Source · Select Committees · Housing, Communities and Local Government Committee
Recommendation 13
13
Paragraph: 69
The retrofitting of existing homes is essential for ensuring the UK reaches net zero by...
Recommendation
The retrofitting of existing homes is essential for ensuring the UK reaches net zero by 2050. Retrofitting will come at substantial cost and can only be achieved through a mix of both public and private funding. We welcome the additional £3.9 billion of funding being provided for retrofitting as outlined in the Government’s Heat and Buildings Strategy, including for public sector buildings, social housing, and low-income families. But more needs to be done to provide long-term certainty for funding for retrofitting beyond 2025. The Government should set out its longer- term funding plans beyond 2025, and outline the share of funding for retrofitting it anticipates will come from private investment. The use of private sector financial instruments should be encouraged and incentivised by government. This should include greater action by the UK Infrastructure Bank to support private financing of retrofitting, following the example of the German national infrastructure bank. We note the Government’s proposal to encourage green mortgages, and this should be subject to extensive consultation to avoid unintended consequences. The Government should also consider offering tax incentives, which could include lower VAT, stamp duty and council tax, for energy efficient measures and homes.
Paragraph Reference:
69
Government Response
Acknowledged
HM Government
Acknowledged
As outlined in the Net Zero Strategy, Government committed to consult on phasing in higher minimum standards to ensure all homes meet EPC Band C by 2035, where practical, affordable, and cost effective. In order to meet these standards, we are providing targeted funding to households that need it most, in particular fuel poor and low-income households. We are also working to catalyse a competitive green finance market for other homeowners. We are working with mortgage lenders to support homeowners to improve the energy performance of their properties and will publish in due course our response to the consultation on improving home energy performance through lenders. We have also recently announced a £10 million Green Home Finance Accelerator programme, focussed on supporting the development of innovative green finance products and services. This will enable homeowners to decarbonise their homes and improve thermal comfort. Building on the outputs and learnings from the Green Home Finance Innovation Fund competition, BEIS has invited the UK Infrastructure Bank (UKIB) to help steer the design and delivery of a further green home finance programme. We will also work with UKIB to explore whether they can play a wider role in scaling-up green home finance. Consumers already benefit from a number of VAT reliefs on construction. The Government currently maintains a zero rate of VAT on new-build residential or qualifying buildings to incentivise the construction of new homes. Additionally, a reduced rate of VAT at 5% is also maintained, subject to certain conditions, for residential renovations. This includes conversions of buildings from one residential use to another, conversions from commercial to residential use, and the renovation of properties that have been empty for two years or more. Going further would impose significant additional pressure on the public finances, to which VAT makes a significant contribution. Stamp Duty Land Tax (SDLT) is currently a fair tax, where properties under £125,000 do not pay any SDLT and neither do first-time buyers buying a property under £300,000. This means that in 2019-2020, 34% of people buying a property did not pay SDLT at all. Using SDLT to incentivise home energy performance improvements would require a radical overhaul of this tax which could risk unintended impacts, for example on housing affordability and social mobility. SDLT continues to be an important source of government revenue, raising several billion pounds each year to help pay for the essential services the government provides. For these reasons, there are no plans to change the current VAT treatment of construction or to replace SDLT with a different form of tax. Since any reductions in the council tax bill would result in reduced income for local authorities in delivering critical local services to their communities, the Government does not have any plans to provide energy efficiency incentives through the council tax system either. The Government, however, keeps all aspects of the tax system under review.