Building industry proposes £10,000 green home loans

Efforts to slash carbon emissions from the UK housing stock could be accelerated with the help of green home loans worth up to £10,000 to every property, under wide-ranging proposals set out today by the Green Building Council (GBC).

The industry and government backed group has issued a report outlining how to implement the government's recently announced plan for a pay-as-you-save scheme whereby households would be provided with loans to undertake energy efficiency improvements, which are then repaid using money saved through lower energy bills.

It calls for the creation of an independent finance body that would seek to raise up to £5bn in private capital to fund the scheme.

Households would then be offered low interest loans of up to £10,000 to be repaid over 25 years, which would be used to pay for energy efficiency and low carbon measures, such as solid-wall insulation, A-rated boilers and microgeneration technologies, from accredited building services firms.

"Loans of up to £10,000 make sense if you want to make the maths work," explained the GBC's John Alker. "Any more than that and the repayments will start to get larger than the savings on your energy bills."

The report also outlines proposals for new primary legislation that would ensure that the loan is attached to the property rather than the home owner – ensuring that people trying to move are not lumbered with a loan for which they no longer realise any benefit on their energy bills.

It recommends local authorities create a "Local Land Charge" that allows them to maintain a schedule of repayments alongside existing council tax bills.

The government, which is preparing to trial its own pay-as-you-save schemes, had been thought to be in favour of allowing energy firms to run the loan schemes. But Alker said that using local authorities made more sense as there was a lower rate of default on council taxes than on energy bills and they tend to command higher levels of public trust as non-money making organisations.

According to the report, the loans could cut energy usage for a typical three bedroom home by up to 40 per cent, saving between £50 and £200 a year on energy bills and slashing carbon emissions by 2.8 tonnes a year.

Paul King, chief executive of the UK Green Building Council, said that the scheme would also help create up to 40,000 jobs in across the building industry.

"Both the government and opposition parties have voiced their support for the principles of a scheme like this," he added. "What's needed is to get on with it."

The government welcomed the report, but gave no indication as to the extent the proposals could be adopted.

"This independent report makes a valuable contribution to our ongoing work to introduce comprehensive energy efficiency programmes," said a spokeswoman for the Department of Energy and Climate Change. "The government will soon be trialling pay-as-you-save schemes in several hundred homes across the country, and we will also use what we learn from these pilots in our final decision on what form the scheme will take."