Finance in retrofit: the case for Credit Unions
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If the availability of finance can unlock demand for retrofit, how should that finance be deployed most efficiently to meet the needs of householders? In this blog we share our learning from collaboration with credit unions, set out how People Powered Retrofit clients can benefit and assess the potential for approaches to be scaled further with government support.
The government is currently consulting on the opportunities and challenges of deploying finance to support home retrofit improvements at scale. The greater availability of finance has often been seen as a key requisite for a growing retrofit sector: ultimately the benefits of investing in energy efficiency require upfront investment to realise long term savings and finance mechanisms like the Feed in Tariff transformed the market for and availability of solar panels in the 2010s.
But as the consultation makes clear, finance alone won’t unlock demand and how that finance is delivered needs to address a range of other factors including “awareness of technologies, trust in [and availability of] installers, perceived disruption, confidence in savings, payback periods, consumer protection and the availability of affordable products”, to name just a few!
To better understand this problem, People Powered Retrofit teamed up with SoundPound, the Greater Manchester wide consortium of credit unions whose collective membership tops 120,000 people. Credit Unions are savings and lending co-operatives, organised around a locality or in the case of payroll credit unions, a workforce. They have a strong financial inclusion agenda, offering access to bank accounts for those who might struggle to open them, but the membership is diverse with many public sector workers or ethically motivated customers. As such there is a natural alignment to the values of People Powered Retrofit based around mutual aid, co-operation and social and environmental sustainability.
The development of the Better Home Loan in collaboration with SoundPound members like Metro Moneywise and South Manchester Credit Union taught us a few things about householder demand:
For existing Credit Union members:
- Members have high levels of trust in their Credit Unions and are comfortable borrowing money when needed.
- Members have typically improved their homes to some extent, often with energy efficiency measures, and are motivated to do further improvements to reduce energy bills.
- Despite this, a key barrier for members is understanding what improvements might work for their homes, what to do first and what to leave for later.
- They also struggle to find effective contractors who they trust to do the work.
For members looking for guidance on retrofit measures, whilst credit union staff are used to offering guidance on financial inclusion, debt management etc, home energy efficiency felt like a stretch and a new area of expertise many lacked or feared making inappropriate recommendations for.
For People Powered Retrofit’s One Stop Shop clients, a distinct, but related audience, some barriers are overcome by their use of our One Stop Shop services, to assess their home and create a tailored retrofit plan for their property. Many already have funds in place for their works, but some appreciate the ability to extend the scope and scale of their plans, which can happen as projects develop.
There was also a theme around who clients are comfortable lending from, with a strong preference for ‘ethically motivated’ lenders, in it for the right reasons.
Ultimately we ended up designing two products.
The People Powered Retrofit Loan
A green home improvement loan offered by South Manchester Credit Union of up to £15,000 with a rate of 6.2% APR subject to certain approvals for a range of retrofit measures. The loan means that People Powered Retrofit clients who have benefitted from an assessment and are in the process of planning improvements can extend budgets if necessary to maximise the impact of the works. Existing and prospective clients can learn more here:
The Better Home Loan
The Better Home Loan is a loan product that participating SoundPound credit unions can offer members.
To ensure members get the advice they need to make the right decisions on home improvements we’ve worked to put a holistic approach in place.
Credit Unions receive a training package designed by People Powered Retrofit to help staff get up to speed and be able to offer members basic signposting guidance on home improvements.
We’ve designed a range of factsheets and guides to support member-decision making and created a selection of ‘packages’ of works that householders can choose from such as basic electrification, whole house plan, air tightness and draught-proofing. Limiting choice like this means we can be more prescriptive on quality assurance and contractor requirements without the need to be involved throughout.
And for members who do want more involvement or more ambitious improvements, they can access People Powered Retrofit support via the scheme.
Next Steps
With increasing interest in scaling retrofit finance, we are strongly advocating for the UK’s network of credit unions to be front and centre of any new initiatives. Investment in the wrap around advice packages and staff training will translate not only to more loans and more improvements but to appropriate and high quality works.
For credit unions interested in adopting the Better Home Loan or developing their own product there is now a guide available from the Altogether Money federation that we have contributed to:
At People Powered Retrofit, we are focussing on home electrification as an increasingly popular route for retrofit and devising a focussed staff training programme and householder guidance to support this. Inspired by the work of Rewiring America we’re looking at their Electric Coaching programme.
