More support needed from the Scottish Government’s Heat in Buildings Bill

Paul Hilton, ESPC's CEO, explains why homeowners (whether owner-occupiers or landlords) need more support from the Scottish Government’s upcoming Heat in Buildings Bill, for which we recently participated in the consultation. 

“We are all very aware of the changes being proposed to the way that we heat our homes in the years to come, as we move ever closer to the Scottish Government’s 2045 net-zero target, and the target the same year for all polluting heating systems to be removed from homes across the country. While we absolutely agree with these commitments, and we welcome the Government’s comments that state the proposals for the upcoming Heat in Buildings Bill will be ‘affordable, fair and feasible’, we believe that there is much support still required for homeowners to ensure that these changes can be made in positive ways that limit any detrimental effect. 

“We support the suggestion that grants and/or loans may be available, and we particularly welcome the Government’s recognition that certain type of properties may have limited options for clean heating systems, which is something we know is a huge concern for owners of traditional tenement properties or homes which fall under conservation or World Heritage sites. However, there are several issues raised in the proposals which we are concerned about, and which we think may have significant financial implications for homeowners and tenants in the years to come and may also negatively affect the property market. 

“Our concerns around the Bill fall into two main categories: landlords, and owner-occupiers. Landlords in Scotland have experienced a tumultuous few years, with changing legislation including rent freezes and eviction moratoriums. Recent figures from the Scottish Association of Landlords suggests that 22,000 privately rented properties have been lost from the market in the last year alone, largely due to these legislations coming into force. The current proposals for the Heat in Buildings Bill place landlords under higher pressure than other homeowners, as they will be required to ensure properties meet a minimum energy efficiency standard by 2028 (2033 for owner-occupiers), which, without due care or process, may push others to leave the sector, exacerbating the housing shortage we are experiencing across our major cities. 

“Timing is key when it comes to landlords, and we need to ensure that we are not deterring potential landlords from entering the market at a critical time, when we need more rented properties. For the benefits of both landlords and their tenants, we would strongly suggest that grants are made available to landlords to help them afford the required upgrades. Without this support, there is a chance that landlords may opt for the lowest-cost solutions to meet the standards, which could then lead to higher heating costs for tenants (such as in the use of expensive electric warm air heaters). To mitigate this risk, we believe grants could be made more favourable if landlords opt for a more efficient, economical fuel system, thus reducing the risk of any future tenant falling into fuel poverty.” 

“Owner-occupiers may also be disproportionately affected by the proposals, especially with the idea that a time limit will be imposed on buyers when they purchase a property, to make the required changes. Recent market research conducted by ESPC indicates that 50% of homes for sale are currently below the proposed new standard (likely to be an EPC rating of C).  

“Despite suggestions of a grace period of up to five years being put in place, ESPC believes that a property purchase should not be the ‘trigger event’ to make these changes. This policy would put a financial burden on an individual at a time when they are most financially stretched, particularly first-time buyers. There is a real risk that a buyer taking out a 95% mortgage and then a £15,000 loan to cover the improvements would then find themselves in negative equity, rendering them unable to move in the future. This spectre may be off-putting to many buyers, and we may even see a slowing in the property market, with buyers staying in properties for longer than they would have otherwise, to ‘feel the benefit’ of the investments made before potentially having to do it all over again in their next home. 

“As we have suggested to the Scottish Government during the consultation process, it’s our preference that an alternative solution is offered. We suggest that from 2030 onwards, the requirement would be that when installing a new heating system, a non-polluting system is installed, with both a low-cost loan and a scrappage scheme offered as an incentive. If a property purchase is to be the event that triggers the five-year deadline, we’d like to see the burden of debt sit against the property, and not the individual. In other words, a first-time buyer can have the work done and start to pay off the loan, but if, after three years they wish to move, the debt is inherited and continued to be paid off by the new, incoming buyer. This way, the debt is paid off over time, perhaps by multiple owners, but avoids a negative equity risk for just one owner. When coming on the market, the property would find its own level of value in the market depending on the outstanding loan balance, reflected in the property’s asking price. 

“To ensure consumer protection, we would also want to see a centralised database of approved contractors- much the same way you see for gas and electricity contractors. Secondly, all work must be completed to an approved building standard.  

“We would welcome any opportunity to discuss our thoughts and ideas with the Scottish Government prior to the publication of the Heat in Buildings Bill, to do all that we can to support homeowners, aspiring homeowners and tenants across the country to make their homes more environmentally and economically efficient.”