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Sure, that is correct, in the end prices are determined by the market, not cost. So in many cases the cost is not passed on to buyers, it is carried by developers. In some cases the cost becomes a barrier for building, though.

But still, it's not the government that carries this cost.

Retrofit cost goes to government if the government decides to subsidize it. I live in Finland, which is considerably colder than Britain, not to mention Australia, and here the requirement for insulation is simply mandatory in building permits (which is required also for major renovation, not just new houses).

There are no real subsidies for this. Also, there are no heating grants which I hear are a thing in the UK (and a thing big enough to have an impact on how people vote).

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