October 2020 marked the opening of the Green Homes Grant – a new funding mechanism designed to help homeowners and landlords to pay for a range of important energy efficiency improvements. The grant operates only in England and it will be available until the end of March 2021, so there’s a limited time in which to submit an application.
In this article, we’ll look at what sorts of projects could be eligible for funding support, how the Green Homes Grant works, and how to take advantage of it.
Why It Matters, and Why Now’s the Time
Back in February 2020, we published a post about the growing importance of sustainability in the minds of potential tenants. Research carried out last year indicates that it’s a key consideration for the great majority (85%) of people. What’s more, the UK Government has made it essentially illegal to rent out a property with an EPC score lower than ‘E’ and all the signs are that the rules will be progressively tightened. The Energy Saving Trust predicts that the minimum threshold could eventually be raised as high as band C. In short, if landlords want to stay in business, then many are going to have to invest in meaningful energy efficiency improvements.
The government’s Green Homes Grant scheme offers a significant inducement to make those changes sooner rather than later. The fund will remain open until March but applications can’t be left to the last minute. All works have to be agreed, and the improvements completed, before the project’s end. What’s more, works can only be undertaken by a limited number of accredited contractors, who are likely to be especially busy over the next few months. For landlords wishing to take advantage of the funding, now is certainly the time to be making an application.
How Much Funding is Available?
The Grant will cover two-thirds of the cost of eligible improvements. These include the cost of materials, labour and VAT. For landlords and the majority of homeowners, the value of the funding is capped at £5,000 – although the sum could be as much as double that for those on low incomes.
It’s also worth noting that the total fund value is £2 billion. This is important because, if the government’s previous Green Deal scheme is anything to judge by, that pot of money could easily be exhausted before the grant’s formal end date. The Green Deal was another scheme designed to help fund energy efficiency improvements; it was popular but repeatedly suspended at short notice because each tranche of funding tended to be used up more quickly than had been anticipated.
It has been some time now since this kind of funding was made widely available, so demand could prove to be very high. Landlords wishing to make improvements would be well advised to act quickly.
What Does the Grant Cover?
The Green Homes Grant is a voucher-based scheme that aims to encourage a ‘fabric first’ approach to energy efficiency. That is to say that it aims to prioritise support for installing measures that enhance a building’s ability to make efficient use of energy – especially heat.
The logic behind this approach is simple enough; there is little point in funding the installation of systems such as ground source heat pumps and under-floor heating if the heat they produce is almost immediately lost through poorly insulated walls and roofs. A vital first step is to ensure that any heat tends to stay in the living spaces where it’s needed.
Consequently, the scheme identifies two different categories of work – primary and secondary measures. To qualify for funding, a landlord must install at least one of the following primary measures:
Solid wall insulation (internal or external
Cavity wall insulation
Under-floor insulation (solid floor, suspended floor)
Flat roof insulation
Pitched roof insulation
‘Room in roof’ insulation
Biomass pellet boilers
Air source or ground source heat pumps1
Solar thermal water heating1
1 Note that funding for these last two measures will only be awarded if the property is already equipped with wall and loft insulation, or if wall / loft insulation is being installed as part of the same project.
Eligible secondary measures include:
Secondary glazing 2
Double or triple glazing 3
Energy efficient replacement doors 4
Hot water tank thermostats
Hot water tank insulation
Heating controls – e.g. appliance thermostats, smart heating controls, zone controls, intelligent delayed start thermostat, thermostatic radiator valves.
2 Secondary glazing must be installed as an additional measure over single glazing.
3 Funding for new glazing work only applies when the installation will replace existing single glazing. (It cannot be used to modernise existing double glazing.)
4 Doors must replace single glazed or solid doors installed before 2002.
The UK Government is keen to put the focus on the primary measures because it’s these that tend to make a more fundamental difference, either to net carbon emissions or to the inherent energy efficiency of the property. Consequently, at least 50% of the total grant application must relate to primary measures. (Another way of putting that would be that funding for any secondary measures will be capped so that it does not exceed the value of the primary measures.) In any case, the total value of funding will not normally exceed £5,000.
Grant funding for primary measures: £4,000
Grant funding for secondary measures: £1,000
Grant funding for primary measures: £2,500
Grant funding for secondary measures: £2,500
Grant funding for primary measures: £1,000
Grant funding for secondary measures: not more than £1,000
The Government notes that “You will only be able to redeem vouchers for secondary measures once you have installed a primary measure and redeemed the vouchers for that measure.” It has published notes to explain some additional requirements and restrictions. For example:
“All heat installations must be used for space heating and/or domestic hot water heating purposes. A heat installation must not be used for process heating, outdoor heating or heating swimming pools.”
“With the exception of solar thermal, low carbon heat measures must entirely replace an existing fossil fuel heating system. This means you can’t use the voucher to replace an existing low carbon heating system.”
“You must declare that you either have planning permission, or that it is not required, to have the measure installed.”
You can read the two Government guidance documents here:
Additional requirements around insulation measures (ODT, 5.93KB)
Additional requirements around low carbon heat measures (ODT, 8.61KB).
Design, Installation and Other Costs
To help explain exactly what design, labour and installation costs are covered, the Government has produced a grant guidance document, which can be downloaded here. (ODT, 12.7KB).
As a brief summary, however, the Grant covers essential elements such as:
Detailed design drawings and calculations
Structural engineer costs
Air tightness and controlled ventilation tests
Repairs and treatments for damp
Labour and materials
The same document explains many of the works that the Grant will not cover – such as general repairs, re-roofing, asbestos removal and works not related to the approved energy improvement retrofit measures.
An important condition for securing grant funding is that the work must be carried out by approved contractors. The Green Homes Grant section on the Gov.uk website note that “All work covered by the voucher must be completed by a TrustMark-registered installer who is also registered for the scheme. Your installer will also need to meet PAS and Microgeneration Certification Scheme standards when installing your measures.”
TrustMark is an accreditation scheme that acts as a form of consumer protection. It is only awarded to contractors that can show they meet specific minimum standards, including technical competence, trading practices and customer service. In the event of any problem or disputes, it also provides clear routes towards resolution. More details can be found on the TrustMark website.
The Government advises that applicants should seek three quotes for any grant-funded work but that this is not essential. Applicants actually only need to obtain one quote from a Green Homes Grant-registered installer in order to apply for a voucher.
Approved local installers can be found via the Simple Energy Advice website, which includes a searchable directory of contractors.
The Government clearly wants this Green Home Grant to be spent on essential energy efficiency improvements in ordinary people’s homes, but it also wants the money to be spread fairly and as widely as possible. Consequently, there are some exclusions. The Grant cannot be claimed on new-build properties, or on work that has already been completed. Nor can it be applied to projects that are using public funding from other sources, such as the Energy Company Obligation (ECO) or existing local authority schemes. (However, it is possible to claim Green Homes Grant funding for one efficiency measure and to use ECO funding for another.)
The Gov.uk website also notes that “You can claim both the Domestic Renewable Heat Incentive (RHI) and the Green Home Grant for a renewable heat installation. You must claim the Green Home Grant voucher first and then notify Ofgem that you have used it when you apply for accreditation to the Domestic RHI. The Green Homes Grant will then be deducted from your Domestic RHI payments.”
Landlords should be aware that any Green Homes Grant funding will count towards their total de minimis funding allowance. (Businesses are not entitled to claim more than €200,000 of state aid over a three-year period, so it’s important to check that the Grant will not push the applicant beyond the permitted threshold.)
Choosing Energy Efficiency Measures
In order to get the best value from the green home grant scheme, landlords should take advice on which measures will be best suited to the property in question.
A recommended resource is the Simple Energy Advice website, which offers articles, videos and other information on everything from solid wall insulation to window replacements. It also includes a dedicated page for landlords, with advice about funding, energy improvements and tips for reducing bills. For tailored advice about a particular property, landlords should fill in the form on the Plan Home Improvements page.
Another useful source of information is the Energy Saving Trust website. Amongst other information, it offers a simple illustration of energy savings resulting from different measures installed in a typical semi-detached home. It notes, for example, that insulating a solid wall property could generate savings of £225 per year, and an air source heat pump could save up to £690 annually.
The Green Homes Grant page on the Gov.uk website lists four simple steps in the application process.
Step 1: Check eligibility
Step 2: Confirm which measures will be most appropriate
Step 3: Identify local TrustMark-certified contractors and obtain quotes
Step 4: Apply for a voucher
As part of the application process, applicants will have to provide a copy of the quote(s) they have received.
The government notes that: “You can use more than one installer to install different measures. You only need to complete one application form, but you will need to provide a separate quote for each measure.”
It’s important to await the voucher before commissioning any work. Not all voucher applications will be approved and the grant-funding cannot be applied retrospectively. Vouchers will be issued from November 2020. Successful applicants will receive a separate voucher to cover each of the requested measures.
Official guidance states that “Vouchers will be valid for three months from the date they are issued or until 31 March 2021 (whichever is earlier). Vouchers must be redeemed before the validity period ends.”
Deposits and Voucher Payments
The scheme requires that landlords pay a third of the total cost of the work they have requested. Contractors will often ask for a deposit at the start of the works, but this amount must be reasonable and cannot exceed the total amount that will be payable by the landlord.
Once the works are complete, the landlord must report the results of the work to the Grant managers, providing:
the work has been done to a satisfactory standard before the voucher’s expiry date
the installer has provided all the necessary documentation
the landlord has paid his/her share of the project costs to the installer
A dated copy of the installer’s invoice
Once these conditions have been met, the remaining sum will be paid directly to the installer.
Energy efficiency is increasingly important to prospective tenants. It’s important when advertising properties and it will often help to reduce void periods, since tenants may choose to stay longer in homes that are comfortable and cheaper to run.
Moreover, regulatory pressures are likely to continue to push landlords to raise the energy performance of the units they let, so the need for energy improvements is only likely to increase over time. The Green Homes Grant therefore represents an important opportunity to implement those changes cheaply and to a certified standard. However, given the scheme’s short duration, it’s an opportunity that needs to be acted upon today.
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If you would like more information about investing in sustainable property, please talk to one of our professional advisers. Call us today on 01244 343 355.