Plans to boost the energy efficiency of UK homes by offering green home improvement loans that are tied to the property and not the owner have been put forward by the Green Finance Institute (GFI), Lloyds Banking Group (LBG) and NatWest.
The initiative, Property Linked Finance (PLF), could unlock between £52bn and £70bn of private investment, which could be ploughed into making the country’s homes greener.
The report, entitled A greenprint for Property Linked Linked Finance in the UK, sets out a series of guiding principles and key steps for how PLF should be designed and launched in England and Wales.
These include calling for enabling legislation from the government as well as the establishment of pilot programmes, initially in the commercial sector.
Finance tied to properties
Homeowners who take out a PLF agreement, which has the potential to be spread over a long term, would only need to pay the loan while they own the property. When the home is sold, the responsibility to maintain the loan agreement is passed to the next owner, who benefits from living in an energy-efficient home that is cheaper to run.
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By linking the loan to the property instead of the owner, the GFI claims it will stop owners who expect to move home in the near to medium term being put off from making improvements because their energy savings would not offset the project costs before they leave.
The loans, available to homeowners and the owners of commercial property, would fund up to 100% of the initial home improvement project.
Potential to unlock up to £70bn
An estimated investment of £360bn is needed to decarbonise UK buildings by 2050, according to the report.
The GFI says PLF could unlock up to £70bn of private investment into energy-efficiency upgrades in the residential market alone, accelerating the transition to decarbonising UK’s buildings.
Funders could include banks, building societies, non-bank lenders, institutional investors and local authorities that have the power to create a Local Land Charge.
Eloise Henderson-Day, PLF programme director at the GFI, said: “Successfully introducing PLF in the UK will require a collaborative approach across the entire built environment ecosystem.
“We are working with financial institutions, policymakers, regulators, local authorities, property owners and experts to ensure financial, real estate and retrofit industries support the evolution of this innovative green finance solution, but more players are needed.
“By working together, we can create a robust, flexible and widely adopted PLF market in the UK and beyond, driving the transition to a more sustainable future for all of us.”
