EPCs – the building blocks of data for greener real estate

Where and how we live understandably plays a critical role in our national quest for net-zero living. Last year the National Housing Federation released a report that calculated for the first time that England’s 25 million households – which produce 58.5 million tonnes of CO2 each year – emit the equivalent of the average annual consumption of 28 million cars. There are 27 million cars in use in England, which emit 56 million tons of CO2 every year. Emissions from our homes are so high, thanks to a combination of gas central heating and poor insulation, that the average household in England currently produces more CO2 each year just staying at home than it drives.

Work is already underway to understand what needs to be done to address this. In November 2020, the UK government launched its ‘Improving home energy performance through lenders’ consultation. According to the government, lenders have a role to play in building a market for energy efficiency improvements. The Government is currently considering feedback and will publish its response in due course, but the consultation suggested that lenders must publicly report their portfolio’s average EPC rating and aim to improve to a portfolio average of EPC Band C by 2030 with the aspiration the government that as many households as possible should be EPC Band C by 2035.

I’ve written before that the transition to a greener economy will require all organizations to create data points that underpin our measurement of progress. This is fundamental to an effective and safer transition to a net-zero economy.

Not surprisingly, data is incredibly important in understanding the magnitude of the emissions problem and the necessary corrective actions homeowners may need to take to fix their properties’ deficiencies. Mortgage lenders already approach us on this topic when they start assessing their portfolio’s average EPC band.

While far from perfect, the EPC is now the accepted starting point for understanding what can be done and how we measure it. The validity period of the EPC is too long as a lot can change in a property over 10 years. This timeframe needs to be shortened to more accurately reflect the reality of a property. Reassuringly, the government has committed in its progress report on the Improving EPCs Action Plan to review this as part of the forthcoming consultation on the Energy Performance of Buildings Regulation.

Of course, there are other ways the government can incentivize the right homeowner behavior—for example, through tax breaks or penalties. But measuring their effectiveness will still lead to creating comprehensive and accurate data points – like the EPC.

Ultimately, the EPC has three important tasks. First, they should provide a trusted, accurate and reliable measure of a building’s energy performance; second, they should encourage consumers to reduce energy consumption in buildings; Third, they should support consumers and third parties with the right data to make informed decisions. Confidence in the data will be critical and we are working hard to ensure it is widely available, accurate, complete and timely.

We know that an energy efficient property will appreciate in value over time and this can increase the amount of credit available when the time comes. Understanding EPCs’ lending opportunities starts with the data, and understanding more fully how data like this will affect value in the future is critical.