Lower bills for millions of households: retrofit’s role in the long-term housing strategy

Ellie Mae O'Hagan and James Huw Dyson, 08 January 2025

In the wash up of the US presidential election, polling and analysis showed that the cost of living was the most important issue for voters. The cost of everyday necessities was at the forefront of voters’ minds despite increases to GDP, an abstract concept to most.

In the UK, where the economic recovery has been slower, the squeeze on everyday spending is also a crucial issue for voters. This year, six in ten families have had to make cuts due to cost-of-living pressures, struggling to pay for essentials, including groceries and energy bills. For most, light at the end of the tunnel is not in sight; eight in ten are not optimistic about next year’s outlook.

Indeed, climate change will make the world riskier, so UK households will be more vulnerable to repeated shocks experienced in the early 2020s. Reducing carbon emissions from gas and oil boilers by installing electric heating is a vital way for the UK to protect its citizens, contribute fairly in the global effort to net zero, and lead the transition.

The government’s long-term vision for homes must tie decarbonisation to a mission which also lowers bills through both new build and retrofit.  

Labour’s commitment to build 1.5m new homes is key to meeting this vision. People with mortgages spend half the proportion of their income on housing costs compared to renters. The challenge of meeting this target and a potentially fractious “war on nimbys” is significant and will absorb a lot of Keir Starmer and Angela Rayner’s time and energy. Achieving clean power by 2030 will protect bill payers from foreign price shocks, but more needs to be done to lower consumer bills in the immediate term.

Over 4.7 million households in the UK are in fuel poverty, meaning they spend at least 10% of household net income on energy after housing. Half of UK homes are relatively energy inefficient, below EPC C, and in England alone, the End Fuel Poverty Coalition finds 15.4 million or a third of the population experience damp and mould. This underlines the sheer number of families and households who struggle to pay for heating, and live in unsafe homes, with compounding negative impacts on their well-being.

Insulation is the most effective way to directly reduce energy bills, so the long-term housing strategy must reflect policy changes which will deliver this cost effectively to as many households as possible. Next year’s Warm Homes Plan is an opportunity to set this in motion, reorientating retrofit to return it to deliver, cost effective, high-volume home insulation and decarbonisation. With the number of energy efficiency measures being installed in homes having crashed by 95% since 2013, these reforms can’t come too soon. 

In the worst sector, the private rented sector, insulating homes would save households an average of £300 a year. With a decent level of fabric insulation and solar panels where possible, an efficient heat pump enables households to access lower cost, flexible tariffs to achieve lower running costs than a gas boiler.

Home retrofit needs an injection of high-level political engagement to steer the UK’s existing circa £2bn annual investment to the right homes and people. Poor policy decisions by the last government have meant that far too much money is being wasted instead of making its way to households, pushing the sector into an unsustainable position. Continuing to spend the same amount per home in the biggest UK-wide scheme 'Energy Company Obligation 4' will mean the 2030 statutory fuel poverty target will cost around £80bn to meet, blowing the £13.2bn retrofit budget six times over. 

Alongside investment, the government has the chance to drastically improve housing conditions in the private rented sector, applying higher standards of quality, safety and energy efficiency to privately rented homes. Again, this will require political commitment to deliver real change. For example, re-investing in humble local council Environmental Health Officers, the forgotten guardian of local housing standards.

Retrofit schemes need to be simplified, devolved and consumer protections radically improved to eliminate bad practice and ensure consumers are helped when mistakes occur. With the renewal of Energy Company Obligation 4 beginning next year, the time is now for the government to focus minds on retrofit, and deliver swift, lasting and meaningful savings for families – whether they own their homes or rent them.

Following the trauma of the pandemic and price shocks following Russia’s invasion of Ukraine, designing a long-term housing strategy which helps people to invest in fixing their cold, damp and leaky homes can convince voters that the government understands the challenges they face and can make a direct and positive impact in their everyday lives.