The impacts of the Deregulation Bill 2013/2014 on Bath’s future homes

Currently B&NES council, where viable, imposes high standards on building development in Bath than the minimum required by Building Regulation. It currently requires most new housing developments to be built to Code for Sustainable Homes Level 5, which reduces the carbon emissions from homes by over 50% and reduces energy bills by up to 80%. The current coalition government want to remove local council’s ability to impose higher standards ,which it is attempting to do under the Deregulation Bill 2013/2014. Given it is planned that 12,700 homes are to be built in Bath over the next 15 years the potential impact of building to lower standards is very significant – we believe the impact could be as much as 27,000 tonnes of carbon per year – equivalent to over 60 MW of solar PV – or more than 30 times the current renewable capacity in the B&NES area.

The remainder of this post provides more detailed background information on this issue and a possible amendment to the de-regulation bill:

Local Authorities where economically viable have been able to specify more sustainable homes above minimum building regulations:

For the last 6 years Local Authorities have been able to require that new housing development is built to higher than minimum building regulation standards, as long as any additional costs are economically justified by ‘Viability Studies’. VIABILITY STUDIES Typically local authorities have specified that housing developers meet Code for Sustainable Homes levels 3 to 6. The Code for Sustainable Homes covers a broad range of sustainability standards including energy and water consumption, materials, pollution, security, disabled access, noise, daylight and ecology. Bath & North East Somerset Council have recently been requesting that new developments meet Code for Sustainable Homes levels 4 and 5, and meet a 20% renewables criteria under the Merton Rule, a policy which Transition Bath supports. Code for Sustainable Homes level 5 homes for example can reduce energy bills and CO2 emissions by 80% over minimum building regulation homes, making homes cheaper to heat and run and reducing fuel poverty.

Deregulation Bill: Will specifically stop Local Authorities specifying more sustainable, lower energy homes

Ostensibly to reduce red tape and regulation the government is bringing forward the Deregulation Bill 2013 -2014, which includes changes to housing standards and regulations following the Housing Consultation Review 2013. The bill stops local authorities from being able to specify any standards above minimum building regulations, with a few exceptions which are unlikely to apply to Bath. This means that going forward B&NES council and the residents of Bath will have no say in the standard and quality of homes being built in Bath. The government claims that because they are planning on bringing a ‘zero carbon’ homes standard in 2016, higher standards like Code for Sustainable Homes are not necessary; unfortunately Transition Bath believes based on the recent record of government and industry rumours that the 2016 ‘zero-carbon’ standard will be delivered late and in a significantly watered down state – far below that of Code for Sustainable Homes 5. The likely effect of the Deregulation Bill is that the majority of the 12,700 new homes planned for Bath over the next 15 years will be built to minimum building regulation standards

In addition to the removal of higher energy standards in homes, local authorities will not be able to specify higher standards for water conservation, wheel chair and disabled access, and higher levels of security, unless under exceptional circumstances which won’t apply to Bath.

How does the amendment to the 2013/2014 Deregulation bill help?

The amendment to the 2013/2014 deregulation bill states

‘Clause 28, page 23, line 13, at end insert—

‘(2) This section and section 29 shall not come into force until the Secretary of State

has laid a Zero-Carbon Housing Strategy before both Houses of Parliament.’.

An article in Business Green article covers the amendment in more detail. But in summary, it would allow B&NES council to continue to impose higher sustainability standards for new homes until the government provides more concrete information about the 2016 standard, and may mean that a significant proportion of the 12,700 homes to be built in Bath will be built to higher standards. If the amendment goes through it is almost certain the majority of these homes will be built to minimum standards.

A brief synopsis of the pros and cons of the Deregulation Bill

The government’s arguments for bringing the bill forward are

  • Reducing red tape caused by regulation will mean more homes will be built, increasing supply and reducing demand, and therefore house price inflation
  • Higher housing standards reduces the number of homes being built
  • More sustainable homes makes homes more expensive and therefore less affordable
  • Building regulation are complicated and overlapping and it might be better if the market decides

 

Transition Bath’s arguments against

  • Regulation can sometimes be a good thing; space standards are the largest area of omission in UK building regulations, they have never been regulated in the UK and as a result we have the smallest homes in Europe
  • The administrative overheads of higher standards are vastly exaggerated by large developers
  • The imposition of higher standards has no impact on house prices in Bath, no impact on the amount of land coming forward and thus will not impact supply
  • More sustainable housing will lead to an 80% reduction in energy costs, a 55% reduction in CO2 emissions for these new homes
  • The government has explicitly excluded any assessment of the economic benefits to house holders in the Deregulation Bill – only an assessment of the benefit to large developers was allowed. You can make your own interpretation of this exclusion!
  • While we agree that simplification of regulation is a good thing, we believe in this instance it is being used as a smoke screen to allow builders to build low quality, minimum standard homes

 

Further Detail

 

The remainder of the document provides Transition Bath’s counter-arguments to the government’s analysis, and in particular:

  1. Why we believe based on the evidence of the delivery of the 2013 Part L Building Regulations that the 2016 Zero Carbon Regulations will be delivered late and in a watered down state
  2. Why in Bath, with its high house prices there will be no impact on the volume of land being made available for housing and the price of those homes if higher sustainability standards are specified
  3. The economic benefits to home owners of homes built to more sustainable standards and the costs to house builders

 1.       Why we believe based on the evidence of the delivery of the 2013 Part L Building Regulations that the 2016 Zero Carbon Regulations will be delivered late and in a watered down state

 

To understand why we don’t think the 2016 Zero Carbon standard will be delivered you need to understand the recent history of building standards relating to energy conservation:

  • The standard of the energy efficiency of new homes is governed by Building Regulations Part L
  • With the introduction of new energy efficiency standards in 2006, the government stated their commitment that all new homes from 2016 would be ‘Zero Carbon’, and that this would be achieved by 2 interim steps, a 25% reduction by 2010 and a further 40% reduction by 2013 – these intermediate steps would give the builders time to learn and adjust to these more stringent standards so they would ready for the zero carbon standard in 2016
  • In the March 2011 budget, the chancellor quietly watered down the requirements for the 2016 ‘Zero Carbon’ standard by removing unregulated electricity (appliances) from the 2016 standard
  • Also in 2011 the concept of ‘Allowable Solutions’, a ‘carbon offsetting’ scheme was proposed to allow builders to offset carbon emissions on housing schemes under the 2016 Zero Carbon standards where it was economically or technically feasible to build ‘zero carbon homes’, for example if the roofs of the scheme  were not suitable for solar PV. A working figure of £105/tonne CO2 was suggested for these offsets and that these offsets would be invested in the local community for example to pay for upgrades like solid wall insulation in nearby homes. In the recent Allowable Solutions Consultation there are very clear suggestions that the government is minded to introduce a cap on the carbon offset price of either £60/tonne or £36/tonne and that the requirement for local investment would be removed
  • In April 2014 the coalition government introduced the 2013 standards – 6 months late and with only a 6% improvement in energy efficiency rather than the originally proposed 40% improvement

 

Given this history and industry rumours we believe the 2016 Zero Carbon standard will be delivered late – probably 2019 and in a significantly watered down state. The concern is that given there was only a 6%, rather than the proposed 40% uplift in 2014, that builders will say they haven’t had sufficient time and experience to deliver the much higher standard and that it is too big a jump compared with current standards.

There is also the risk that Allowable Solutions with a very low carbon price will be used to allow the builders to avoid all together building to the higher standards. We also believe that there are no opportunities to deliver carbon savings below £80/tonne and so if the cap is set below this level, then Allowable Solutions could only be used to contribute to other projects and would thus not be a true carbon offset.

 2.       Why in Bath, with its high house prices there will be no impact on the volume of land being made available for housing and the price of those homes if higher sustainability standards are specified

 

Although it might seem counterintuitive higher standards imposed on housing development do not in most circumstances increase the sales price of a home; the most likely impact is to reduce the land value i.e. whoever sells the land for a development tends to lose out. This is probably best illustrated by example:

  1. If we assume a house costs £200,000 to build and its market value is £300,000 the implied land value is £100,000 i.e. £300,000 – £200,000
  2. If we then assume more sustainable housing is required by the local authority, which increases the build cost by £10,000, the implied land value becomes £90,000 i.e. £300,000 – (£200,000 + £10,000)

The net effect of these higher standards is that the land owner loses out, in this example the value of the land drops from £100,000 to £90,000. This analysis is covered in more detail in another recent post, here.

When local authorities seek to impose higher standards they are required to assess whether these higher standards would stop a development taking place. This assessment is called a Viability Study which is simply a more sophisticated version of the calculation described above on a per hectare basis. The output of the calculation is an implied land value which is then compared with alternative uses for the same land. So for example agricultural land is worth about £20,000 per hectare, and if the implied land value from the viability study is above £20,000 per hectare the council’s imposition of higher standards and costs is deemed viable and is therefore unlikely to stop this agricultural land coming forward for housing  development.

3. The economic benefits to home owners of homes built to more sustainable standards and the costs to house builders

This is covered in much more detail in another post, but in summary energy bills are reduced from about £1000 per year to £600 per year, and down to £200 per year, an 80% reduction if Solar Feed-In-Tariffs are taken into account.

Conclusion

From a carbon perspective trying to ensure that homes are to be built to the highest standards possible is probably more important than any other work Transition Bath does. Unfortunately we have little control over this as government is seeking to remove local authorities ability to impose higher standards. Even if the amendment to the deregulation bill goes through it seems likely than Simon Emerson, the Planning Inspector who is currently examining B&NES’s Core Strategy is minded to ignore the amendment and strike out B&NES’s requirement for Code for Sustainable Homes level 5 housing from the Core Strategy.

Background Reading

If you would like more background reading on the subject, or some ‘colour’ on the Deregulation Bill, we suggest the following reading:

  1. A Business Green article explaining the background to the amendment
  2. A Business Green article outlining some of the political issues
  3. The Parliamentary Environmental Audit Committee’s report on the Housing Standards Review which the coalition government has rejected

 

Posted in Energy, Planning.