Select Committee on Environmental Audit Twelfth Report

2  The target for 3 million new homes by 2020

Rationale for the 3 million new homes figure

5.  When our predecessor Committee first looked at house-building policy in 2005, the Government target was to increase the construction of new homes from around 150,000 per year to around 180,000 a year by 2016.[5] By 2006, the target had increased to around 200,000 a year by 2016.[6] In the Housing Green Paper of July 2007 the Government increased this to a total of 3 million homes to be built by 2020, with 240,000 of them to be built every year by 2016.[7]

6.  The Housing Green Paper explains why the targets have been increased as follows:

Why we need more homes: While the housing stock is growing by 185,000 a year, the number of households is projected to grow at 223,000 a year, many of them people living alone.[8]

New targets: That is why the Government is now setting a new housing target for 2016 of 240,000 additional homes a year to meet the growing demand and address affordability issues. […]

In addition, the Government frequently stresses the need to build more homes to meet the demand for social housing.[9]

7.  Less prominently, a fourth factor given by the Government for its house-building targets is the need to meeting a projected growth in aspirations for bigger homes and gardens. For example, the Impact Assessment to the 2007 Housing Green Paper argued that "as incomes are expected to continue to rise with economic growth, each household is expected to demand more space. This underlines the urgent need to build more homes for this and future generations."[10] Responding to the 2007 Green Paper, the National Housing and Planning Advice Unit stated: "England is an aspirational, prosperous and growing nation and that means a demand for more housing. If we fail to act then […] current home owners will not be able to move on to bigger and better homes."[11] The final report from the Barker Review made the same argument:

[…] as incomes continue to increase it is likely that the demand for space will also increase; put simply, people tend to want to live in larger homes (often with larger gardens). This trend has been evident over a number of decades, partly as a result of the changing nature of the UK's economic and industrial base and supported by changes in the transport network.[12]

8.  We find this rationale for the Government's house-building targets unconvincing, given that it is not necessarily a question of meeting urgent needs. Moreover, such aspirations are potentially unlimited, and could be used to justify ever increasing house-building targets, which would be, by definition, unsustainable. Construction of large volumes of houses, and the infrastructure to support them, will necessarily lead to sizeable environmental impacts; the Government should demonstrate that major drives to increase house-building are properly weighed against the principles of sustainable development. We recommend that both the Department for Communities and Local Government, and the National Housing and Planning Advice Unit, review the share of new homes attributable to meeting the aspiration for bigger homes and gardens in their national house-building plans and targets; and seek the advice of the Sustainable Development Commission on the environmental limits of continuous annual house-building targets.

The impact of the housing market downturn

9.  Housing markets are highly complex and house prices are influenced by many factors apart from the supply of land, most obviously the availability of credit and the state of the wider economy. In 2004 our predecessor Committee asked Kate Barker whether there was a danger that, in the event of a market downturn, national house-building targets could lead to more homes being built than were needed. In arguing that house-building ought to be more responsive to market demand, she suggested that in a market downturn, fewer homes should be built:

One would hope that the reaction of the house builders to the situation that you have described is such that they would not build the houses. Within the situation you have described you presumably have downward pressures on prices. It is difficult to see that being a situation in which the builders would take the position to go ahead with the building. They are more likely to do what in these circumstances would be a sensible thing, that is, waiting and building the houses at a more auspicious time.[13]

10.  The latest evidence suggests that this is indeed what is taking place in the current downturn. The Government expects house prices to decline by 5-10% in 2008.[14] Figures from the National House-Building Council (NHBC) reveal applications to start building new homes declined by 51% year-on-year in the three month period June to August 2008; taking just homes for private sale, the number of new developments beginning construction was down 65% in the same period.[15] In August 2008 mortgage approvals in August 2008 sank to the lowest level since comparable records began in 1993, while net mortgage lending dropped to just £143 million, down 82% from £7.9 billion at the end of 2007.[16]

11.  While acknowledging the limitations of using evidence from 2008 to predict the housing situation in 2016, we asked the then Housing Minister whether the Government would reconsider its overall targets for new homes, given the current decline in demand. She responded that it was too early to consider revising the targets for 2016 and 2020,[17] and declined to outline under what circumstances the Government would consider revising them.[18] She argued that while "the number of houses that is projected to be built in any one year might be reduced […], that does not necessarily mean in terms of the long term that we would move away from our target."[19] Since we finished taking evidence events have moved on, with the global economic situation deteriorating significantly. We note that the Government has made a number of announcements aimed at sustaining the construction industry through these difficult conditions.[20]

12.  The Barker Report and subsequent house-building targets intended to influence the affordability of housing through supply. But they were agreed in a time of optimistic growth assumptions and easy credit. We recommend that the Government urgently reviews the assumptions on which the 3 million homes target was based and whether it is still justified on the basis of the latest economic growth projections, fundamental changes in the mortgage market and house prices which are falling anyway.

Environmental impact of the national targets

13.  In December 2006 the Treasury announced a target for all new homes to be zero carbon by 2016.[21] In a subsequent report, we criticised the Government for the lack of urgency it showed in giving this target a 10-year lead-time.[22] The Treasury responded:

The Government consulted industry closely in reaching the 2016 date for making all new homes zero carbon, which they have said is challenging but achievable. Setting a date for zero carbon standards any earlier than 2016 could jeopardise the number of homes that need to be built (Kate Barker's 2004 report into housing supply in the UK made clear that, unless we intervene, only a third of young couples will be able to afford a home of their own in 2025.) It is important that the building regulations are progressively tightened over time to help the house-building industry move towards the zero carbon standards and test out new techniques and technologies.[23]

In other words, one of the main reasons why the Government has decided not to introduce the zero carbon target earlier is that if it did so this would slow down rates of house-building, meaning that the target to build 2 million new homes by 2016 could not be achieved.

14.  The Government has made its priorities clear: out of building more homes, and ensuring that new homes are zero carbon, it favours building more homes. Given the housing market slow-down, the Government should reassess these priorities. In the light of current market conditions, we recommend the Government changes the balance of its 3 million new homes by 2020 target, so that the proportion that are built after the zero carbon target is significantly increased.

15.  We asked the then Environment Minister, Phil Woolas MP, for the Government's estimate of the rise in emissions, and resulting impact on the UK's carbon targets,[24] of building 2 million new homes before the zero carbon target came into effect. His answer suggested that: (i) the energy efficiency of new homes will be ratcheted up before 2016; and (ii) the 2 million additional homes built before the zero carbon standard comes into effect would not make that much difference, since they would merely be incremental to all the other homes that are already standing.[25]

16.  Tony Grayling of the Environment Agency told us: "Building new homes will inevitably increase the amount of emissions from the UK and, therefore, it will make [meeting the UK's 2020 CO2 target] more difficult. You would have to get larger emission reductions elsewhere in order to compensate for that."[26] James Marsden of Natural England told us that both they and the Environment Agency were concerned that much housing growth was being planned in seriously water-stressed areas.[27] Neither agency felt in a position to comment on the size of the overarching house-building targets.[28] The Environment Agency, however, recommended that the Government produce an assessment of the carbon impacts of its house-building targets.[29]

17.  The Sustainable Development Commission concluded: "we are concerned that the 2 million new homes that might be built between now and 2016 […] will make it more difficult for the UK to meet its carbon emission reduction targets."[30] One of the things it stressed was the role of the embodied emissions of this house-building programme (i.e., the carbon emissions produced from the construction process itself):

Existing data concerning the embodied carbon emissions that result from the construction of new housing (the carbon emissions that result from manufacture of materials, transport of components and site activities) is sparse. Published estimates range through 40, 50 to 120 tCO2 for each typical house. This variability of data means that assessing the total construction impact for the 3 million new homes planned by 2020 is difficult. However, it is currently likely to make up somewhere between 10%-30% of lifecycle emissions from homes, and this will increase towards 100% of lifecycle emissions from 'zero carbon' homes. Homes that are built to a higher performance are likely to include more materials (more insulation, additional ventilation and renewable energy systems) and therefore to have a higher absolute embodied carbon content. New homes use 4-8 times more resources than an equivalent refurbishment. We recommend that the Government commissions more extensive research into the embodied emissions of low and zero carbon housing, to understand their importance and how they can be reduced.[31]

The SDC also stressed a related point, that house-building produces a considerable amount of waste:

Waste generated from construction, demolition and excavation (CD&E) activities makes up 33% of UK waste. The CD&E sector generates more waste in England than any other sector, and it is also the largest generator of hazardous waste. CD&E waste is also a major component of fly-tipped waste. There are cost-neutral opportunities to use recycled materials and reuse of CD&E waste on construction projects. But currently only around 10% of construction materials in new homes come from recycled sources.[32]

18.  We recommend that the Government suspends the implementation of its regional spatial strategies until it has carried out and published an environmental appraisal of its house-building targets. We also invite the Committee on Climate Change to assess the impact of new house-building targets on the UK's 2020 carbon reduction target, and related carbon budgets. This should include the embodied emissions—i.e., the carbon emitted from making, transporting, and using the building materials—in the construction of the homes and surrounding infrastructure. We further recommend that the Government takes action to reduce waste from house-building and construction more generally, including decisive measures to increase the use of recycled materials and reuse of construction waste.

5   Environmental Audit Committee, Housing: Building a sustainable future, para 7 Back

6   Office of the Deputy Prime Minister (ODPM), "Factsheet 1", Back

7   Cm 7191, p 7 Back

8   Cm 7191, p 7 Back

9   The Housing Green Paper states that social housing need is growing by 40,000 households a year, and introduces annual targets for 70,000 more affordable homes and at least 45,000 new homes for social rent by 2010-11. Cm 7191, pp 10-11, 20. Back

10   CLG, Impact Assessment for Homes for the Future: more affordable, more sustainable, July 2007, p 8 Back

11   "Housing across South East, South West and East England could be less affordable than London by 2026", National Housing and Planning Advice Unit press release, 25 October 2007 Back

12   HM Treasury, Barker Review of Housing Supply Final Report-Recommendations, March 2004, p 13 Back

13   Environmental Audit Committee, Housing: Building a sustainable future, Q439 Back

14   "House of cards: the property crisis", The Observer, 18 May 2008 Back

15   "New homes starts fall by almost half", National House-Building Council press release, 5 September 2008 Back

16   "Mortgage approvals sink to another record low", The Independent, 30 September 2008 Back

17   Q166 Back

18   Q177 Back

19   Q173 Back

20   See, for instance, "Ensuring a fair housing market for all", CLG press release, 2 September 2008 Back

21   HC Deb, 6 December 2006, col 309  Back

22   Environmental Audit Committee, Fourth Report of Session 2006-07, Pre-Budget 2006 and the Stern Review, HC 227, para 91 Back

23   Environmental Audit Committee, Fifth Special Report of Session 2006-07, Government Response to the Committee's Fourth Report of 2006-07: Pre-Budget 2006 and the Stern Review, HC 739, p 19  Back

24   Under the current terms of the Climate Change Bill, UK annual emissions of CO2 are to be cut by at least 26% from 1990 levels by 2020. The Government has also accepted the recommendation of the Committee on Climate Change that UK greenhouse gas emissions should be cut by 80% from 1990 levels by 2050. Back

25   Q181 Back

26   Q3 Back

27   Q4 Back

28   Q1 Back

29   Qq 3-4 Back

30   Ev 189 Back

31   Ev 190 Back

32   Ev 191 Back

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