A new report from Edinburgh’s Smart Data Foundry has revealed only 20% of people in Scotland can comfortably afford the home upgrades required to meet the Scottish Government’s net zero targets for buildings by 2045.
The findings highlight the affordability challenge posed by retrofitting and expose the ‘poverty premium’ associated with making homes more energy efficient – as those who can least afford upgrades end up paying more in the long run.
The findings are said to emphasise the need for targeted financial support.
The report estimates 55% of Scottish homes have an EPC rating of D or lower, meaning they require upgrades to meet band C – the standard necessary to reach net zero.
Among the changes required to achieve this are improvements to the energy efficiency of buildings and the replacement of direct emissions heating systems, such as gas boilers, with electric systems, such as heat pumps. These improvements could cost homeowners up to £15,000.
Analysing consumer financial data around disposable income in combination with housing and energy data, the report found that while 20% of Scots living in homes with a rating of EPC D or lower would be able to easily afford to make the upgrades required to reach a C rating, others would struggle even with the help of grant subsidies.
The report shows 26% of Scots would be able to afford it with the help of a grant but 42% would only find it affordable with both a grant and a medium-term loan. A further 12% would not be able to afford to do so at all, even with a grant subsidy, as the cost would be greater than their total disposable income over five years.
Rui Cardoso, head of public sector engagement at Smart Data Foundry, said, “One of the major challenges of decarbonising the 55% of homes in Scotland that have a D or lower energy rating is that homeowners will meet significant up-front costs even with government grants and loans. However, they may not see a significant reduction in heating bills to offset this cost for many years to come.
“Around 1.6 million homes in Scotland are owner occupied and a further 360,000 are privately rented, so there is a significant challenge to understand the best ways government can incentivise homeowners and enable suitable, targeted financial support through public grants and private lending.
“One size of support won’t fit all – those in the lowest income households will struggle most to meet the costs of upgrading their homes and find it more difficult to access affordable credit. However, having less energy-efficient homes means they will continue to pay higher energy bills. This is a clear example of the ‘poverty premium’ at play: additional costs for those least able to afford it.”
The data shows that those under 25 and over 59 are less likely to be able to afford the retrofit.
The ‘Estimating affordability of net zero retrofit for homes in Scotland’ report is the latest publication from Smart Data Foundry, a subsidiary of the University of Edinburgh established to unlock the power of financial data to tackle big issues and create positive impact. SDF was recently awarded £3 million funding by Smart Data Research UK – part of the UK Research and Innovation (UKRI) to operate a new financial data service, enabling more researchers to study the financial health of millions of households across the UK, by providing secure access to financial behaviours, economic resilience, and regional economic activity.
Read Estimating affordability of net zero retrofit for homes in Scotland here.
