DJ Alexander: Encourage green energy with incentives, not punishments
Scotland’s consultation to introduce green heating systems requires more of a carrot than stick approach, property firm DJ Alexander has urged.
David Alexander, chief executive of the firm, is critical of the Heating in Buildings Bill, which states that penalties may be used to incentivise landlords and homeowners to install green heating systems.
While he said it’s welcome that this consultation delayed the timescale for achieving these changes to 2028 for landlords and 2033 for homeowners, there remains the threat of penalties and charge.
PRS owners must fit new heating systems over the next five years and the Scottish government has said that “private landlords would be subject to civil penalties if they don’t meet the minimum energy efficiency standard after 2028.”
Alexander responded: “Few people disagree with the principle of these initiatives to introduce more green measures into our housing stock. It is the timing, the organisation, and the funding which are questionable.
“A relatively short deadline of five years for the PRS could reduce the number of landlords wanting to stay in the sector. Equally, ensuring there is an element of threat in the consultation is unlikely to foster good relations with the sector.
“Larger investors will remain, but individuals may find this a step too far and we may see an erosion in the number of properties available to rent. The inevitable result will be higher rents for tenants.”
The majority of homeowners and landlords will be made to pay for these new heating systems, as Scottish government allocated just £1.8bn for this work but predicted an anticipated cost of £32bn to install appropriate systems in all homes.
This equates to at least £10-12,000 per household with suggestions that homeowners pay for this through loans, extending their mortgages, or by releasing equity from their homes.
The consultation goes on to “require those purchasing a home or business premises to end their use of polluting heating systems (this is the term the report uses for oil and gas systems) within a fixed period following completion of the sale. The suggested time period could be as little as two years up to five years and has still to be determined”.
The consultation concedes that if the property fails to meet the new heat in buildings standard buyers “may wish to take this into account in any offer they go on to make.”
This means that anyone buying a house will be told that they must install a heat pump or similar system potentially within two years and bear all the associated costs.
The consultation goes further and states: “Whether banks and buildings societies can – or already do – make complying with laws relating to your property a condition of mortgage and/or home and buildings insurance. If this were to extend to meeting the Heat in Buildings Standard when required to, then it would give building owners a strong incentive to do so and to ensure compliance with the terms of their mortgage or home or buildings insurance.
“In such a scenario, we may wish to record those buildings that have not met the Heat in Buildings Standard when they were required to, thus avoiding the need to fine or penalise building owners. We will engage further with lenders and insurance companies on this point.”
“However, if it becomes evident that not enough properties are complying with the Standard, we may think about other tools to help us achieve this, including wider civil penalties.”
The consultation states that “certain types of properties may have limited options for clean heating systems in the near term. This includes, for example, flats, homes that aren’t suitable for certain energy efficiency upgrades, or properties in areas that don’t have sufficient electrical grid capacity.”
Despite an extension of the deadline there was also no mention of how these heat pumps would be installed, as currently 5,000 people per year are installing heat pumps.
The consultation paper concedes this point and states: “at the current pace it would take several hundred years to reach net zero.”
Alexander added: “This consultation needs to heed the words and advice of those in the sector who are concerned about the viability and achievability of these proposals and understand and reflect the potential issues a major project like this produces. The appropriateness of the offerings is too narrow for the diverse range and geography of housing in Scotland. The costs are not transparent in terms of how much each household will pay.
“Affordability is assumed to be built in, but it is clear that homeowners will receive lower offers for their properties (acknowledged in the consultation), and that asking buyers to add in an extra £100 a month (in one example contained in the paper) may seem reasonable to some but could be the difference in an individual being able to afford a home. There is also nothing which addresses the key issue of how likely these targets are to be delivered. Where is the funding and support to increase the trained workforce to do the job and grow the businesses to deliver such large levels of installation over a short period.”