Thursday 17 October 2019

'Relax loan rules to make homes energy efficient' - says economist


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Alan O'Keeffe

A call has been made for Central Bank lending rules to be relaxed to allow installation of energy-efficient insulation in newly purchased homes.

Leading economist Professor Ronan Lyons said lending thresholds should be raised to allow home-buyers to undertake measures to save on energy bills and help fight climate change.

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Improving the energy rating of an average second-hand house from a BER rating of F to B1 would add €25,000 to its market value, said the Trinity College Dublin academic. The same energy-saving improvement on a higher valued house in an area like south Co Dublin could add nearly €60,000 to its value, he said.

The new figures emerged from research by the ESRI and Prof Lyons on how energy-efficiency improvements boost property values.

He said it was encouraging that the governor of the Central Bank spoke recently "about the link between the financial system and climate change".

Mortgages often include funding for renovation work as well as the purchase price. When funds are being sought for improving insulation and other energy measures, the threshold on lending levels should be raised to facilitate these climate-friendly actions, said Prof Lyons.

"There needs to be more linking between the Sustainable Energy Authority of Ireland and the Central Bank," he said. "People seeking mortgages are often factoring in the renovation and energy-efficiency work in the home. The total loan can't be more than a certain multiple of your income.

"One thing to do should be to focus more on the loan-to-value side rather than the loan-to-income side. This would allow a buyer to borrow a little bit more for an energy efficient home," he added.

Relaxing rules around that aspect of the loan so the limit is raised would benefit the individual in lower energy bills and benefit society by fighting climate change, he said.

"At the moment, this is not happening. You are basically encouraged to buy a less energy-efficient home because it is cheaper relative to your income," Prof Lyons added.

He said an important question that needed to be addressed in Ireland was why more homes were not undergoing energy-efficiency upgrades.

"This question is at the heart of an EU project I am part of, led by Prof Eleanor Denny, a colleague at Trinity. The project looks at consumer decision-making when it comes to energy efficiency.

"As part of the project, we surveyed members of the public - in particular those active in the housing market - about their attitudes to energy efficiency, and its costs and benefits. Unlike firms - who were also surveyed - households do place importance on energy efficiency. It ranked third, behind price and crime levels, but ahead of size and location, in the list of consumer priorities.

"Not only this, respondents were well aware of the multi- faceted benefits associated with energy efficiency - not just environmental impact, but also increased comfort and higher property values.

"Despite consumers prioritising energy efficiency, BERs more often than not have not influenced decisions," Prof Lyons said. "This speaks volumes about the lack of supply on the market. What home-buyer or indeed tenant can afford to say 'I'll take it, but only if you have it in a BER rating of A2' given the lack of availability they face?"

Sunday Independent

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