Summary of Green Buildings Event

The Chair, Clive Betts MP, thanked the Aldersgate Group for hosting the event, and introduced the All Party Urban Development Group report Greening UK Cities’ Buildings.

The report, released in July 2008, finds that that there are significant barriers to ‘greening’ Britain’s existing buildings. These include the availability of information; the costs and benefits of retrofitting existing buildings; and physical barriers, such as the age and location of buildings.

Attendees in Committee Room 14

Jon Lovell, Head of Sustainability, Drivers Jonas, briefly introduced the Aldersgate Group and outlined its recent report on sustainable buildings, as well as discussing the challenges to the property sector posed by the credit crunch. 

The Aldersgate Group is a high level coalition of companies, environmental groups and individuals who maintain that high environmental standards are essential for long term growth and competitiveness.  Better Regulation for a Sustainable Built Environment, released by the Aldersgate Group in July 2008, finds that disjointed policy and weak enforcement risk damaging the credibility of the Government’s ambitious targets for low-carbon buildings.  It recommends that the Government:

• Work with industry to publish a Code of Practice on measuring the environmental performance of occupied buildings in the non-domestic sector.
• Extend the system of operational energy ratings (required for public buildings in England and Wales from 1st October 2008) to all non-domestic buildings by the end of 2009.
• Significantly extend post-completion performance testing of non-domestic buildings and dwellings against Building Regulations.
• Provide clarity across Government departments and amongst the devolved administrations on the definition of zero-carbon buildings.
• Radically improve its procurement record in relation to the environmental performance of buildings and building services.

Recently, there has been mixed and varied media coverage on whether the credit crunch is threatening to derail the green agenda in light of seemingly more important priorities.  While the credit crunch signals the end of easy credit, the corresponding climate and energy crunches reinforce the fact that long-term profitability and value will increasingly be linked to sustainability.  There is also a discernable shift in emphasis within the property sector from viewing sustainability as a (shallow) CSR concern to risk aversion and regulatory resilience.  This is reinforced by heightened public and business expectation for robust, proportionate regulation.  The recent ‘triumph’ for Edward Miliband over Peter Mandelson regarding the provision for mandatory carbon reporting in the Climate Change Bill, which was strongly supported by the Aldersgate Group, could be a very significant development in regard to future legislation and political priorities.   

Paul King, Chief Executive, UK Green Buildings Council (UK GBC), discussed recent Government initiatives regarding zero-carbon homes and buildings and the wider regulatory framework.  

UK-GBC was launched in February 2007 and is an industry-led, independent, not for profit, membership-based organisation made up of world class engineering practices, architects, project and cost management consultants, developers, NGOs and many others that aim to bring clarity, purpose and co-ordination of strategy to the green buildings sector.

There has been little connection between regulatory requirements and what is actually needed to achieve ambitious government targets (such as an 80% reduction in total carbon emissions by 2050).  Fundamental, deep seated change and innovation is required, rather than incremental improvements to existing legislation.  A good example is the zero carbon homes target, which has arguably stimulated as much innovation in the last 2 years than the previous 200 years!  Similarly, the Code for Sustainable Homes, as a regulatory escalator, provides certainty and clarity to the market that is multiple steps ahead.  These are very encouraging developments. 

Contrary to what many believed would be possible in the sector, the UK GBC zero carbon non-domestic task group recommended in December 2007 that a target for zero-carbon buildings by 2019 would be challenging but feasible.  This shows the benefit of consulting with a wide range of stakeholders and the major developers.

Improving the performance of existing homes is arguably more challenging, in particular because of confusion over grants and subsidies programmes, large upfront costs and the hassle factor of implementing building works.  In a report to inform the Government’s Low Carbon Homes strategy, the UK GBC recommended that Government should commit to at least an 80 per cent cut in CO2 from UK households by 2050, with interim targets every 5 years along the way.  Additionally, householders should have access to a ‘Whole Home Energy Plan’, providing advice on low carbon refurbishment and which measures should be taken out, and there needs to be a fundamentally new way for consumers to fund energy efficiency improvements to their home, which spread the cost of upfront measures over time, saving money on energy bills straight away.

The current economic crisis may actual signal the end to the boom and bust for sustainability, the fortunes of which have historically been linked with that of the wider economy.  Only the trade press have warned that the crisis has derailed the sustainability agenda, but this is not the message emanating from industry.

Peter Cosmetatos, Director of Finance and Investment, British Property Federation (BPF), outlined the crucial role of information and fiscal incentives. 

The BPF is a membership organisation which represents the interests of all those involved in property ownership and investment.  It aims to create the conditions in which the commercial property industry can grow and thrive, for the benefit of its members and the economy as a whole.

In terms of the economic downturn, sustainability remains a key differentiator of stock, and is here to stay.  However, the current economic climate means that there is inevitably greater sensitivity to costs, and that in turn means that there will be more focus on financial sustainability as opposed to green sustainability.  Engagement with the sustainability agenda is likely to falter overall but this will be patchy, with the major players in the market likely to remain much more engaged than the more cost-focused part of the market. 

There is a significant amount of regulation now and in the pipeline which is set to increase compliance costs.  In the current climate, the BPF considers that the focus should move away from further increasing the regulatory burden in the short term.  While the BPF supports the current regulatory framework and sees regulation as a key instrument in tackling climate change, now is the time to do much more in terms of (1) education/ information about no cost / low cost sustainability improving measures and (2) incentivising higher cost sustainability improving measures.   

Speakers Neil Jefferson, Jon Lovell, Clive Betts, Peter Cosmetatos and Paul King

(1) Poor behaviour in the use of services and equipment will undermine the performance of even the most efficient new buildings.  Parts of the property market are also so concerned with costs at the moment that it should be particularly responsive to suggestions for greening which also reduce energy bills without requiring a significant initial outlay.  For both these reasons, the Government should concentrate on delivering strong, clear messages, with a single voice, about the scope for more efficient use of lighting, heating and air conditioning, cleaning and maintenance, and other win-win opportunities that reduce costs and resource use at no or low initial cost.  Display Energy Certificates (DECs) which display the actual energy use of a building to the public are only required for certain public buildings.  The BPF is keen to see these rolled out more widely to increase transparency and encourage greater dialogue between landlords and tenants. 

(2) Regarding fiscal incentives, the government is right to focus on implementing measures that actually drive behavioural change.  One option is to target performance and results, such as by greening business rates.  An attraction of this approach is that it is based on outcomes, but the rating system is very complex already and the impact on local

authorities and businesses could be excessively burdensome.  The highest degree of transparency and simplicity is required for this to be effective. 

Alternatively, the government could target investment and expenditure decisions.  Tax tools for doing this include:

• VAT – better in the residential context, as VAT on commercial property is in most cases no more than a short term cash flow cost.  In any event, EU legislation limits what can be achieved and there is not a great scope to introduce rate reductions. 
• Stamp Duty – could be quite attractive as a right to relief would have an immediate positive impact on the balance sheet, without imposing a cost on the Exchequer until a transaction takes place.  However, stamp duty may offer limited flexibility.
• Capital Allowances – although there has been a regime offering enhanced allowances for certain types of plant and machinery since 2001, it is widely felt to be quite complicated and cumbersome on a practical level.  In addition, it is not generally available to give tax relief for expenditure on the fabric of buildings, even though that is how significant sustainability improvements can be achieved.

Overall, there are some very encouraging signs in regard to the government’s regulatory framework but the importance of raising awareness about no cost and low cost measures, and of and the way fiscal incentives could be used to drive higher cost measures, should not be underestimated.   

Neil Jefferson, Chief Executive, Zero Carbon Hub, summarised the key objectives of the recently formed partnership and the challenges moving forward.  

The Zero Carbon Hub was set up in June 2008 in response to the Callcut Review (November 2007) to make Zero Carbon homes a reality from 2016.  It is a new public and private partnership responsible for galvanising action and working with government, councils and industry to overcome barriers to ensure this ambitious policy is implemented.  Its strategic objectives are to provide leadership and create confidence; reduce risk and clear obstacles; and disseminate information. 

The board includes representatives from CLG, NHBC, the Home Builders Federation, Construction Products Association and the Local Government Association. Paul King, Chief Executive of UK GBC has been appointed as Chairman.  Reporting to the 2016 Zero Carbon Task Force (the cross-sectoral committee co-chaired by the Housing Minister Caroline Flint and Stewart Baseley, Executive Chairman of the HBF), the new delivery body will lead and manage a series of work streams to drive forward the implementation of the 2016 Zero Carbon new homes policy.

The major challenge is to ensure an unprecedented step change in  performance on a short timescale.  In regards to the economic downturn, the zero carbon policy is here to stay, and it represents only one of many impacts that are adding to the cost of new homes.  While private sector starts have plummeted over the last year, affordable housing built to higher standards for energy and sustainability is being delivered as expected.

The Barratt Green House, built to code level 6 of the Code for Sustainable Homes, shows what can be achieved, and exemplifies the importance of design. 
 
A number of working groups have been set up which will examine the definition of zero carbon (there is currently a very mature and considered debate within the industry), SAP assessments, verification of performance and air leakage. 

Key dates are:

More information

Contact Andrew Raingold
Public Affairs Manager
Aldersgate Group.

T: 0207 863 8712
F: 0207 863 8775
E: andrew.raingold@aldersgategroup.org.uk 
www.aldersgategroup.org.uk

The meeting was joint hosted by the Aldersgate Group and All Party Urban Development Group.  It took place at 2pm on the 5th November 2008 in Committee Room 14 at the House of Commons.