Tom Brearley
Posted on 9 Nov 2017

The government's Clean Growth Strategy – what does it mean for the property industry?

The Department for Business, Energy and Industrial Strategy (BEIS) published the government's Clean Growth Strategy on 12 October 2017. The aim of the Strategy is to accelerate 'clean growth'. Clean growth means growing national income while cutting greenhouse gas emissions.

The Strategy affects many aspects of the UK economy, including commercial and domestic property. Set out below are the key points for those in the property industry.

Domestic and commercial

The Strategy sets out a commitment to reviewing Building Regulations for energy efficiency. The government has commissioned an independent review of Building Regulations and fire safety, to report in spring 2018. Following this, the government will consult on improving Building Regulations to ensure that work meets a high standard of energy efficiency.

The government will back a lenders' initiative, 'Green Mortgages', to incorporate energy efficiency into lending decisions. Such products will incentivise energy efficiency improvements by taking account of the lower lending risk and enhanced repayment that such properties will provide.

There will also be significant investment through the Renewable Heat Incentive to focus on long-term decarbonisation technologies. There is an intention to phase out oil-fired heating in new and existing homes and commercial premises during the 2020s.

From April 2018, the Minimum Energy Efficiency Standards (MEES) will make it unlawful for landlords to let properties with an Energy Performance Certificate (EPC) rating lower than E. The Strategy proposes consultations on how to make these measures more effective in the residential sector and on raising the MEES threshold for commercial property (presumably to D or C).

Commercial property

The government hopes that businesses will improve their energy productivity (being the ratio of output divided by energy consumption) by at least 20% by 2030. Businesses will be encouraged to get more from their energy inputs by the MEES regime, Building Regulations and voluntary building standards such as Building Research Establishment Environmental Assessment Method (BREEAM) ratings.

In addition, the government intends to establish an Industrial Energy Efficiency scheme to help large companies install measures in order to reduce their energy use. There will also be a consultation aimed at simplifying the reporting obligations relating to energy efficiency for business.

Domestic property

There will be continued support for the Energy Company Obligation (ECO) until at least 2028. This will include £3.6bn investment and upgrading around a million homes.

There is an aspiration to upgrade fuel-poor homes to an EPC rating of C by 2030 and, where practical, the remainder of homes by 2035. The government will also look at how social housing can meet similar standards in the same time frame. There will be a consultation aimed at making the Green Deal framework more effective at funding improvements by residential landlords.

The policies and proposals set out in this Strategy will have a significant impact on the property industry. The picture will become more distinct as detail emerges from the planned consultations; however, the direction of government policy seems clear.

For more information please contact Alice Spicer Edwards, Trainee Solicitor, at alice.spicerewards@michelmores, or Tom Brearley, Associate in the Real Estate team, at tom.brearley@michelmores.com.