The UK housing sector is at risk of losing out on £31bn (€36.2bn) of private investment as companies look for opportunities in more favourable investment environments abroad, according to research from the UK Sustainable Investment and Finance Association (UKSIF).
UKSIF, which has more than 300 members managing over £19trn in global assets, polled 100 business decision makers across the UK housing sector, representing £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.
However, improvements in the sustainability policy landscape could see the UK housing sector benefit, the study found, with almost all large UK real estate companies considering an increase in investment if this was the case. The respondents identified various factors which could support this further investment drive, including:
- 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 decarbonsing the UK housing stock, respondents said that if the government collaborated with lenders and brokers to better signpost green mortgage options, it would encourage over half (56%) of large UK real estate companies to increase investment in sustainable housing.
- Over four in five (85%) of 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.
The UKSIF Financing the Future: Housing Report is the second of a four-part series of research and policy papers calling for a series of practical and cost-effective policy reforms required to unlock greater investment for the UK’s highest carbon-emitting sectors and fulfil the UK’s true potential for sustainable economic growth.
Within the report, UKSIF has identified three key measures required to unlock the private capital needed to decarbonise the UK’s housing stock, including the need for private rented homes to achieve an EPC rating of C by 2025, an increase in green mortgage take-up, and longer term funding for social housing providers.
James Alexander, CEO at UKSIF, said: “Successive governments’ wavering on decarbonising the UK’s 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, and only then can opportunities be unlocked for the UK housing sector, with benefits realised for consumers, the environment and the wider economy.”
Chris Taylor, head of real estate at Federated Hermes added that 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” He believes the scale and complexity of this challenge ”demands a tailored approach that considers the unique characteristics of the sector and supports the role of private investment in driving this transition”.
UKSIF said that the fragmented nature of the UK housing market means there is a need for a ”joined-up approach with the creation of appropriate mechanisms and legislative frameworks, as well as well-defined, interim targets and long-term policies to facilitate and encourage private investment in the decarbonisation of UK housing”.
Tim Lord, UK head of climate change, HSBC UK, said: “We need to unlock investment to retrofit almost all of the 28 million homes in the UK – and if we get it right we can cut emissions, increase comfort, and reduce running costs.
”At the moment, the upfront costs of measures like replacing gas boilers with green alternatives, installing solar panels, and upgrading insulation can be challenging for households to meet. We need to create the right incentives for householders to invest.”
Shamez Alibhai, head of community housing at Man Group, concluded: “UKSIF has developed a set of recommendations that we think could accelerate the much-needed decarbonisation of the UK’s housing stock. Its cost-effective proposals are broad-based with clear economic benefits to families, investors and the planet.
”We want to build a housing market that works for everyone, and this research underlines the significant potential for sustainable economic growth delivered through comprehensive housing policy.”
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