UKGBC sets outs proposals for a 'green' stamp duty incentive as government data reveals record interest for Green Homes Grant in its final month
The UK Green Building Council is calling for the government to reform stamp duty to incentivise houseowners to make their homes more energy efficient, warning that urgent action is needed to drive long-term consumer appetite for green home retrofits.
In a report published this week, the trade body called for the government to embed an "energy adjustment nudge" to stamp duty land tax that would adjust the tax up or down dependent on the property's energy use and carbon emissions.
The adjustment would be proportionate to the value of the base stamp duty, to ensure that it fairly encourages and rewards action, and would increase and decrease over time to stimulate the housing market to value energy and carbon performance, the group said.
Under the proposals, purchasers of new homes who invest in measures improving the carbon or energy performance of their homes in the two years after purchasing could get a rebate from the total stamp duty paid.
Jenny Holland, public affairs and policy specialist at the UKGBC, noted that "energy efficiency isn't properly rewarded in the homebuying market" and said the measures would incentivise householders to take steps to curb their domestic carbon emissions.
"That's why we need a new stamp duty incentive, which will make energy efficient homes cheaper to buy and poorer-performing ones less attractive to purchasers," she said. "Properly designed, the incentive can be made revenue-neutral to the Treasury and would be very easy to administer."
Decarbonising the UK's housing stock is seen as one of the biggest challenges to the UK's efforts to meet its carbon targets, and the government is facing growing calls to set out how it plans to incentivise property owners to deliver energy efficiency and low-carbon retrofits to their homes in the wake of its controversial decision to axe the Green Homes Grant scheme last month. The UK's homes are some of the leakiest in Europe and are responsible for more than one fifth of emissions and 30 per cent of energy use, but the government is yet to set out how it plans to enable the retrofit of 29 million existing properties around the UK, the majority of which are powered by gas boilers.
Holland emphasised that decarbonising the UK's housing stock would unlock myriad benefits for the economy and make homes healthier and cheaper to run. "A stamp duty incentive would build a thriving retrofit market, supporting green jobs, boosting household spending and bringing down fuel bills," she said. "And crucially, it would embed energy efficiency into the decision-making process of homebuyers and drive a value differential in the property market as a whole."
The report notes that efforts to establish a thriving market for energy efficient home homes is critical and should go alongside grant schemes that subsidise energy efficiency improvements in the short-term.
"We cannot rely on grant funding alone to create a long-term, self-sustaining market," the report notes. "In addition, the inevitable boom-bust delivery cycle associated with grant schemes makes businesses inefficient, increases costs and drives down quality. Energy-adjusted stamp duty land tax would act as a long-term driver of consumer demand and would also allow grant funding to be focused where it is most needed."
The Treasury was considering a request for comment at the time of going to press.
The call from the UKGBC comes after figures published by the government on Thursday revealed that, despite government claims that the Green Homes Grant scheme had endured a disappointing level of take up amongst the public, applications for vouchers under the scheme hit a record high in March - the final month before it was unceremoniously scrapped.
More than 41,000 people applied for the scheme last month, in a significant increase from the next highest month, which was October 2020, the month the embattled grant programme was launched.
The government maintains that the short-lived scheme was hampered from a lack of consumer interest in the midst of a pandemic, but campaigners and MPs have slammed that assessment, pointing to strong interest from homeowners and well-documented administrative challenges that led to just a fraction of grant applications resulting in vouchers for energy efficiency or low carbon upgrades.
There have been growing calls for the government to urgently set out a replacement for the failed scheme and deliver a host of policy measures in the forthcoming Buildings and Heat Strategy that could kick-start the decarbonisation of the UK's homes.