UK risks losing £31bn due to lack of sustainable housing support

The UK Sustainable Investment and Finance Association said that the UK could potentially lose up to £31bn of private investment. UKSIF comprises of over 300 members managing over £19tn in global assets under management. It polled 100 businesses across the UK housing sector, which together represent £300bn in turnover, on their views about the current opportunities and challenges of decarbonising the UK housing sector. The research found that only 15% of UK real estate companies place the UK as the top market for sustainable investments, with 63% of respondents planning to move investments out of the UK to a market that is more supportive of their sustainability goals. Sustainability policy However, the report said that improvements in the sustainability policy landscape could see the UK housing sector benefit, with almost all large UK real estate companies considering an increase in investment if this was the case. Nearly three quarters, 71% of large UK real estate companies, believe that introducing a long-term, CPI-linked rent ceiling for social housing, post-2025, would have a positive impact on companies investing in sustainable real estate in the UK. Recognising the multiple participants involved in decarbonising the UK housing stock, respondents said that if the government collaborated with lenders and brokers to better signpost green mortgage options, it would encourage 56% of large UK real estate companies to increase investment in sustainable housing. Over four in five – 85% – of the UK’s large real estate companies also said that they believe skills training hubs to reduce heat pump installation delays would have a positive impact on companies investing in sustainable housing in the UK. Unlocking investment UKSIF also identified key measures to unlock the private capital needed to decarbonise the UK’s housing stock. These include a set requirement for private rented homes to achieve an EPC C rating by 2035. Widespread retrofitting, including new skills hubs and the rollout of heat pumps, will help to significantly reduce the UK’s carbon emissions and save £8bn in energy bills over the next decade. The respondents also said the Financial Conduct Authority should adopt “a clear definition” of green mortgages to better align market products. This could include developing a lenders’ charter for green mortgage providers, or encouraging lenders to offer their green mortgages to any home that has an EPC C rating and above. In addition, funding remains the biggest barrier for social housing providers to retrofit their housing stock. UKSIF said introducing capital allowances for private investors to invest in the sector could help to decarbonise the UK’s housing stock more efficiently. The need for clarity UKSIF chief executive James Alexander said: “Successive governments’ wavering on decarbonising housing stock has hampered private investment into one of the UK’s highest emitting sectors. “Our research shows that there is huge demand from real estate companies and investors alike to invest in the UK, but policy reform and government measures to close the skills gap are critical if the UK is to avoid falling behind other countries in the race for capital. “UK residents can live in greener houses that are cheaper to heat as long as policymakers remain focused on the critical role of private investment in the transition. “Investors are in desperate need of clarity from the government on sustainability policy.” Federated Hermes head of real estate Chris Taylor said: “It is critical that we take immediate steps to unlock the private capital needed to decarbonise the UK’s housing stock and achieve our net-zero ambitions.”