Britain’s Green Deal fails to attract a Single Homeowner to Exchange Higher Debt for Higher Energy Bills

Posted by PITHOCRATES - November 18th, 2012

Week in Review

The British have a program where they encourage homeowners to borrow up to £10,000 ($15,900) to weatherproof their homes in exchange for higher energy bills.  With the goal of combating global warming.  And saving the planet.  So how is that program going?  Not good (see Green Deal ‘in tatters’ as no-one registers by James Hall posted 11/16/2012 on The Telegraph).

The Green Deal encourages homeowners to take out a loan to make their house more energy-efficient. The project goes live in 10 weeks but households have had since October 1 to have their home assessed for the scheme prior to its launch.

However Greg Barker, the climate change minister, has admitted that “no assessments have yet been lodged” on the Government’s official register by homeowners…

Luciana Berger, the shadow climate change minister, described the Green Deal as a “shambles” and said its launch is “lying in tatters”. The Coalition hopes that owners of up to 14 million draughty homes will sign up to the scheme…

Under the Green Deal people can borrow up to £10,000 from a private sector loan provider and have loft and wall insulation fitted in their homes. The loan is repaid over a period of up to 25 years through higher bills. The idea is that bills will fall once the loan has been paid off because the houses need less energy.

They’re scratching their heads why not one of the 14 million homes signed up yet for this program?  Well, I’ll take a guess as to why.  How about that 25 year payback?  This means a couple could start a family and raise 7 kids and send them on to college before breaking even on their investment.  That’s not a good investment.  Why would anyone want to raise their energy bills for 25 years?  Especially when a lot of things can happen in 25 years.

People change jobs and move.  People lose their jobs and move.  People get divorced and move.  People get married and move.  People suffer a loss and move.  People suffer ill health and can no longer maintain a house and move.  Twenty five years is a long time.  A lot of things could happen to prevent people from remaining 25 years in the same home.  And, yes, you may be able to get that money out of your house when you sell it.  As long as there aren’t any houses selling in your neighborhood for £10,000 ($15,900) less.  And that’s the last thing a person wants when they’re trying to sell their home.  Trying to recover the cost of a home improvement when they’re selling.  Especially in a depressed housing market.

So there’s that.  Then there’s something else.  Energy bills have soared in recent years.  Which was the whole point for the Green Deal in the first place.  And if those energy bills are high now what’s to keep them from being higher later?  Especially with the government’s green policies to reduce global warming.  No, the British homeowner probably can count on few things in life with any certainty.  Taxes.  Death.  And higher energy bills.  So why would they want to add to those energy bills when they’re only going to continue to rise?  Because the government says those bills will be cheaper 25 years hence?  When it’s the same government who made those energy prices soar in recent years?

Many real estate experts will tell you there are few home improvements that an owner will get their money back on when they sell.  Kitchen and bathrooms lead a very short list.  But finished basements, dormers and sun porches?  Kiss that money goodbye.  Because when it comes to selling a house it’s all about location.  People pay what the location is worth.  Not what the house is worth.  If you build a $250,000 house in a $100,000 neighborhood guess what that house will sell for.  The same price all houses sell for in a $100,000 neighborhood.  Around $100,000.  If a buyer is choosing between two houses that cost $115,000 in the $100,000 neighborhood which do you think the buyer will choose?  The one with the new insulation that raised the energy bills?  Or the one with the new bathroom or the new kitchen that the new homeowners will use every day of their life in their new home?  They’ll choose the nice bathroom and kitchen.  For their energy costs will probably be a wash.  They’ll either buy more energy at a lower rate.  Or buy less energy at a higher rate.  Giving them no advantage in energy costs no matter which house they buy.

This is why no one is signing up for this program.  It’s just a horrible deal for homeowners.

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