The balance of cost and energy efficiency in new homes to meet national demand

There is a clear need to improve the energy efficiency of UK homes. This is something that is increasingly being prioritised by consumers and which has also been identified as a need in multiple reports on the subject. Given that homes in the UK are responsible for around a fifth of the country’s emissions – and a considerable proportion of energy usage – this is one area where significant progress could be made towards meeting net zero targets that have been set for 2050. However, this type of change costs money so how can the balance of cost and energy efficiency be managed to meet both demand and expectations?

A new green standard for homes?

The government is proposing a new green standard for homes that is designed to help improve energy efficiency and support the UK in meeting key targets. A recent impact assessment of this project revealed that it could deliver benefits worth in the region of £11 billion. However, the overall cost to the industry could be roughly £10 billion. The goal for the plans – to deliver “a world-leading performance standard incorporating low-carbon heat in new homes by 2025” –would cost just over £10 billion over a period of 70 years [1]. Measures would include:

  • More stringent building regulations focusing on standards such as overall carbon performance
  • Mandatory energy efficiency requirements
  • Increased ventilation and air tightness levels

A burden on developers?

The plans that have been outlined could deliver a very wide range of benefits, including allowing consumers to save on energy bills. There would also be a significant shift in pushing the UK closer to achieving climate change targets, including higher carbon savings and improvements in air quality. However, the proposed changes – which could come into force as early as 2025 – would see the initial capital costs for implementing the plans falling on developers.

The impact assessment identified that there was currently little motivation in the UK housing market to build energy efficient, green stock, concluding that “split incentives mean that developers have little reason to build better performing buildings.” It’s worth noting that while these initial costs would fall to developers to cover they could eventually be passed on to landowners. In terms of any ongoing maintenance or replacement costs these would fall to the owner of the building.

Making up for market failures

The impact assessment surrounding these plans blames a range of market failures – and a lack of government support – for the current situation in which existing housing stock in the UK is not ready for climate change. However, it does indicate that change is possible. Consultation on the plans will run until January 2020 and then a conclusion on whether the new building standards are practical will be reached.

Although change is clearly required to bring UK housing stock on track in green terms, it’s essential to ensure that what is being proposed achieves the right balance of cost and energy efficiency when it comes to meeting national demand.

Find out how The RG Group are helping to meet the UK’s housing requirements here.

[1] Inside Housing

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