Can millennials lead a green home revolution?
Generational disparities will need to be addressed if residential property is to cut carbon emissions
- Nick Whitten
Millennials are the most likely generation to have changed their buying behaviours due to climate change. But has that behaviour shifted to the biggest purchase we make in our lives – buying a home?
Ranging from 25 to 40, millennials are also the de facto first-time buyer (FTB) category. Across Europe, the average age of a FTB is 31, according to Swiss Life.
Surely there should now be hundreds of thousands, if not millions, of FTBs across Europe demanding greener homes and potentially paying a premium for one?
But that isn’t the case.
Residential green premiums are in short supply due to a chronic shortage of supply and affordability, with many millennials being priced out of home ownership, whether they want a green home or not.
Furthermore, similar carbon reduction targets to those set nationally for businesses, have not been set for individuals.
New versus old
In housing, the focus is instead on improving the carbon footprint of homes themselves. And this gives new build homes a major advantage.
JLL analysis of around 20 million homes in England and Wales on the Energy Performance Certificate (EPC) Register shows newer homes built since 2007 emit significantly less carbon per year per square metre, compared with homes built before 1930.
At the same time, JLL data shows that urban homes emit lower carbon emissions per floor area than rural homes, no matter the age of the home.
And new homes should improve further. By 15 June 2022, all UK new builds will need to cut carbon emissions by 30 percent. Developers will need to incorporate more low-carbon technology, such as solar panels, heat pumps and sustainable materials.
But right now, most existing homes aren’t achieving the ‘highest’ green standards – just 3 percent of UK homes are rated A or B (the two ‘best-performing’ EPC categories) – compared with 83 percent of new build homes.
And here lies a problem; the majority of homes are owned by the Baby Boomer and Generation X age groups – many of whom are unlikely to be moving any time soon (the average length of stay in an owner-occupied UK home is 17 years, according to the English Housing Survey).
This isn’t to suggest that these older age groups care less than millennials about climate change. But it is a challenge to find ways to incentivise these groups to improve their domestic carbon footprint.
It seems mortgage lenders will also have a major role to play, both in stimulating appetite for greener new homes as well as helping to retrofit older ones.
Banks are turning their attention to this. In 2021, five new lenders entered the green mortgage market in the UK, where there are now 14 green mortgage lenders with a total of 26 product offerings, compared with just three prior to the COVID pandemic.
It may only represent about 10 percent of the total mortgage products on the market – but it’s the direction of travel that is notable. Expect many more green mortgages to hit the market in 2022.
Costly but worthwhile upgrade
Further forward, all UK homes will need to have at least an EPC C rating by 2035 (rented homes will need to hit the target by 2030). Right now, 60 percent of the 28 million homes in the country are D or below. Getting those homes up to standard is a huge challenge, not least financially; the Climate Change Committee estimates it would cost £23,000 to retrofit an older home, but it’s not clear up to what standard exactly.
If it’s assumed that that is sufficient to get all homes to the EPC C threshold, it would require at least £386 billion in funding.
JLL calculates that if all existing UK homes are retrofitted to a minimum EPC C, it would remove the equivalent carbon emissions made by 42,000 London to New York flights. That’s more than four years’ worth of air traffic on the world’s highest frequency long haul flight route.
It may be costly, but the rewards, not least in terms of running costs, could be huge.