The Hub has worked with a team of consultants to create an ‘Able-to-Pay’ Retrofit Loan Fund Business Case. Over the last three years we have been investigating the potential to provide accessible low-interest loans for those looking to reduce carbon and improve the energy efficiency of their homes.
This work was in response to feedback from our stakeholders, and evidence from reports that access to affordable loans was one of the barriers to the take up of low-carbon retrofit measures in the homes of those defined as ‘able-to-pay’ (ATP).
In 2021 we carried out a retrofit loan finance study with Lendology CIC, a not-for-profit loan agency working with local councils to provide affordable finance for home improvements.
This initial scoping study explored the current market for retrofit loan finance, as well as the potential for a static loan fund, using a blend of public and private finance, to make loans available at scale for residents in local authority areas supported by Lendology. The results of the study showed the concept was viable in principle, encouraging us to develop a more detailed business case.
Working with consultant partners, we have now created an ‘Able-to-Pay’ Retrofit Loan Fund Business Case – a Green Book compliant proposal for a £100 million loan for residents living in the South West.
This work explored the idea that by using public sector funding as part of a blended finance approach you could attract private finance at scale, while offering a loan that is both competitively priced, and accessible for those deemed ‘able to pay’ but struggling to access existing finance offers.
Further to this, the project explored the creation of a revolving loan fund, so that repayments could be recycled into onward lending. The outputs of this approach were compared with the carbon saving and social and economic value of the more traditional grant model used to incentivise retrofit improvements in people’s homes.
The project has shown the potential for a fund that delivers an adequate risk profile, sufficient scale, and appropriate level return for private sector investors, while ensuring there is a viable proposition for the public sector that significantly improves outcomes when compared to a traditional grant model.
The business case has shown the potential to do this while offering competitive finance to those with household incomes as low as £42k. Using this approach, a £100 million pound fund could help save 376,000t CO2e and improve the homes of 10,000 residents.
Watch a webinar on the Able to Pay Retrofit Loan fund to find out more.
