The Government is considering a new tax on homes which waste energy as part of its “Green Deal”. We seek the view of local property experts on the proposal and consider the potential implications for the market.

Under the proposals being considered, buyers moving to the least energy efficient homes would have to bear an additional 0.5 per cent levy on top of the normal rate of stamp duty, adding hundreds, if not thousands of pounds to the cost of a new home. As part of the scheme, initially commissioned by the previous government, those purchasing homes with an energy efficiency rating of F or G would be liable for the new tax and would only be eligible for a rebate if significant upgrades were made. The tax would penalise homes with insufficient insulation, an old inefficient boiler or draughty windows, with the cost of upgrading to a minimum E grade amounting to several thousand pounds in most cases. It is believed those who improved the property to the required minimum within an allocated time frame would be refunded the 0.5 per cent levy, together with an additional 0.5 per cent.
Sue Taylor, head of Keppie Massie Residential, believes the plan would create a fresh obstacle to prospective first time buyers. She said: “This is yet another “fund raiser” by the government which will penalise house buyers or sellers in the most vulnerable sectors of the market. We are already producing Energy Performance Certificates on all properties for sale and let, which doesn’t influence buyers or renters in any way. The market for properties in need of renovation is one of the only avenues available to some first time buyers. Let’s not deter them from entering the housing market yet again.”
The proposal was part of a report by the ‘Green Investment Bank Commission’ initially commissioned by former Chancellor Alistair Darling and produced by Bob Wigley, chairman of the Yell Group. The tax could form part of the Government’s “Green Deal”, which is expected to be launched towards the end of 2012. That initiative would again favour the most energy efficient homes, with householders offered ‘green makeovers’ as part of the wider promotion of the climate change lobby, advocated by the previous government and the incumbents. According to the Energy Saving Trust, the Government aim to have all new homes built in Britain meet “zero-carbon standards” by 2016.
Nick Dawson, head of residential at Venmore, Allerton, thinks the stamp duty penalty could be considered a form of stealth tax. He said: “I think it would be fair and justified for some form of taxation to be placed on households who fail to recycle or create excessive wastage, be it refuse or homes who fail to insulate properly. On the other hand there may be some who consider this a form of stealth taxation. From a property perspective it will further widen the gap between rich and poor with many poorer, less affluent households being unable to remedy any sub-standard insulation. Prices for lower income housing, un-modernisned or poorly maintained stock will continue to inevitably fall and this may cause a landslide in prices across all property classes.”
A spokesman for the Department of Energy and Climate Change told Your Move that although the Government is considering introducing the tax, no plans have been finalised: “There are many incentives that we are considering to tackle the huge challenge of making homes more energy efficient and saving money on energy bills as part of our Green Deal. We have no current plans to introduce this and no final decisions have been made yet.”
Nick Stott, managing director at HOMEsure, offered an alternative to the proposal, saying: “I would suggest offering to increase people’s tax allowance so they can use the extra money they earn towards reducing their home’s carbon footprint. This way, people can choose whether to do it safe in the knowledge that they won’t be penalised for not having enough readily available cash. It would also keep the Government’s cash reserves in a healthier state as they don’t have to pay out lump sums.” Nick added: “The suggestion of incentivising sellers to upgrade their homes before putting them on the market doesn’t make as much sense as it would seem on the face of it. Not everyone wants to buy a property that has been modernised and leaves the buyer without the opportunity to add value. Further, I think it leaves buyers wide open to negative market fluctuations. If you have the ability to add value, you can increase the equity you have in a property which hedges against a fall in the market. If you don’t, any drop in the market value will leave the vendor with negative equity meaning they can’t sell, won’t sell, or will make a loss. I also think it’s another tax on the poorer end of the market. No one wants to have draughty windows and an old, inefficient boiler. Losing heat through windows, lofts and walls because of draughty windows means the occupier will be paying extra in heating bills, but cannot afford the lump sum to replace their windows, add extra insulation and upgrade their boiler.”

Five simple ways to improve energy efficiency in your home:
• Turn your thermostat down a couple of degrees in the winter
• Ensure there’s adequate insulation in your walls and loft. It’s cheap to install and will save you hundreds of pounds a year
• Make sure your hot water pipes and hot water cylinder are properly lagged
• Install energy saving bulbs throughout the home. They last around ten times longer than ordinary bulbs
• Make use of draught excluders in the winter months