Net zero

Turning up the heat

Making the home heating transition work for low-income households

Zachary Leather
Zachary Leather
Jonathan Marshall
Jonathan Marshall

This report continues the Resolution Foundation’s series of reports looking at how changes associated with the net zero transition will impact low-to-middle income households. It deals with the issue of home heating, providing insights into how this transition is playing out across different parts of society, and how policy should change to be more inclusive. 

A warm home is central to family life, but the gas boilers in our homes are a significant contributor to the UK’s carbon footprint. Over the coming decades, most households will replace these boilers with a heat pump, but they are expensive to buy and do not currently repay this cost through cheaper bills. This means that the decarbonisation of home heating will not happen organically: proactive policy will be needed. These should be designed in such a way that makes heat pumps more affordable and cheaper to run. 

Key findings

  • The rollout of heat pumps is slow – with fewer than 100,000 fitted into British homes in 2024.  
  • But it is also uneven: 45 per cent of those installed to date are in the richest parts of the country, and 73 per cent in places with the lowest population densities. 
  • Recent changes to Government policies have started to address this challenge: in 2024, a similar number of heat pumps were installed through fuel poverty schemes as those through grants that all homeowners could access. 
  • A strategy based on subsidies alone is not bringing down the costs of heat pumps, which have only fallen by just 6 per cent in the past five years. At the same time, the new Government is showing reluctance to bring in regulations that are vital to drive changes in rented properties. 
  • Our analysis shows that most families can expect to see their energy bills increase slightly when replacing a gas boiler with a heat pump, with energy costs increasing, on average, by £32 per year. Just one-third are set to save at all, but those replacing the oldest and least efficient gas boilers will see big upsides. 
  • Heating costs are particularly important for poorer families, accounting for 7 per cent of disposable incomes, compared to 1.5 per cent for the richest. The home heating transition should work to reduce this expenditure, improving living standards as well as providing an incentive for families to make the switch from gas boilers. 
  • Households face electricity unit prices four times those of gas, which means that the higher efficiencies of running costs do not feed through into lower bills. There are numerous ways to reduce this relative difference, with changing how policy costs are funded ripe for intervention.  

Recommendations

  • The nascent state of the heat pump rollout means that now is not the time to remove grants available to homeowners.  
  • But as the Government looks to set out the future of these schemes, it needs to acknowledge that costs remain too high for many families, and should bring in additional, more generous, means-tested subsidies for vulnerable families. 
  • Low carbon heating should be made cheaper to run, to both increase incentives for households and deliver improvements in living standards that will be more pronounced for poorer families. Moving policy costs from electricity to gas bills would deliver this goal, and do so without a substantial bill for the exchequer. 
  • Making heat pumps cheaper sits at the top of home heating policy goals, but subsidy alone is not working to this end. Private landlords are also showing little interest in available grants. Clear regulatory changes, on both the retrofit of heating systems and on new homes, will be needed to reinforce the effect of subsidies. 
  • And consumer protections – in the form of a social tariff – can be put into place so that vulnerable families that remain reliant on gas boilers are not exposed to any additional costs that they may find difficult to shoulder. 

Further reading

Turning up the heat
Making the home heating transition work for low-income households
·
Zachary Leather, Jonathan Marshall
The grass is greener on the net zero side
What the Seventh Carbon Budget tells us about the net zero transition
·
Zachary Leather
Sunny day savings
Assessing Government support for solar panels
·
Zachary Leather

https://doi.org/10.63492/BWNY1908

Zachary Leather
Zachary Leather Economist
Jonathan Marshall
Jonathan Marshall Principal Economist