‘Leaky walls’ are the biggest challenge for England’s energy efficiency drive, and radical steps are needed to support less affluent families with home improvements 12 December 2022 England’s plans to insulate its housing stock must step up a gear by focusing on the most difficult barrier – nine million homes with ‘leaky walls’ – which poorer owners will simply be unable to address without more radical state support, according to new research published today (Monday) by the Resolution Foundation. Hitting a brick wall – the 33rd report of The Economy 2030 Inquiry, funded by the Nuffield Foundation – says that decarbonising our homes is one of the hardest aspects of the net zero transition. Because of this, policy makers must adopt tougher, more radical solutions than those tried in the past, or currently being proposed. The report says that the main home insulation challenge facing Britain is addressing the poor quality of walls – a by-product of over a third of its housing stock being built pre-1946. While some progress has been made in the past – home insulations peaked at 1.6 million in 2012, before dropping back sharply – these efforts were focused on easier options of improving lofts and windows, rather than the more expensive and disruptive issue of solid wall insulation. Without these improvements, many lower income families will not see their homes reach the standards needed to lock in lower energy bills and prepare homes for the transition to carbon-free heating. The Foundation’s analysis shows that four-in-ten homes in England – nine million homes in total – have walls rated as poor or very poor, compared with two-in-ten homes with inefficient roofs, and one-in-ten homes with poorly-graded windows. The issue is most acute in large cities, with close to two-thirds (64 per cent) of all homes in London having poor quality walls. The cost of poorly insulated homes will become very apparent to families this winter – with the cost of heating a home with poor quality walls likely to be around £350 higher than one with wall upgrades, just between January and April next year. The ‘leaky wall’ problem is particularly difficult because the financial incentive to tackle it is very weak for home-owners. The cost of wall insulation averages £8,000, and it can take 18 years to recoup upfront costs. The shock of high energy bills is unlikely therefore to persuade enough people to improve their homes in this way. Rather than repeating another failed incentive scheme for home improvements, or putting the entire nationwide wall insulation onto the state, the report calls for a radical new ‘carrot and stick’ approach – combining targeted financial help for home improvements with a ban on poorly insulated homes by 2035. The report says with leaky homes often concentrated in less affluent neighbourhoods, targeted financial support will be vital for those who simply can’t afford vital home improvements. A means test that takes account of households’ income and assets in order to determine eligibility, such as the one used in social care, could be used to determine who receives access to state support. For example, setting a ceiling for support for households with £250,000 of assets (such as property wealth), and a floor below which the state pays for households with assets under £100,000 and incomes under £30,000, would mean that around half of home-owners would pay in full for home insulation, around one-in-ten would have their costs fully covered by the state, and the remaining two-in-five would receive a sliding scale of state support. This would push around three quarters (71 per cent) of the costs onto property owners, requiring up to £1.8 billion per year of state funding over the next decade. The ‘stick’ should be a new regulation setting a hard deadline for homes to meet energy efficiency standards. The Government should mandate that all homes must be EPC C rated for energy efficiency by 2035. This approach has been successful before, with the introduction of minimum energy efficiency standards in private rented homes in 2018 driving the number of poorly insulated rented properties down from 30 per cent of new tenancies to 10 per cent almost overnight. Enforcement of this requirement should be targeted at times when they are least disruptive, such as between tenancies or when people are moving into their new home. The cost of improvements could be added to existing mortgage agreements or house price negotiations. None of this will be achievable, the authors note, without overcoming workforce issues that have proved terminal to recent insulation schemes. As such, the Government should focus on skilling up the wider construction force in retrofit techniques (especially wall insulation) and training retrofit coordinators in parts of the country with greatest need. Jonny Marshall, Senior Economist at the Resolution Foundation, said: “England’s homes have as large a carbon footprint as our petrol and diesel powered cars. The key policy task for the 2020s is finding a way of decarbonising millions of homes without leaving poorer households behind or burdening them with unaffordable costs. “Previous approaches such as cheap loans have failed to deliver improvements at scale, and the biggest barrier to energy efficient homes has been largely ignored: our leaky walls. The sheer cost of insulating Britain’s walls means that the state cannot be expected to foot the bill entirely. “Instead, a new carrot and stick approach is needed to ensure that England’s nine million leaky homes are upgraded. Mandating that all homes must be energy efficient by 2035 can spur home-owners and landlords into action, while a new means test could help around half of households with at least some of the costs of the upgrades, and all of the costs for those with the lowest means.” Notes to Editors The report presents results for England (rather than the UK) because housing is a devolved policy area, and different schemes are in place in the constituent nations. However, the share of inefficient (EPC rated D and below) homes in Northern Ireland (51 per cent) Scotland (55 per cent) and Wales (65 per cent) are broadly comparable to that in England (59 per cent), and the lessons in the report are generalisable across the four nations. The Economy 2030 Inquiry is a collaboration between the Resolution Foundation and the Centre for Economic Performance at the LSE, funded by the Nuffield Foundation. The Nuffield Foundation is an independent charitable trust with a mission to advance social well-being. It funds research that informs social policy, primarily in Education, Welfare and Justice. It also funds student programmes that provide opportunities for young people to develop skills in quantitative and scientific methods. The Nuffield Foundation is the founder and co-funder of the Nuffield Council on Bioethics, the Ada Lovelace Institute and the Nuffield Family Justice Observatory. The Foundation has funded this project, but the views expressed are those of the authors and not necessarily of the Foundation. Visit www.nuffieldfoundation.org.