Memorandum submitted by the Royal Institute
of Chartered Surveyors (RICS)
The Royal Institution of Chartered Surveyors
(RICS) welcomes the opportunity to submit evidence to the Communities
and Local Government Select Committee's enquiry into Existing
Housing Stock and Climate Change. This submission has been kept
as short as possible, however we would welcome the opportunity
to give oral evidence to expand on these ideas.
RICS believes that the emphasis on reducing
carbon emissions on new build has been disproportionate, as has
the emphasis on energy performance certificates on a transactional
basis. In order to assist Government we are making figures compiled
by RICS Building Cost Information Service available for the first
time. These figures provide new data on the payback times on the
improvements suggested in the Energy Performance Certificate (EPC).
The EPC will have little impact on reducing emissions unless it
is linked to other measures.
Who is the RICS?
By way of background, RICS is the largest organisation
for professionals in property, land, construction and related
environmental issues worldwide. We promote best practice, regulation
and consumer protection to business and the public. With 140,000
members, RICS is the leading source of property related knowledge,
providing independent, impartial advice to governments and global
institutions.
RICS is uniquely well placed to offer its perspective
as the leading property professional body, required by its Royal
Charter to place the public interest at the core of all its activities
and ahead of its members' own interests.
How does the age of the property affect carbon
emissions?
— New build houses are typically more
energy efficient that older properties; carbon emissions of a
typical UK pre-1914 home are in the region of eight tonnes of
CO2 per year compared to four tonnes in a home built
after 1995. It is essential to ensure that the construction process
is performed in a carbon friendly manner, as we risk cancelling
low-carbon homes with a high-carbon building process. The perverse
incentive that it is cheaper to knock down a property and rebuild
rather than making improvements due to VAT obligations must be
eradicated. By 2016 all new houses will be low-carbon, however
we must ensure that the building process is carbon as well as
the finished product.
— At the other end of the scale, there
are a relatively small number of historic houses (around 10%-15%).
However this is not the most energy inefficient group of dwellings.
Lesser emitters that are easier to improve carbon efficiency should
be targeted first.
— Properties from the 1920s to 1960s
have been largely built without insulation, however these properties
make up around 70%-80% of the housing market and we must therefore
focus efforts on these given that most property in the UK is and
will be to come existing stock from this period.
— In light of the vast amount of existing
properties, the first priority must be to improve the energy efficiency
of the existing housing stock, in particular targeting the estimated
six million low income households that cannot afford to keep their
homes adequately heated and damp-free. More research and development
is needed into methods of making the existing housing stock more
energy efficient.
— The potential for renovation and
retrofit of existing housing to benefit from energy efficient
design and operational systems is substantially higher than the
size of the new construction market. If the energy usage in the
millions of existing homes and offices was reduced by 10% this
would far outweigh the energy savings in the limited number of
new homes due to be built over the next decade. Education of consumers
is vital in achieving this.
How does the tenure of the property affect carbon
emissions?
— Owner occupation is by far the most
common tenure in the UK and makes up around two thirds of all
energy inefficient homes. Owner occupiers on below average incomes
are least likely to invest in energy efficiency improvements.
Smart meters and similar innovations can help owners to keep energy
usage low and encourage changes.
— Social renters are at a relatively
low risk of living in an energy inefficient home because of the
statutory requirements in the social sector. For example, social
dwellings must meet the Decent Homes Standards which includes
requirements for energy efficiency and must have an average SAP
rating.
— Leaseholders may live in a wide spectrum
of properties but have little opportunity to make changes to their
property. The freeholder-leaseholder-managing agent relationship
may prevent changes from being made. More must be done to provide
incentives to solve the problem of financing and consent between
freeholders and leaseholders to make changes to properties.
— Private renters are at a relatively
high risk of living in a very energy inefficient home and have
very little opportunity to make energy performance improvements
themselves. Investor landlords are particularly unlikely to make
changes to their properties. There needs to be a level playing
field between the timing of Energy Performance Certificates for
sales and rentals in order for the consumer to have appropriate
choice and knowledge.
— There must be a differentiation between
investor landlord and buy-to-let type landlords (private individuals)
in order to provide incentives to each category. We are also starting
to see the advent of business landlord who will present their
own particular challenges.
— To tackle energy inefficiency among
different housing tenure we must ensure that there are targeted
incentives and provision of information for each type.
Energy Performance Certificates
How does the EPC fit in with the existing building
stock?
— In an unprecedented move in May 2007,
RICS initiated Judicial Review proceedings against CLG intended
to call the government to account of a lack of consultation or
justification on its gold plating of a European Directive. Following
CLG's agreement to carry out a new consultation and pay RICS'
legal costs, the Judicial Review has been stayed pending a new
12 week consultation which is expected imminently.
— RICS is committed to the introduction
of Energy Performance Certificates. However, we believe that the
Energy Performance Certificates need to be de-coupled from the
Home Information Pack. The sector views them as a very important
tool to tackle climate change and as such believes that they should
not be attached to the buying and selling of homes which is only
6.9% per year of the total housing stock. Instead they need to
be rolled out to all housing stock. Energy Performance Certificates
should be applied to all residential property not just those changing
hands.
— We firmly believe in a more flexible
market led approach in order to keep the cost down for the consumer
and reduce the number of visits to homes. Such flexibility would
encourage the market into making the EPC into a useful tool rather
than a necessary evil in the context of a transaction. If linked
to buying and selling houses, the EPC should be allowed to be
provided at any stage in the transaction before an exchange of
contracts takes place.
What are the problems with the EPC?
RICS supports the Government's aim of reducing
carbon emissions from homes by improving their energy efficiency
but for the following reasons the current approach is not the
best solution.
1. Potentially causing an additional car
journey to each marketed home (for instance on top of a survey
or valuation visit), purely for the purposes of producing an EPC,
will cancel out the benefits of providing the EPC up front. This
could be addressed by allowing the EPC to be produced at the same
time as a survey and valuation.
2. The current approach will cost consumers
considerably more than allowing the EPC to be provided at any
stage in the transaction.
3. The requirement to produce a new HIP every
time a property is marketed represents a gold plating of EU legislation
which only requires a new EPC every ten years. It is contrary
to government policy to gold plate EU legislation, but especially
where there is no beneficial effect.
4. There is no evidence to support the Government
view that prospective purchasers will make decisions to view property
on the strength of a favourable EPC. We still await the results
of the pilots on EPCs and feel that further research is needed
urgently. We are also awaiting the MORI survey commissioned by
CLG.
5. There are questions over the accuracy
of EPCs. The requirement for accuracy of certificates from the
SAP schemes is 5% tougher than rdSAP and in addition to this,
rdSAP uses a lot of default values, and therefore the more a property
deviates from the average the greater the inaccuracy. In addition
to this, the EPC does not take into account factors such as the
direction which the property faces and whether it is sheltered
by other structures or landscape features which can make a huge
difference to the performance of the property.
6. The EPC has particular problems relating
to historical properties as the data used to compile the report
is not appropriate for historical buildings. The EPC is likely
to be inaccurate with the actual performance of buildings varying
widely from the ratings on the EPC. For example historic homes
with heavy structures may be very good at staying warming in winter
and remaining summer. This issue is examined further in an article
by Steven Boniface which is included as an appendix.
7. The payback times of the suggestions are
too lengthy for the decision to implement them to be financially
viable on saving alone. Further incentives are needed to redress
this. Payback times of suggestions are covered in more depth below.
8. There is concern that the EPC focuses
too much on insulation and heat retention which may necessitate
air conditioning during warm weather.
Payback times
— For the first time, we are publishing
research by the RICS Building Costs Information Service into the
payback times for suggested improvements on EPCs.
— The payback time is greatly affected
by the level of VAT charged on the improvement and consequently
we have examined each suggested improvement for costs including
VAT at 17.5%, 5% and excluding VAT.
— Only cavity wall insulation, which
would cost around £680 to install and has potential savings
of £145 per year, has a relatively short payback time of
five years. Other improvements have a payback time ranging from
13 years, in the case of cavity wall insulation, to 208 years
for a solar water heater. The full list of figures including VAT
considerations is attached as an appendix to this document.
— Alternative methods of funding such
improvements must be considered, such as spreading the cost over
a number of different property owners, or providing greater incentives
to help with the cost.
How should EPCs be used?
— Having introduced EPCs, Government
must now look at the information provided within them and how
it is used. Stand alone Energy Performance Certificates will not
tackle climate change.
— Energy Performance Certificates need
to be accompanied by coherent consumer advice, guidance, penalties
and incentives for consumers on payback periods and energy saving.
— Simply providing information about
how a property can become more energy efficient will not by itself
encourage people to take action to make those improvements.
— The EPC will have little impact on
reducing emissions unless it is linked to other measures. The
Government must therefore take the lead in raising public awareness
of the role that individuals can play in tackling climate change
in their own homes, and in providing incentives for them to do
so.
— The figures speak for themselves.
The efficiency improvements that will be outlined in the EPC can
be expensive and RICS calculations suggest there is little scope
for payback from reduced energy bills in a short period of time.
— Now is the crunch time for EPCs which
have suffered a loss in consumer confidence. They must be uncoupled
from the transaction now to ensure consumer buy-in.
— EPCs must be required for rented
properties to provide a level playing field for sales and lettings
and must have a similar lifespan to sales properties.
RICS Suggestions of ways to improve energy efficiency
RICS calls on the Government and industry to
show a full commitment to the low carbon built environment by
actively encouraging homeowners to make the necessary upgrades.
These could be:
— Reduce VAT on energy efficient materials
such as insulation and low energy light bulbs, as well as on their
installation and on renovation and repair work, from 17.5%-5%.
— Using the VAT collected from the
production of HIPs to provide incentives for carbon-reducing changes
to properties.
— Stamp duty rebates should be offered
to encourage home-owners to make their homes more energy efficient.
— Council tax rebates for high energy
efficiency ratings: Braintree District Council in Essex launched
a joint scheme with British gas whereby a £100 rebate is
payable to those who install cavity wall insulation.
— Financial/fiscal incentives, especially
for those who are the first in a particular property to invest
in energy efficiency measures as they may not stay in it to recoup
their investment and yet pass on the benefits to the next owner.
— Make a wider range of grants available
to all home owners and provide a one-stop-shop giving access to
specialised advice on grants and aid available and how to access
them.
— More detailed energy bills and use
of smart meters to highlight areas of high consumption and to
increase understanding of how energy is used.
— Clear improvement targets for national
and local authorities aimed solely at existing housing. Whenever
planning permission is granted for extensions or refurbishment
of existing houses, the whole building should come under the purview
of the energy regulations which then need to be enforced.
— Energy companies should be involved
in encouraging energy efficiency. Schemes whereby energy companies
do not seek to make profits on provision of energy, but instead
focus on making profits from undertaking work on customers' homes
by improving energy efficiency should be encouraged. This type
of scheme is particularly effective when coupled with charging
the property rather than the owner over the long-term so that
successive property owners share the costs of improvements.
— Regulation may be effective in encouraging
specific changes, for example to phase out conventional energy
inefficient lighting as has been the case in other countries.
Making the switch to energy efficient lighting systems in the
domestic sector would save the EU 20 million tonnes of CO2,
which equates to the annual output of 25 power stations (at 2TWh/year);
and between €5-8 billion per year savings in energy costs.
Regulation has proved effective in the UK in the case of requiring
new boilers to be of the condensing variety.
— Focus public funding schemes on the
cheapest measures with the quickest pay back time in the poorest
housing stock.
Key messages
— Expertise RICS has expert members
across the whole spectrum of the built environment from construction
and renovation to valuation, facilities and environmental management.
We therefore have the expertise to advise on and implement the
best policy solutions in the public interest. RICS will publishes
its own guidance for members on taking an holistic "cradle
to grave" approach on sustainability issues in order to ensure
best practice in all retrofit and refurbishment work.
— Clear political leadership Governments
need to take brave decisions to achieve a low carbon built environment.
Setting national targets is a good start. Government must also
be clear on motivations for improving energy efficiency; whether
this is to reduce reliance on foreign energy sources or as a genuine
desire to protect the environment.
— Local solutions to a global problem
We as individuals must understand how we contribute to climate
change in our daily lives and take individual responsibility for
changing our behaviour.
— Focus on existing buildings Action
should concentrate on the energy efficiency of existing buildings
rather than new buildings as the potential for carbon emission
reductions is substantially higher than the size of the new construction
market.
— Cheapest measures first Public funding
schemes should focus on the cheapest measures with the quickest
pay back time in the poorest stock, ie cavity wall and loft insulation
and energy efficient lighting.
— Financial incentives Market forces
are unlikely to be enough so fiscal (including VAT) and other
financial incentives should be developed to encourage energy efficiency
improvements.
— Affordable energy efficient alternatives
Fixtures and fittings are responsible for a large proportion of
energy use in buildings. For example, traditional light bulbs
could be phased out in favour of more energy efficiency alternatives.
— Skills and education RICS calls on
governments and other professions to ensure sustainability becomes
a core principle for all those working in the built environment.
Compulsory lifelong learning on sustainability for all built environment
professions should be introduced.
— Energy consumption Domestic fuel
bills should contain clear information about energy consumption
so that consumers can compare themselves with others and monitor
their own consumption. Smart metering should be introduced wherever
possible.
Whilst the Committee is not considering the
emissions from commercial buildings it is important to note that
RICS has sounded a note of caution with the Department as there
is the risk that the challenging timetable for the implementation
of the EPBD will not be met.
RICS want to work with government to help tackle
some of the pressing environment issues that we are currently
facing. We would welcome the opportunity to give oral evidence
in order to expand upon the points raised above.
Notes
1. All costs sourced from the BCIS Housing Repair Cost Guide
2006 except where indicated, therefore they all include VAT as
indicated above. The costs have been updated to present day costs
(2nd Quarter 2007) and are based on nationally average UK prices
(location factor 1), they must be adjusted to suit regional differences.
2. Energy Saving Costs per year have been derived from "Domestic
Energy Primer—an introduction to energy efficiency in existing
homes" published by the Energy Savings Trust (1) and that
indicated by ESD per Building Magazine article dated 7th July
2006 (2).
3. Only those measures indicated in the sample report have
been considered. There are other measures that could be included
such as draughtstripping of all external and internal doors, better
ventilation details, use of biomass boilers, wind turbines (provided
that the average wind speed is more than 4.5m/s, Energy Savings
Trust or 13 m/s, other sources), photovoltaic panels, heat recovery
ventilation, increased insulation works to either the external
face or internal faces of the property and ground sourced heat
pumps.
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