Concern over property values may lead to banks opposing retrofit deals
Landlords fear lenders could scupper green deal
Landlords fear the government’s flagship retrofit scheme could be derailed by lenders because it might reduce property values.
There are growing concerns banks will object to the multibillion-pound green deal programme, on the grounds that, in the event an association defaulted on a loan, properties held as security could be harder to sell.
Households receiving energy efficiency works under the green deal will repay the upfront cost over time through the resulting savings in energy bills through a pay-as-you-save charge on household energy meters.
Landlords and lawyers worry these third-party charges with green deal providers could make properties less marketable, thereby reducing values and contravening loan agreements.
They want to prevent a repeat of last autumn’s solar saga in which lenders refused to sign rent-a-roof photovoltaic panel deals on similar grounds.
Nicholas Doyle, project director at 62,034-home housing association Places for People, said the issue had been raised by concerned providers at a meeting of the Department of Energy and Climate Change’s green deal forum earlier this month.
He added landlords are waiting for the government to publish secondary legislation next month and ‘don’t want to set the hares running’ by approaching lenders without more details.
‘There doesn’t seem to be any recognition [from DECC] that it might be a problem,’ Mr Doyle said. ‘This is something that DECC needs to address.’
Rob Beiley, partner at law firm Trowers & Hamlins, said: ‘There is no one-size-fits-all situation here because each association will have different loan covenants. Banks will be concerned about their ability to sell properties. The sooner housing associations can start talking to banks the better.’
A Council of Mortgage Lenders spokesperson said it did not yet have a position on the issue.
A DECC spokesperson said there was an ‘ongoing dialogue’ and it had spoken to the CML with the intention of producing guidance ‘soon’.
Piers Williamson, chief executive of The Housing Finance Corporation, said the green deal was less likely to be as much of a problem to lenders as some of the third-party PV agreements were, but added there was a real risk banks would use the green deal as an excuse to renegotiate existing loan terms.
In addition, industry body The Modern Masonry Alliance has expressed ‘massive concerns’ that retrofit measures such as external solid wall insulation could reduce the value of housing. It is in talks with the Royal Institute of Chartered Surveyors over how it could impact property valuations. It has also formed a group with the National Trust and English Heritage that will flag up concerns to the government that solid wall insulation could damage the national housing stock.