The path to cleaner greener homes through a changing regulatory landscape

By Jeremy Davy, Partner and Head of New Build at BDB Pitmans

Early in the New Year, the launch of ‘Energy House 2.0’, a £16m research facility conceived by the University of Salford, was widely reported by the media, including BBC Breakfast. The facility has two chambers, each able to accommodate two detached houses in a controlled environment that can simulate a wide variety of weather conditions, including extremes of temperature, wind, rain, snow and solar radiation. In partnership with Bellway Homes, Barratt Developments and Saint-Gobain, two detached three-bedroom test houses have been built inside Chamber 1 and the process of testing new technologies for powering, heating and insulating homes is underway. There’s no time to waste because, when it comes to the energy efficiency of new homes, the regulatory landscape is changing.

According to the Climate Change Committee’s Sixth Carbon Budget, energy use in homes accounted for 13% of the UK’s total greenhouse gas emissions in 2019. In its Spring Statement of that year, the government announced its commitment to introduce a Future Homes Standard (now known as the Future Homes and Buildings Standard) to improve the environmental performance of new build homes. Later that year it published a consultation to get views on changes to Part L (Conservation of fuel and power) and Part F (Ventilation) of the Building Regulations.

In January 2021, the government issued its response to the consultation on the proposed Future Homes Standard in which it declared that, from 2025, the Standard will prohibit homes from being built with fossil fuel heating. Instead, all new homes will be equipped with low carbon heating. The aim is for carbon emissions to be 75-80% lower than homes built to the then-current standards and for all new homes to be future-proofed as zero carbon-ready.

Whilst it’s proposed that the Future Homes Standard will take effect in 2025, the government has introduced an interim uplift to the Building Regulations which came into effect in England on 15 June 2022 to pave the way for the Future Homes Standard. The changes to the Building Regulations introduced higher standards under Part F, a new Part O (Overheating) and Part L to achieve an overall reduction in carbon emissions of 31% compared to the previous regulations. Developers can still build under the previous regime if a Building Regulations application was made prior to 15 June 2022 provided that building works commence before 15 June 2023, but note that these transitional arrangements apply to individual plots and not whole phases or sites. This will, inevitably, mean that some developers will have to coordinate the construction of different homes on the same site in accordance with different regulations.

With no immediate plans to implement changes to the Planning and Energy Act 2008, local authorities will continue to retain powers to set higher energy efficiency standards for new homes in their areas. This can be problematic, particularly for those housebuilders that operate across multiple regions who have to navigate councils’ varying requirements and adapt their products accordingly. Where some local authorities have moved further and faster than the government’s changes, there is concern that the skills and solutions to meet such requirements are not yet fully-formed.

One of the challenges facing housebuilders is the uncertainty surrounding government policy, particularly having experienced a year that saw three different Conservative administrations. Whilst the changes to the Building Regulations last year do, at least, show the regulatory direction of travel, it’s important to keep abreast of all communications from the machinery of government to gain insight into the latest thinking of lawmakers. The latest ‘signpost’ in relation to the Future Homes Standard is the “Mission Zero” report published by Chris Skidmore MP on 13 January 2023.

When, in June 2019, the UK became the first major economy to enshrine in law its commitment to reduce greenhouse gas emissions to net zero by 2050, the relevant legislation (an amendment to the Climate Change Act 2008) was signed by Mr Skidmore, the then Energy Minister. Since that time, the World has changed enormously and, during her Tory Party leadership campaign, Liz Truss pledged to review government policy on climate change. During its brief existence, the Truss government commissioned Mr Skidmore (now the Chair of the All-Party Parliamentary Group on the Environment) to undertake an independent review of how the UK can meet its net zero commitments in an affordable and efficient manner, and in a way that’s pro-business.

Describing net zero as the “growth opportunity of the 21st century”, the Mission Zero report identified ten priority missions some of which relate to housing. These include unblocking the planning system to empower local authorities and communities to support net zero, a commitment to work towards gas free homes by 2035, a new Net Zero Performance Certificate and a “rooftop revolution” in the deployment of solar. The report’s recommendation of wide-ranging reform of the planning system (likely to be met with some howls of derision) includes the introduction of a “net zero test” and a “rapid review of bottlenecks in the system”.

On the Future Homes Standard, the report states a need to “go further and faster” and calls on the government to bring forward all consultations and to mandate the Future Homes Standard by 2025. It goes on to state that “the cheapest energy is the energy we do not use” and reiterates the importance of improving insulation and heating sources to deliver cleaner, cheaper and greener homes. In addition, the Mission Zero report recommends a consultation on mandating that new homes be built with solar and calls for a “Net Zero Homes Standard” for the future. The report urges government to “turbocharge” our adoption of heat pumps with a “10-year mission to make heat pumps a widespread technology” and recommends that ministers provide certainty by 2024 on the phase out date of new and replacement gas boilers.

Looking into the future, the Department for Levelling Up Housing and Communities intends to consult on a technical specification for the Future Homes Standard in 2023 with a view to publishing it in 2024. Legislation will then be introduced prior to implementation of the Standard which, it’s understood, remains earmarked for 2025.

An obvious and understandable concern for developers when it comes to compliance with the Future Homes Standard is rising build costs. Estimates of the additional costs involved in compliance with the 2022 changes to Building Regulations range from £3,000 to £5,000 per unit and costs will increase more significantly upon full implementation of the Future Homes Standard. These additional costs are being incurred at a time when other economic factors, including rising costs of materials and labour in general, are squeezing margins.

The Mission Zero report states that homes built to energy efficient standards through “a mixture of fabric and low carbon heating measures will be more financially desirable to… buy” but some housebuilders are concerned that the higher build costs will not automatically translate into higher sale prices because not all consumers see the value in the enhanced standards in the same way that they see the value in, say, an uplift in the fixtures and fittings specification. Ultimately, the need to maintain margins means that the higher build costs of complying with higher regulatory standards will impact on the amount housebuilders are prepared to pay for land with the obvious knock-on impact on land values.

Whilst the 2022 changes to Building Regulations were significant, the changes that will hit the industry on full implementation of the Future Homes Standard will be more significant. There is concern that

the government’s time scale will not be long enough to allow already creaking supply chains to adapt and for those with the necessary skills in new technologies to be available in sufficient numbers.

Perhaps the industry’s biggest skills gap is exposed by the government’s aim to ban gas boilers in new homes from 2025 and its ambition to install 600,000 heat pumps per year by 2028. Currently, there are a limited number of manufacturers, suppliers and installers in the UK. For example, there are less than 4,000 qualified heat pump installers (as compared to more than 100,000 gas engineers) and, to meet the government’s target of 600,000 installations in 2028, there will need to be at least 27,000 qualified installers. Therefore, the question as to who will install the required number of heat pumps remains unanswered. Experienced gas engineers have many of the skills required and can be trained relatively quickly, but there are barriers preventing them from retraining. These include the cost of training (which can be as much as £2,000), a lack of incentive (there’s no clear earnings premium), uncertainty around a still relatively immature market and a lack of time (there remains a shortage of gas engineers and many of them are very busy with the ‘day job’). Commentators have urged the government to provide clarity on its position on heat pumps and other low carbon technologies and launch a national information campaign.

The request for clarity on the government’s position is understandable. The government slightly watered down its proposed prohibition on fossil fuel heating in new homes when it published its Heat and Buildings Strategy in October 2021 and declared that it was planning to consult on whether it’s “appropriate” to prevent new build homes from connecting to the gas grid in England from 2025. We will have to wait for future communications to understand whether the current government sits in this more cautious camp or whether they have joined Chris Skidmore in the “go further and faster” camp. In the meantime, the industry will continue to meet the climate challenge head-on and the work being done in Energy House 2.0 is all part of that industry-wide effort.