There’s new momentum for the property finance instrument that pays for sustainability upgrades on property through the savings on energy to re-emerge.
The mechanism burst onto the Australian market more than a decade ago but was pushed back by red tape looks set to re-emerge in the UK at least.
In London the Green Finance Institute is hoping to get Property Linked Finance to be introduced into the UK.
The mechanism is designed to support property owners – both commercial and residential – to fund up to 100 per cent of the upfront costs of energy efficiency improvements with private capital.
Research by the institute, which delves into details on how this PLF can be established and scaled in the UK, says that instrument could catalyse between £52 billion ($A102 billion) and £70 b (A$136 billion) private investment into decarbonisation of the residential market across England, Scotland and Wales.
It could also help improve UK’s inefficient building stock, which it says is responsible for 23 per cent of the UK’s total greenhouse gas emissions.
This could help bridge the £360 b (A$703 billion) investment gap to decarbonise UK buildings and overcome the upfront cost barrier for consumers – and will require a bespoke ‘linking mechanism’ that works within the context of UK laws and regulations.
UK carbon free homes advocate and charity MCS Foundation said that “almost two-thirds of consumers stated they were “open” to or “likely” to use PLFs – if offered- for energy efficiency improvements. In fact, 52 per cent of consumers are now more likely to sign into the scheme compared to 2021 the foundation said.
The Green Finance Institute report, done in conjunction with industry partners NatWest Group and Lloyds Banking Group, identifies long term affordable finance as something that should be linked to the property rather than the property owner. This means that repayment obligation will be transferred to the new owner if a property is sold or transferred – which would “overcome a key challenge of investment” known as “payback period barrier”.
As part of the report, a consortium of contributors has developed a “green print” in attempt to strike nation wide movement towards PLF uptake, by identifying what primary legislation should include as well as the next steps. The group is also working with the market to develop a commercial property pilot of PLF in the UK.
The report also made sweeping claims that projects funded by PLF could create up to 146,000 jobs a year. Those in the value chain includes capital providers, UK public finance organisations, retrofit contractors and specialists, regulators, HM Land Registry, legislators and other market participants such as estate agents.
Proposed next steps are proposed:
- a commercial PLF pilot using the Restriction on Title linking mechanism to demonstrate the concept
- use lessons from the pilot to refine the model and develop r obust process around sales of property with PLF
- enable legislation to create a new type of local land charge
- establish relevant public and industry bodies to oversee market and promote growth
- prime the market for the launch of PLF including financial institutions, mortgage brokers and intermediaries, lawyers, estate agents, property owners, regulators, local authorities and HM Land Registry
- launch the residential PLF and C-PLF using the Local Land Charge linking mechanism continue to iterate and improve the market
- See the full report: A-Greenprint-for-Property-Linked-Finance-in-the-UK.pdf