Retrofitting leaky homes would cost £5bn over next four years, UK ministers told

Renovating the UK’s draughty homes to low-carbon standards would cost the government only £5bn within the next four years and would create 100,000 jobs, cut people’s energy bills, increase tax revenue and bring tens of billions in economic benefits, the construction industry has estimated.

Sector leaders have written to ministers proposing a new “national retrofit strategy” that they say would boost a green recovery in the UK and put Britain on track to meet its climate targets.

The proposal comes ahead of the government’s heat and buildings strategy, which is expected to be published soon. Decarbonising the UK’s homes, which are among the leakiest in Europe, and which produce nearly one-fifth of the UK’s carbon output, is a pressing issue as the government seeks cuts of 78% to greenhouse gas emissions by 2035.

Gas boilers will have to be replaced with heat pumps, district heating systems and possibly hydrogen systems, and homes will need loft, window and wall insulation. But the task is huge, and a plan has so far been lacking, with the green homes grant – an insulation scheme launched to fanfare last year as a way to build a green recovery from the Covid-19 pandemic – having been scrapped after a disastrous six months in operation.

In a letter to the business secretary, Kwasi Kwarteng, signed by more than 50 organisations and seen by the Guardian, the Construction Leadership Council set out a strategy that would help people to save more than £400 on their energy bills each year, and improve the health of those in fuel poverty.

“If the UK is to meet our world-leading carbon reduction targets, create jobs and level up, we must address the energy and water efficiency of our 28m homes. Our strategy is a blueprint, endorsed by the construction industry and beyond,” they wrote.

A government-led programme for refurbishing houses between now and 2024 would “support the levelling-up agenda, generate government revenue of more than £12bn, provide additional GDP of more than £21bn and unlock £11.4bn of private capital,” they added.

As well as a short-term strategy for this parliament of recruiting tens of thousands of people to install insulation and low-carbon heating systems in more than 850,000 homes, they propose a long-term strategy that would refurbish all of the UK’s homes by 2040. This would cost £524bn in total, of which the government would need to invest £168bn, and would create 500,000 jobs.

According to the construction industry’s strategy, this would require a mix of policies, including green mortgages to provide the finance for people to install low-carbon heating, stamp duty rebates on refurbished homes, reduced VAT on home improvement works, and loans to landlords to improve their properties.

Low-income households would need government grants, and those on higher incomes should be given access to low interest loans and council tax rebates, paid for by central government, the Construction Leadership Council said. Ministers should also act quickly to enable companies to start training employees and new recruits in the skills needed, the companies said.

“Wide-scale domestic retrofit is essential to the net zero agenda and backing a long-term strategy will help position the UK as global market leader in the low carbon economy ahead of the UN climate change conference [Cop26] in November,” the organisations added.

A spokesperson for the Department for Business, Energy and Industrial Strategy said: “We are already investing in making our buildings more energy efficient, and in order to meet our world-leading commitments on carbon emissions, we are gradually transitioning away from fossil fuel boilers and incentivising the take-up of low carbon alternatives as appliances are replaced, in a way that is fair, affordable and practical. To encourage energy efficiency and lower people’s energy bills, we are considering a range of options put forward by stakeholders and plan to launch a call for evidence to test what will work best for consumers in the UK.”

The government has said that people would not be fined for using their existing gas boilers, or refusing to switch to a low-carbon heating system, and that no one would be prevented from selling their homes if they do not meet energy efficiency standards, as some media reports have claimed.

Jenny Hill, the head of buildings and international action at the Committee on Climate Change, the government’s statutory adviser, said the industry’s proposed strategy was in line with the government’s net zero target. “This report shows a can-do attitude and a clear vision by the construction industry,” she told the Guardian. “It has all the different elements that are needed to come together: skills, consumer education, compliance and enforcement, performance standards, and a framework for market certainty.”

Public backing for the move to low-carbon heating would be essential, Hill added. Many media reports have focused on the difficulties of switching away from gas boilers, and the cost of low-carbon alternatives such as heat pumps. However, without a comprehensive programme for domestic housing there is little chance of meeting climate targets.

“It’s a condition of success that the negative impacts are minimised, that this is fair and equitable, and that people have a say in the process,” said Hill. “This transition definitely can be done in a sensible way that supports people and listens to their concerns.”