The Climate Change Committee has made clear that the UK won’t meet its net zero target without near-complete decarbonisation of the housing stock. But against this backdrop the vast majority of the UK’s privately owned homes remain stubbornly energy inefficient. A big shift is therefore needed to change behaviour, improve energy efficiency and switch to low carbon heat. But there is currently a market failure, with householders lacking the motivation to undertake improvements at anything like the rate needed, while the cost of fuel bills is rarely factored into the price of a home.
This report shows how an adjustment to Stamp Duty Land Tax could catalyse and drive the market to deliver both energy efficiency improvements and low carbon heat and power. It would also be revenue neutral to HM Treasury. Grants could then be focused on early and ambitious adopters, supporting lower income households, accelerating scale-up and driving down costs, with financial products used to help those that are asset-rich but cash-limited.
Accompanying the report is an illustrative SDLT Energy Adjustment Calculator, with over 60 worked examples showing how the incentive would work in practice.
Though by no means a ‘silver bullet’, we firmly believe that a stamp duty incentive would drive a value differential in favour of more energy efficient homes and embed energy efficiency into the decision-making process of homebuyers. Without it, we won’t be on track to decarbonise our housing stock or meet our climate and energy targets.