As the rates of under-occupation continue to increase and energy bills are higher than they have been any previous winter, saving money on bills can be a persuasive argument to encourage greater downsizing. Alec Haglund, IF Researcher, discusses some of the key points of the recently published IF report “Downsize your energy bills”.
Under-occupation rates have increased
Previous research by the Intergenerational Foundation has identified under-occupation (having two or more spare bedrooms) as one of the major contributing factors to the housing crisis facing young people and low- and middle-income workers. This is because staying put in homes that are too big reduces supply and raises the price younger generations have to pay for family homes for young families.
In economic terms, more efficient use of the housing stock would help to relieve pressure in the housing market, but unfortunately under-occupation rates have increased, not decreased, over the past few decades. In 1995/96, under-occupation among owner-occupiers of all ages in England ran at 39%, but by 2020/21 this had increased to 53%. Combined with low levels of housing construction, under-occupation only worsens the housing crisis.
Under-occupation is particularly high among the 65+ cohort as 67% of older owner-occupier households in England are currently under-occupying, implying that there is plenty of opportunity for older households to downsize.
Energy bills remain high
The housing crisis affects young and low- and middle-income workers the most, but the current cost-of-living crisis is felt across generations. There are many older households that are considered to be “brick-rich but cash-poor” who certainly might be feeling a squeeze on their living standards while living in larger homes.
For many, the cost-of-living crisis is most directly experienced in terms of the rapid increase in energy bills, as costs for heating have more than doubled compared to the previous winter. Although it appears that costs might decrease somewhat soon, prices are unlikely to return to lower (but still expensive) previous levels.
Substantial sums can be saved on energy bills by downsizing
By analysing house age, house size, number of bedrooms, energy efficiency, and the cost of energy, our recent report, “Downsize your energy bills”, reveals that owner-occupiers could save thousands of pounds on energy bills by downsizing.
The report provides estimates of the cash amount that could be saved on energy bills by analysing different downsizing scenarios. For example, data reveals that if an under-occupying household moved from a 150 square metre house built before 1919 to a newly built flat at 75 square metres, their energy bill would decrease from approximately £5,410 to £1,660, or by £3,750 annually.
If those in the largest properties downsized, the savings would be even higher, as downsizing from a property with five or more bedrooms and an EPC rating of E to a two-bedroom property with an EPC rating of B would save approximately £5,000 per year on energy bills.
An opportunity to upgrade and improve our housing stock
Downsizing also presents an opportunity to improve the energy efficiency of our national housing stock. Only 42% of English dwellings currently have an EPC rating of C or above, but many people are unwilling to undertake energy efficiency improvement works, believing that their homes are already energy efficient enough or that the upgrades would be too costly.
While 28% of people argue that it would be too much hassle to go through with improvement works, the point of transaction, when new owners take ownership of a home, actually provides the perfect opportunity to upgrade, insulate, and improve. It is also an opportunity to divide suitable larger properties into flats.
The government must do more
The housing crisis is the most visible form of intergenerational injustice facing young people in the UK today. Younger generations are having to spend too much money on housing whether that is to rent or buy and it is vital that the government recognises the extent of the crisis and looks at all potential policy levers. That is why the government should provide more incentives for older generations to downsize, including addressing the market failure in the retirement housing sector.
Naturally, the government should also do more on other fronts: support building more homes across all tenures; provide funding for the building of high-quality social housing; increase protections for private tenants; stop incentivising buy-to-let landlords; and introduce a fair and progressive property taxation system.
Although downsizing is not enough by itself to solve the housing crisis, it should be seen as a vital part of what should be a holistic plan to overcome the crisis. Downsizing increases the supply of housing overall, reduces energy bills for older generations, allows for energy efficiency improvement works to be undertaken, and contributes to much needed reductions in carbon consumption – a win-win for all generations.
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