Paragon Development Finance’s Green Homes initiative rewards developers building the most energy efficient homes. Managing Director Robert Orr explains why we have launched it and how we are supporting clients towards achieving net zero.

As COP26 closes, the hard work now begins on delivering the Government's goal of net zero by 2050. Housing will play a key role in the country achieving that target.

The UK's housing stock accounts for 21% of the country's total carbon emissions according to the Energy Saving Trust. Too many of our houses are old, energy inefficient and difficult to upgrade in a cost-effective way.

The challenge of upgrading existing stock will be felt by many across the tenures - homeowners, landlords and social housing providers - and it's not going to be easy. Understanding what work needs to be done, finding the right tradespeople to carry out upgrades and financing work will be a challenge millions of households will face.

This is why the new build sector has an increasingly important role to play, not only in building homes to the scale required to satisfy demand, but to the energy performance needed to support the net zero transition.

The new build sector is making great strides and we should recognise and celebrate the progress that has been made. However, more can be done.

In 2009, 62.5% of new homes built that year had an EPC rating of B or above; last year that number hit 83%. In terms of actual properties, that equates to 184,946 homes in 2020 at EPC B or above - double the number built 11 years previously. This is brilliant progress.

The next target is to improve that percentage even further, and for more homes to be at the EPC A rated level. Last year, just 3,457, or 1.5%, of the 222,966 new dwellings in England and Wales were EPC A.

That's why we have launched our Green Homes initiative. This gives SME developers 50% off their development finance exit fee if 80% of the homes in their scheme are at the highest EPC rating, based on a minimum number of five properties in the project.

Learn more about our green homes initiative

We recognise the extra lengths that developers need to go to achieve an EPC A rating for their properties, including the additional costs, and we also understand that buyer demand may not be at the point where A rated homes are deliberately sought just yet.

But we are all on a journey to net zero and this initiative is designed to encourage a change in behaviours and a change in thinking, rewarding those developers prepared to take the steps to build the most energy efficient homes possible.

This is a challenging yet exciting time for the sector. New materials and construction techniques are being introduced that will help drive improvements from the supply chain through to the end product.

Lenders, developers, suppliers and Government will need to work together to help deliver more energy efficient homes. The Government's Future Homes Standard should ensure that all new homes built from 2025 will produce 75-80% less carbon emissions than homes delivered under current regulations.

Full details on how that will be achieved have yet to be published by the Government, but it's an encouraging step, particularly the commitment that no new home built under the Future Homes Standard will be reliant on fossil fuels.

Developers want to be certain they have a funding partner that understands the journey they are on, with the commitment to support them to achieve their efficiency goals. The Green Homes initiative is a starting point for that.
 

Robert Orr
Managing Director Paragon Development Finance