Eco targets creating ‘property prisoners’

‘Flawed’ Energy Performance Certificates mean eco-friendly upgrades can actually lower ratings. By Melissa Lawford

Homeowners risk spending tens of thousands on eco works that could make their homes less valuable thanks to the Government’s “flawed” Energy Performance Certificate system.

A senior banking source said that in 10 years’ time there could be a group of “property prisoners” because their homes have fallen in value as they are not deemed green enough. Others could be unable to access cheaper mortgages despite making their homes more energy efficient.

The energy sector has derided the EPC system – which rates homes from A to G – as “not fit for purpose”. The grading is based on bills, not on carbon output, meaning it can punish people for installing heat pumps and incentivises the use of gas over electricity. Inconsistencies in the system mean that homeowners can pay thousands of pounds for work that they later find actually lowered their EPC rating.

Tom Spurrier, of the UK Green Building Council, an industry body, said: “We have currently got a metric that incentivises gas because it is cheaper.” If you install a heat pump, which is powered by electricity, your EPC rating may fall.

The Government wants all homes to be EPC band C by 2035. Landlords will be affected first, with plans to introduce a band C requirement for new lets by 2025 and for existing lets by 2028. But owner occupiers will also be hit. Lenders will be required to have an average band C ranking for their portfolios by 2030, landing those homeowners in worse-performing properties with higher mortgage costs.

There is a risk that homes that cannot meet the target could become unmortgageable.

The flaws in the EPC system have created bizarre irregularities. David Simms, 34, is a small-scale developer and landlord in London. When he redeveloped a block in Clapham, he paid £10,000 for energy-efficiency improvements, including installing insulation. “The EPC rating went from a B to a borderline D because we put in electrical heating. It was like being kicked in the face.”

To increase his rating, the EPC assessor advised him to change the heating system back to overnight storage heaters, despite the fact that this would increase the total energy use.

On another redevelopment, Mr Simms installed double glazing, energyefficient lighting and an electric boiler. The EPC rating fell from D to E. “The assessor told me if it had been a gas heating system it would have gone to a B,” said Mr Simms.

The EPC grading system directly contradicts the Government’s aim to ban gas boilers. Jess Ralston, of the Energy and Climate Intelligence Unit, a nonprofit organisation, said: “EPCs are so focused on cost, they forget the environmental impact. If you install a heat pump, you will be punished.”

When the EPC system was designed in 2007, electric generation was very different. Ten years ago, using electricity produced more than twice as much carbon as gas; now, it is half that of gas.

“In terms of overall net zero, we need to switch as much as we can to electricity,” said Mr Spurrier. But because the

EPC system has not changed, it incentivises homeowners to do the opposite.

“Pressing ahead with EPC targets without reform will be extremely problematic. We don’t want to embark on a policy using a tool that is not fit for purpose,” he added.

David Adams, of the Energy Efficiency Infrastructure Group, an industry body, said: “The EPC system is completely inadequate to tell you how good a dwelling is and how much improvement it needs. People now may have completed on a house and be completely unaware of the liabilities they are taking on.”

The EPC system is subjective. Craig Powell*, an energy assessor, estimated that one in four EPC ratings was wrong.

“Two guys can do the same property and come up with different figures,” he said.

Julia Rennie, 59, spent £4,000 to replace old night storage heaters in two of her flats with electric radiators.

Her tenants’ energy bills dropped dramatically. But the EPC assessment did not take into account that they previously had to plug in fan heaters in the evenings at peak rates. The EPC ratings dropped, and each flat had a different result: in one, the EPC fell from C to D, in the second it fell from C to E. “The flats are virtually identical, it doesn’t make sense,” said Ms Rennie.

In September 2020, the Government published plans to make EPCs more reliable and is reviewing the changes needed to encourage people to improve the energy performance of their homes. But experts are frustrated with the lack of progress so far. “They have done multiple consultations, but nothing has actually been done,” said Ms Ralston.

Mr Powell also warned that government grant schemes, such as the renewable heat incentive, created opportunities for fraud. He said having a poor EPC rating would financially benefit installers and he had seen evidence of manipulation.

“It was clear the EPC they used to claim the grant was deliberately inaccurate,” he said. “There’s a lot of nudge nudge, wink wink, don’t look for certain things.”

A Government spokesman said: “No properties will be made unmortgageable by our plans to boost energy efficiency in homes.

“Our reforms will deliver a fairer system for all, supporting homeowners and landlords to improve their home energy performance, cut energy bills and increase consumer choice.”