Is retrofitting older buildings necessary to reach carbon neutrality?

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With construction and energy costs increasing around the world, along with climate change pressures, it’s more important than ever to consider not just sustainable building methods, but also refurbishing existing buildings to improve their energy efficiency.

According to the UN, cities are responsible for 75% of energy consumption and 70% of greenhouse gas emissions globally – in the UK, the Environmental Audit Committee (EAC) found that the built environment is responsible for 25% of the nation’s emissions. 

As 80% of the buildings that we use today will still exist in 2050, something clearly needs to change with our built environment if the UK government wants to meet its net zero carbon targets by then. 

This blog explores whether retrofitting older buildings with newer energy-efficient features to reduce their consumption could be the way forward.

Old UK housing is the least insulated in Europe

Research by a German technology company, Tado, revealed that UK housing is some of the most poorly insulated throughout Europe. This is compounded by findings from the Building Research Establishment (BRE), which revealed that UK housing stock is the oldest in Europe.

More than a third of houses in the UK were built before 1946, long before we understood the causes and effects of climate change, so it isn’t surprising that these buildings aren’t well-insulated.

However, as the UK Department for Business Energy & Industrial Strategy (BEIS) found that 78% of residents have to use gas central heating to keep their homes warm, it’s a major concern that lots of this energy produced from burning fossil fuels is being wasted due to inadequate building envelopes.

This wasn’t as much of a concern back when fuel was cheap and most people weren’t aware of the consequences of high carbon emissions, but the opposite is true now. It seems unavoidable that the UK’s ageing houses need to be insulated to prevent such massive uncontrolled heat loss.

What are the benefits of retrofitting buildings?

Although retrofitting older buildings requires a significant upfront investment, the cost savings over time would be extremely beneficial. Rather than knocking down existing buildings and constructing new ones, which requires far more resources, insulating existing buildings to reduce energy use and emissions would benefit the owner’s bills as well as the planet’s temperature.

With research by contracting company Willmott Dixon finding that the majority of councils in England and Wales are struggling to decarbonise due to budget shortfalls, and with the possibility of more than a tenth of public buildings becoming unusable, it seems obvious that the government will need to step in and provide funding or tax incentives for retrofitting measures.

Some believe this could come in the form of removing Value Added Tax (VAT) from renovations, which it currently applies to – despite not applying to new builds. Others think that the government should offer low-interest loans to building owners for retrofitting works, which could be repaid over time out of the money saved on reduced energy bills, at a lower cost to the owners.

While the government has not announced plans to do this, there are further benefits to funding retrofits that could influence their future decisions. As shown by a Save the Children study on fuel poverty, poorly heated homes are highly likely to cause health problems, from respiratory issues to mental illness – especially for young children and adolescents.

Save the Children’s cost-benefit analysis suggests that every £1 spent on reducing fuel poverty could return a 12p-42p saving to the NHS. Therefore, investing in retrofitting poorly insulated older houses could improve public health, too, helping to reduce the strain on the NHS.

Why should business owners invest in retrofitting?

Given the difficult economic climate, owners or leaseholders of commercial buildings are likely to focus on cost control in the short-term, and may struggle to see how the cost of retrofitting would generate returns for their businesses quickly enough.

However, failing to take these steps to reduce environmental damage is likely to have further drawbacks in the future. Hesitation and inaction could not only lead to businesses falling behind in sustainability stakes and public perception, but also result in the accelerated devaluation of their property at a time when low-carbon buildings are in high demand.

The number of companies with net zero sustainability targets is likely to far exceed the number of low-carbon commercial buildings actually available, making a retrofitted property more desirable. The new financial risk is that an improperly insulated building, which would already be costly to run, could soon become unsaleable and unlettable if it fails to meet government requirements for low carbon emissions.

Pressures on businesses will probably continue to increase, with higher financial penalties for high carbon emissions and difficulties securing funding without adequate ‘green’ operations. Without retrofitting sooner rather than later, owners of older buildings may fall victim to the ‘brown discount’ of rents and sale prices far below the market average.

Can historic buildings be retrofitted?

According to research commissioned by several organisations, including Historic England and the National Trust, around 6 million houses and 600,000 commercial buildings in the UK were built before 1919. These older buildings contribute a significant proportion of the UK’s carbon emissions.

Improving their energy efficiency would generate around £35 billion in economic output and support almost 300,000 jobs – while reducing carbon emissions from UK buildings by 5%, and making these homes and workplaces cheaper to run and warmer to live and work in.

One of the biggest concerns with retrofitting traditional properties is that many vintage buildings may have historical value. Many of these homes are listed buildings or in conservation areas, which limits the work that can be done in order to preserve heritage, and many types of retrofitted insulation wouldn’t be allowed if they affected the building’s external appearance and character.

There may also be inconsistencies across local planning authorities on similar types of houses and permitted retrofit adaptations. Ensuring that historical buildings are retrofitted to improve their performance with minimal disruption to their appearance will require compromise and a new legal framework – not to mention training carpenters, plumbers, and electricians in the specialist skills necessary for such careful refurbishments.

The organisations behind this report are therefore urging the UK government to take action on the retrofitting of historical buildings for energy efficiency as part of its Levelling Up strategy.

Keeping latent defects insurance up to date

As most of this is prospective, the decision and funding for retrofitting existing buildings currently lie in the hands of the building owners. If you own an older building with poor energy efficiency performance, it may well be worth getting ahead of the curve.

However, it’s also worth remembering that making any structural alterations to a building will not only change its value, but will also affect most insurance policies on the property. Under the Building Safety Act (2022) and concurrent updates to the Defective Premises Act (1972), claims can be made against defective constructive work for up to 15 years – but it’s best to ensure the proper building warranties are in place to protect your investment.While building standards are far more rigorous these days, and completely new constructions are protected by a mandatory warranty, the case may be different for renovations – particularly in older buildings. For these reasons, you might want to discuss latent defects insurance with a reliable provider before starting any intensive renovation work.

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