commercial appetite for more sustainable and socially responsible assets, genuine change is not just possible but inevitable. Let’s start to make it happen.
This article first appeared in The Intermediary Magazine - Feb 2023.