House of Commons - Communities and Local Government Committee

Select Committee on Communities and Local Government Committee Seventh Report

5 Energy Performance Certificates

55. Since the beginning of 2008, all homes marketed for sale have required a Home Information Pack (HIP), prepared by the seller, a central component of which is an Energy Performance Certificate (EPC). From the autumn, homes marketed for rental will also require the provision of an EPC to tenants. EPCs provide buyers or tenants with an energy efficiency rating for the property concerned, tapering down from A to G, and a list of likely improvements that may raise that rating and, potentially, reduce long-term fuel, lighting and other energy-related costs. CLG estimates the cost of introducing domestic EPCs at £81 million a year, but expects a saving of about 0.9 million tonnes of carbon for each year to about 2020.[80]

Raising awareness

56. The primary benefit the Government expects to gain from EPCs is a better informed public. Lack of information is regularly identified as one of the main barriers to homeowners and tenants making improvements to their homes which are both cost-effective and energy efficient. The Commission for Architecture and the Built Environment notes that while homeowners were generally concerned about energy usage, "51% knew 'not very much' and 19% knew 'nothing at all' about sustainable homes in general."[81]

57. Providing new owners or renters of homes with a straightforward list of options, ranging from simple draught-proofing and insulation to the installation of new microgeneration technologies, is expected to prompt householders to act in both their economic and environmental interests. The Government perceives a market failure in the fact that householders currently pay higher-than-necessary fuel bills when fairly simple measures, such as the better cavity wall insulation needed in up to 9 million homes, could reduce their bills sufficiently to pay back the initial cost in as little as three or four years.[82] The pressure group Beyond Green hopes that EPCs may "perform in a similar way to the energy efficiency labelling of white goods", a process that has seen, for example, the near extinction of fridges or washing machines graded below C.[83] National Energy Action suggests that if just one in 20 householders acts sufficiently to raise the rating of their home by one grade, some 15,000 tonnes of carbon emissions might be prevented each year.[84]

The speed of roll-out

58. The information gain to be had from EPCs depends, however, on how quickly they become available to homeowners and tenants. Their inclusion in HIPs and the autumn roll-out to rented homes rest on their being provided at the point when a new owner or tenant buys or rents a home. This, the Government says, makes sense because it improves

the provision of information to householders about the energy efficiency of the home they are intending to occupy at the point in time when they are most likely to consider making improvements and most likely to take account of the cost and benefits of such improvements in their forward planning.[85]

From the industry side, the Construction Products Association also notes that those who move home are most likely to spend money on improvements within 18 months of doing so.[86] It is also suggested, for homeowners, that the point at which they move house, and at which the arrangement of a mortgage is necessary, is also the point at which they might borrow enough to fund some improvement to their new home.

59. There are significant problems, however, with providing EPCs primarily at the point of sale or rental. The Green Alliance, in work commissioned by ODPM in 2006, noted that rented housing changes hands roughly every five years on average, and privately owned homes every 15 years.[87] Oxford University's Environmental Change Institute says that half England's owner-occupiers—representing 35 per cent of the total national housing stock—will live in their homes for longer than 11.8 years.[88] The Council of Mortgage Lenders estimates that "delivering EPCs through HIPs means it will take more than 13 years before all home-owners have received one."[89] Introducing EPCs at point of sale or rental will disseminate increased information to householders, but it will not do it quickly. Given the urgency with which we need to respond to climate change, the Government needs to find a means of disseminating Energy Performance Certificates more rapidly than can be done purely through a mandatory requirement at the point when a home is marketed for sale or for rent. Further 'entry points' for EPCs might include, for example, the points at which planning permission for major works is sought, or at which works are carried out under programmes such as Warm Front or the Carbon Emissions Reduction Target.

Translating information into action

60. A second difficulty lies in whether the Government is right to assume new homeowners are most likely to act on the information contained in the Energy Performance Certificates contained in their Home Information Packs. The Energy Saving Trust, largely Government funded, doubts this:

The reality of moving home is that a certificate in the Home Information Pack is likely to be a low priority in relation to the many other things the customer has to do and look out for. And the EPC may well have been forgotten by the time the householder feels in a position to take action.[90]

The Council of Mortgage Lenders, too, thinks new home-buyers have "other things that they would prefer to spend their money on".[91] The Government hopes that 'market-based mechanisms' will arise to provide housebuyers with access to cash to carry out improvements: as yet, however, only four mortgage providers offer 'green mortgages', and the industry reports little direct demand among would-be house purchasers.[92]

61. Of course, any homeowner who wishes to commission an Energy Performance Certificate for their home may do so, and may choose to act on its recommendations either while still living there or as a prelude to sale. It may even be, as the Government hopes, that simple economic interest will encourage homeowners to commission an EPC, ahead of seeking to sell their houses, as they try to upgrade their energy efficiency rating in the interests of a higher sale price.[93] There is already some indication that this may be happening: by 6 March 2008, 370,000 HIPs had been prepared but 70,000 more EPCs lodged.[94] As Energy Performance Certificates contain guidance, rather than mandatory requirements for improvement works, the Government is relying on a mixture of information and incentives to encourage millions of householders to choose to make the improvements for themselves. We recommend that the Government work closely with the mortgage industry to provide market-based financial incentives, such as 'green mortgages', that will encourage new homeowners to undertake improvement projects within a short period of their occupying their property.

62. We recommend that Energy Performance Certificate ratings be included in all advertisements for houses for sale, as they are for fridges and washing machines, so that prospective buyers may be aware of them from the outset.

63. The full roll out of EPCs dates only to the beginning of 2008, and it is clearly too soon to judge entirely how far they will prompt new homeowners to act. None the less, EPCs have been required on larger properties since August and September 2007, and some indicative data should therefore be obtainable on whether new homeowners are acting on the recommendations contained in EPCs. We recommend that the Government publish as soon as is practicable research on the extent to which Energy Performance Certificates are causing householders to undertake the works recommended within six months or a year of moving into new homes. We recommend that they publish as soon as possible the data gained from experience among owners of larger homes since EPCs were introduced on a limited basis in August 2007.

64. Energy Performance Certificates will also play a part in the work of the new Green Homes Service as it is rolled out nationally this year. The Energy Saving Trust will receive additional funding to enable it to target the lowest-performing homes, and EPCs listing homes with F or G ratings will be a substantial port of information. We welcome the use by the new Green Homes Service of the information contained in posted Energy Performance Certificates to target those whose homes are least energy efficient. This should help householders themselves to reduce their fuel bills and improve their living conditions while also contributing to overall carbon emission reductions

Guidelines or requirements

65. The recommendations made to householders in EPCs have no statutory force, being instead a series of suggestions for possible action. The Chartered Institute of Housing, in particular, has argued that something stronger is required if homeowners are not simply to ignore them, suggesting that they should contain some element of mandatory work required and be produced at regular intervals, in the same way in which MOT certificates require cars and other vehicles to meet standards annually.

66. Clearly, the analogy with MOT certificates is not precise: a car that fails its MOT can be taken off the road but a house that falls below a certain energy rating still provides someone with a home. None the less, for the longer term, we recommend that the Government commission research into the idea of requiring householders to obtain a periodic energy performance rating.

A matter of trust

67. If EPCs go some way to surmounting the information barrier that householders face in identifying what energy improvements can be made to their homes, they do rather less to overcome a second significant barrier—trust. CABE outlines the problem:

Homeowners' views on the trustworthiness of information provided by estate agents and by the housebuilding industry are fairly negative. For example, a CABE survey of 900 homebuyers carried out in 2004 showed that, in the case of new homes, only 3% of residents surveyed considered housebuilders as very trustworthy sources of information …[95]

The Construction Products Association also accepts that householders are suspicious of the value for money they get from many improvement works:

One factor that may well discourage many householders from investing in these kinds of improvements is the poor reputation the construction industry has for dealing with small works of this kind. What the industry needs to develop is companies that have a reputation in this area for giving a top class service of value that householders can trust and rely on.[96]

The CPA itself suggests a way in which the EPC could help to achieve this, by offering householders information on who might be capable of doing the works suggested:

the report that a householder receives needs to be less bland and provide much more of a signpost for what the individual householder needs to do to improve the energy efficiency of the dwelling. It needs to point more clearly to those who can give independent advice on the issues that have been raised and how a householder can get in touch with bona fide companies that will be able to act on the various recommendations that have been made.[97]

Giving householders information on what might be done to improve the energy efficiency of their homes is only one half of the equation. They also need to know who can do the works, and more importantly given fears about costs, hassle and cowboy builders, who can be trusted to do them cost-effectively and well. We recommend that the Government set a mid-term goal for Energy Performance Certificates to provide information on approved builders, installers and engineers.

EPCs and private rental

68. EPCs are not yet required when properties are marketed for rent, but they will be from October 2008. The Housing Corporation has drawn attention to the risk that this may slow the process of re-letting properties, which given the current housing shortage, the Government should seek to avoid.[98] If there is a problem here, it may lie in simple lack of awareness among landlords of the forthcoming requirements to be placed on them. The Paragon group reports awareness is low across the sector, and that landlords "have been late adapting to regulatory change". This difficulty may be exacerbated by the structure of the private rented sector: as noted in Chapter 3, there are more than 13,000 private landlords and most of them rent only one or two properties, usually not as their main business, with comparatively few belonging to representative landlord organisations. We recommend that the Government ensure private landlords, large and small, are fully aware of the requirement to introduce Energy Performance Certificates for properties marketed for rent from October 2008, in order to avoid any lengthening of re-letting periods at a time of housing shortage. We recommend that information be disseminated, for example, through letting and estate agencies and landlord tenancy deposit schemes.

The importance of accuracy

69. Finally, the impact of EPCs will ultimately rely on the accuracy of the information they contain. Householders will require confidence that the ratings their homes are given and the works recommended are appropriate and necessary. Calor Gas raises the point that certificates are drawn up using a standard methodology—the reduced data Standard Assessment Procedure (rdSAP)—that may bear little resemblance to the actual costs that householders pay for fuel, lighting and so on.[99] Parity Projects points out that the EPC software measures the likely performance of a house, but takes no account of the number of occupants:

A home occupied by a single occupant uses 55% more electricity and 61% more gas per capita than one with a four person nuclear family.[100]

The Association of Home Information Pack Providers also says assumptions built into the software used to create EPCs "can sometimes lead to inaccurate predictions". It crystallises the long-term difficulty this may cause for the credibility of the certificates:

Most occupiers are fairly well aware of their fuel bills and … an inaccurate energy cost prediction can undermine their trust and confidence in the EPC … Put simply, if the public do not understand and accept the information provided by the EPC they will not act on it.[101]

The introduction of Energy Performance Certificates represents a substantial leap forward in the provision of home energy efficiency information. We encourage the Government to maintain the momentum likely to be gained from this by seeking continuous improvement in the quality of information provided to householders by EPCs.

The holistic approach

70. While EPCs provide increased information at the level of individual households, they may also provide an opportunity to create more and better information at a wider level. The Chartered Institute of Housing, for example, suggests that the ratings and information contained in EPCs might be made available to local authorities, enabling them to build a comprehensive picture of the energy efficiency, or inefficiency, of the whole stock, both social and private, in their areas.[102] The Association of Home Information Pack Providers has also suggested that a national audit of energy efficiency would be of value to both local and central policy makers, and to the energy industry:

It would provide a definitive snapshot by area and property type, reveal the full extent of measures required to meet targets for reductions in carbon emissions from the domestic sector, and provide a reliable evidence base for decisions on targeting resources both centrally and locally.[103]

There may well be value in obtaining information that might lead to more holistic approaches to energy efficiency improvements across whole streets, neighbourhoods or larger areas. The Association for the Conservation of Energy points out, for example, that

An area-based approach can … save time and reduce costs … If a road of houses is tackled together, more can be done in a shorter period, which reduces the costs and complexity of installation.[104]

The single biggest difficulty in spreading energy efficiency measures across the housing stock lies in engaging millions of individual householders. Allied with this is the problem that actions taken by individual householders are generally piecemeal and partial, particular to their own homes. Given the economies of scale and wider environmental benefits that may be achieved from a more holistic approach, we recommend that the Government consult local authorities on how area-based programmes for basic home improvements, such as cavity wall or loft insulation, might be offered across significant sections of the housing stock rather than, as at present, in one home at a time, and thereby carried out more efficiently and cost-effectively for households which wish to participate.

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87 Green Alliance, housing a low carbon society: an ODPM leadership agenda on climate change, May 2006. Back

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