Protecting communities and the environment through upgrading existing housing stock

Our CIO, Samantha Kempe, delves into the transformative power of retrofitting and how it addresses the pressing demand for quality housing and sustainable living. It also looks at how technology plays a pivotal role in making retrofitting viable and effective.

May 29, 2024

Samantha Kempe IMMO
Samantha Kempe IMMO

By Samantha Kempe, Co-Founder and Chief Investment Officer at IMMO

As we face the dual challenges of a housing crisis and climate change, the call for sustainable and socially responsible housing solutions has never been louder. The UK's housing emergency is not just a matter of supply but also of quality and sustainability, according to Government’s Department for Levelling Up, Housing and Communities, 25% of the UK housing stock is substandard, with 12% of housing conditions representing a category 1 hazard.

The solution lies in two key strategies: retrofitting existing homes to improve their energy efficiency and living standards, and fostering partnerships between institutional, long-term investors and the real estate sector to drive sustainable housing development and regeneration projects. 

This approach not only addresses the immediate need for decent-quality, accessible housing but also aligns with ambitious environmental targets through the improvement of already built homes. 

Let’s delve into the transformative power of retrofitting and how it addresses the pressing demand for quality housing and sustainable living.

Why retrofitting?

In the UK, a market imbalance is emerging, influenced by tightening building efficiency regulations and a significant divergence in investment appetite between energy-efficient and inefficient homes. With the UK housing stock being the most energy-inefficient in Europe, responsible for approximately 26% of the nation's emissions, the need for action is clear. As we navigate this pressing challenge, retrofitting stands out as a tangible step towards alleviating the housing pressures that weigh heavily on millions.

So, why retrofitting? Well, pouring money into refurbishing and retrofitting existing homes isn’t just about hitting those green targets. It’s also about boosting your asset value. 

According to Knight Frank, properties moving from an EPC rating of F or G to C can see a value increase of 19.6%, translating to significant gains for homeowners and investors alike. Yet, failure to meet evolving environmental, social, and governance standards presents a 'stranded asset' risk, potentially rendering properties unattractive to investors and homebuyers as sustainability becomes a priority.

Responsible, long-term institutional investors play a crucial role in this scenario. By focusing their efforts on retrofitting, these investors are not just improving properties but are actively contributing to delivering better quality, affordable housing within existing communities and neighbourhoods. 

Addressing the housing emergency

Aside from a market imbalance, a significant number of properties across the UK aren’t just below par, they're uninhabitable. But here's a silver lining – these properties present a prime opportunity for transformation through retrofitting. To achieve this, it will be crucial to engage long-term institutional investors and raise their awareness of the untapped potential in residential real estate. Currently, residential properties are often overlooked by investors, making it difficult to unlock the full potential of this asset class. 

Despite these obstacles, it is essential for investors to recognise the lucrative opportunities that await them in the residential sector. As things stand, only 2-3% of single-family rental homes (SFR) are accessed by investors, leaving a staggering 98% gap in the market ripe for investment and revitalisation. 

By leveraging the expertise and capital of long-term institutional investors, we can turn these neglected spaces into vibrant, livable communities.

With 676,304 recorded empty homes in England in late 2022, and many more deemed unfit for habitation, the opportunity to retrofit these homes can dramatically change the landscape of housing availability, providing more people with access to safe, energy-efficient living spaces.

By focusing on upgrading what’s already built, we're not just raising living standards, we're also taking a giant leap towards net-zero targets. It's a clear win-win, turning neglected structures into homes ready for the future.

Leveraging technology for accessible housing

Technology plays a pivotal role in making retrofitting viable and effective. Through the smart use of data and digital tools, companies can identify properties that, with targeted improvements, can significantly enhance living standards and energy efficiency. This data-driven approach not only streamlines the process of selecting and upgrading properties but also ensures that interventions are cost-effective and yield the highest environmental and social returns.

At IMMO, we're harnessing this power to lead the charge in upgrading the UK's housing stock. We use advanced data analytics to identify properties ripe for transformation, then deploy digital tools to plan and execute these upgrades with precision. It's about making each step as efficient and effective as possible, ensuring that any money spent on refurbishment adds real value - both for the property owner and the environment.

The IMMO platform offers investors a data-driven solution to streamline the entire investment process, providing a comprehensive and integrated platform that enables efficient ongoing management of investments. Long-term investors play a vital role in the gradual improvement of the nation’s housing stock as this is a challenge that cannot be addressed by short-term investors seeking quick profits. 

By enabling investors to identify and put capital into residential opportunities with granular detail and control, our platform nurtures the relationship between investor and investment, helps them accurately assess the risks inherent in their portfolio, and ultimately gain foresight and confidence in their long term investment.

Technology would enable housing issues to be addressed on a much larger scale. This isn't just good news for the environment, but a crucial step towards solving the housing crisis, making homes more accessible to those who need them most.

The path forward

As we move forward, the real estate sector stands at a crossroads. Investors, policymakers, and communities need to rethink how we approach housing to improve the future of community well-being and environmental sustainability.

Retrofitting existing housing stock presents a tangible, impactful way forward, leveraging technology-driven solutions to breathe new life into communities and contribute to a greener, more inclusive future.

IMMO is at the forefront of this movement, employing data-driven technology to connect long-term residential investors with a platform that can help identify, upgrade, and manage properties. 

The challenge is substantial, but so is the opportunity! With the involvement of responsible, long-term institutional investors who can make the most of the untapped asset class, we can ensure that upgraded housing is not just accessible but also affordable, aligning with the broader goals of society and the environment.

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