ClimateXChange: Qualitative Scenario Analysis of Housing Market Impacts from Heating and Energy Efficiency Regulations in Scotland
ClimateXChange commissioned Cambridge Econometrics to investigate the impacts of the Heat in Buildings Bill on the Scottish housing market through a literature review, interviews with stakeholders and qualitative scenario analysis.
Insights from this analysis are supporting policymakers in Scotland to understand the potential housing market impacts of the proposed Heat in Buildings Bill, helping to meet Scotland’s climate change emission reduction targets.
Approach
We carried out a thorough desk-based evidence review and consulted a wide range of housing market actors to provide expert insights, including Scottish Property Federation, Property Mark, Scottish Association of Landlords, ESPC, Zoopla, Rightmove, Rettie, RICS, UK Finance, Lloyds Banking Group, Nationwide, and Savills.
All evidence was captured, and the impacts of the Bill explored, through a theory of change assessment.
Specifically, we assessed
- the potential impacts of heat and energy efficiency regulation on property and rental prices
- the length of time properties spend on the market,
- the number of properties sold or privately let,
- and whether any geographical or archetypical distributional effects may occur.
Qualitative Scenario Analysis
Removal of point of purchase trigger points from regulatory proposals.
Potential exemptions for first-time buyers from trigger points.
Key Findings
While the Heat in Buildings Bill scenario ensures earlier compliance with the regulation, it may also result in a slowdown in activity of the Scottish housing market.
In the rental market, tenants are likely to bear some of the upfront costs of energy efficiency retrofits in the form of higher rents.
Following the introduction of the proposed Bill, landlords may decide to exit the market if they do not want to comply with the regulations.
Extending the grace periods to five years is not expected to affect compliance rates, compared to a two-year grace period. However, it could delay clean heating installation timings, as homeowners often defer action until the deadline.
If there were no early-action trigger points, compliance with the regulatory framework may be postponed, leading to delayed action in achieving emissions savings.
This could result in a significant increase in demand for energy-efficient homes specifically around the backstop dates, potentially causing a shortage of energy efficient properties.
The market slowdown where an exemption for first-time buyers is introduced is relatively modest compared to the Heat in Buildings Bill scenario where there are no exemptions.
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